UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
___________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997 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 Identification
incorporation or organization) 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 1,653,083
- --------------------------- ----------------------------
Title of Class Number of Shares Outstanding
as of August 1, 1997
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARIES
Contents
------------------------------------------------------------------------------
Page
PART I - FINANCIAL INFORMATION
Item 1
Financial Statements
Consolidated Statement of Financial Condition as of June 30, 1997 (Unaudited)
and December 31, 1996.........................................................1
Unaudited Consolidated Statement of Operations for the Three Months and Six
Months ended June 30, 1997 and June 30, 1996..................................2
Unaudited Consolidated Statement of Changes in Stockholders' Equity for the
Six Months ended June 30, 1997................................................3
Unaudited Consolidated Statement of Cash Flows for the Six Months ended
June 30, 1997 and June 30, 1996...............................................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
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
CENIT BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
<TABLE>
ASSETS
<CAPTION>
(Unaudited)
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Cash $ 14,654 $ 17,475
Federal funds sold and interest earning deposits 5,372 6,003
Securities available for sale at fair value (adjusted
cost of $166,123 and $222,367, respectively) 168,034 224,011
Loans, net:
Held for investment 480,311 422,219
Held for sale 3,519 1,900
Interest receivable 5,393 5,456
Real estate owned, net 1,697 2,769
Federal Home Loan Bank and Federal Reserve Bank stock, at cost 9,461 7,861
Property and equipment, net 13,300 12,664
Goodwill and other intangibles, net 4,195 4,381
Other assets 3,614 2,361
--------- ---------
$ 709,550 $ 707,100
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 47,682 $ 46,154
Interest-bearing 462,936 452,811
--------- ---------
Total deposits 510,618 498,965
Advances from the Federal Home Loan Bank 131,000 148,000
Securities sold under agreements to repurchase 12,154 7,138
Advance payments by borrowers for taxes and insurance 1,092 631
Other liabilities 3,330 2,758
--------- ---------
Total liabilities 658,194 657,492
--------- ---------
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 1,650,208 and 1,635,044 shares,
respectively 16 16
Additional paid-in capital 18,026 17,670
Retained earnings - substantially restricted 32,409 31,040
Common stock acquired by Management Recognition
Plan (MRP) (330) (181)
Net unrealized gain on securities available for sale,
net of income taxes 1,235 1,063
--------- ---------
Total stockholders' equity 51,356 49,608
--------- ---------
$ 709,550 $ 707,100
========= =========
</TABLE>
The notes to unaudited consolidated financial statements are an integral part
of this statement.
1
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three months Six Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and fees on loans $ 9,502 $ 6,948 $ 18,377 $ 14,022
Interest on mortgage-backed certificates 2,296 3,431 5,009 6,938
Interest on investment securities 698 1,043 1,425 2,066
Dividends and other interest income 270 270 505 517
--- --- --- ---
Total interest income 12,766 11,692 25,316 23,543
------ ------ ------ ------
Interest on deposits 5,142 4,611 10,198 9,472
Interest on borrowings 2,243 2,259 4,408 4,401
----- ----- ----- -----
Total interest expense 7,385 6,870 14,606 13,873
----- ----- ------ ------
Net interest income 5,381 4,822 10,710 9,670
Provision for loan losses 150 53 300 155
--- -- --- ---
Net interest income after provision
for loan losses 5,231 4,769 10,410 9,515
----- ----- ------ -----
Other income:
Deposit fees 493 312 976 620
Gains on sales of loans 116 187 224 370
Gains on sales of securities 90 32 90 32
Loan servicing fees and late charges 101 88 180 190
Other 559 362 860 665
--- --- --- ---
Total other income 1,359 981 2,330 1,877
----- --- ----- -----
Other expenses:
Salaries and employee benefits 1,947 1,894 4,027 3,814
Equipment, data processing and supplies 670 571 1,356 1,176
Net occupancy expense of premises 459 421 918 827
Expenses, gains/losses on sales and provision
for losses on real estate owned, net 94 (7) 141 6
Professional fees 125 117 238 217
Federal deposit insurance premiums 69 233 143 467
Expenses related to proxy contest and other matters 11 - 405 -
Other 819 641 1,493 1,156
--- --- ----- -----
Total other expenses 4,194 3,870 8,721 7,663
----- ----- ----- -----
Income before income taxes 2,396 1,880 4,019 3,729
Provision for income taxes 848 659 1,418 1,305
--- --- ----- -----
Net income $ 1,548 $ 1,221 $ 2,601 $ 2,424
======== ======== ========= =========
Earnings per common and common equivalent share $ .90 $ .73 $ 1.52 $ 1.45
======== ======== ========= =========
Dividends per common share $ .25 $ .20 $ .50 $ .30
======== ======== ========= =========
</TABLE>
The notes to unaudited consolidated financial statements are an integral
part of this statement.
2
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Net Unrealized
Common Gain on
Common Additional Stock Securities
Common Stock Paid-In Retained Acquired Available for
Stock Shares Amount Capital Earnings by MRP Sale Total
------------ ------ ---------- -------- -------- --------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 1,635,044 $ 16 $17,670 $31,040 $ (181) $1,063 $ 49,608
Net income - - - 2,601 - - 2,601
Cash dividends declared - - - (1,232) - - (1,232)
Exercise of stock options and
related tax benefits 15,164 - 356 - - - 356
Net change in unrealized gain
on securities available for sale,
net of income taxes - - - - - 172 172
Other - - - - (149) - (149)
--------- ---- ------- -------- ------- ------ --------
Balance, June 30, 1997 1,650,208 $ 16 $18,026 $32,409 $ (330) $1,235 $ 51,356
========= ==== ======= ======= ====== ====== ========
</TABLE>
The notes to unaudited consolidated financial statements are an integral part
of this statement.
3
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,601 $ 2,424
Add (deduct) items not affecting cash in the period:
Provision for loan losses 300 155
Provision for losses on real estate owned 67 -
Amortization of loan yield adjustments 37 (14)
Depreciation, amortization and accretion, net 1,132 1,120
Net (gains) losses on sales/disposals of:
Securities (89) -
Loans (224) (370)
Real estate, property and equipment 13 (23)
Proceeds from sales of loans held for sale 15,768 28,764
Originations of loans held for sale (17,183) (28,076)
Change in assets/liabilities:
Decrease in interest receivable and other assets (1,096) (1,224)
Increase (decrease) in other liabilities 660 (359)
--- ----
Net cash provided by operating activities 1,986 2,397
----- -----
Cash flows from investing activities:
Purchases of securities available for sale (8,088) (60,894)
Principal repayments on securities available for sale 26,676 39,895
Proceeds from maturities of securities available for sale 10,500 7,960
Proceeds from sales of securities available for sale 26,686 1,061
Net (increase) decrease in loans held for investment (58,073) 1,241
Net proceeds on sales of real estate owned 680 78
Additions to real estate owned (82) (35)
Purchases of Federal Home Loan Bank stock
and Federal Reserve Bank stock (1,600) (4,811)
Redemption of Federal Home Loan Bank stock - 2,770
Proceeds from sale of property and equipment 6 -
Purchases of property and equipment (1,208) (769)
------ ----
Net cash used for investing activities (4,503) (13,504)
------ -------
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants 167 199
Net increase (decrease) in deposits 11,653 (13,099)
Proceeds from Federal Home Loan Bank advances 686,000 939,143
Repayment of Federal Home Loan Bank advances (703,000) (912,143)
Net increase in securities sold under agreement
to repurchase and federal funds purchased 5,016 2,265
Cash dividends paid (1,232) (480)
Other, net 461 (63)
--- ---
Net cash (used for) provided by financing activities (935) 15,822
---- ------
Increase (decrease) in cash and cash equivalents (3,452) 4,715
Cash and cash equivalents, beginning of period 23,478 20,405
------ ------
Cash and cash equivalents, end of period $ 20,026 $ 25,120
========= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 6,097 $ 5,755
Cash paid during the period for income taxes 925 775
Schedule of noncash investing and financing activities:
Real estate acquired in settlement of loans $ 868 $ 870
Loans to facilitate sale of real estate owned 1,224 1,113
</TABLE>
The notes to unaudited consolidated financial statements are an integral part
of this statement.
4
<PAGE>
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, 1997 and 1996 are not necessarily indicative of
results that may be expected for the entire year or any interim periods. The
interim financial statements should be read in conjunction with the December 31,
1996 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, 1997 are
determined by dividing income for the periods by 1,710,886 and 1,709,353,
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, 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. 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.
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 Bank ("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 commercial real estate
loans, construction loans, land acquisition and development loans, consumer
loans, commercial business loans, and in residential mortgage loans both inside
and outside their market areas. 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.
Financial Condition Of The Company
Total Assets
At June 30, 1997, the Company had total assets of $709.6 million, compared
to $707.1 million at December 31, 1996.
Securities Available for Sale
Securities available for sale totaled $168.0 million at June 30, 1997 and
are comprised of U. S. Treasury securities, other U. S. Government agency
securities, and mortgage-backed certificates. The net decrease of $56.0 million
from December 31, 1996 resulted primarily from $26.7 million of mortgage-backed
certificate repayments, $8.1 million of U.S. Treasury and other U.S. Government
agency securities purchases, $10.5 million of proceeds from the maturities of
securities, and $26.7 million from the sale of securities.
5
<PAGE>
Loans
The balance of net loans held for investment increased from $422.2 million
at December 31, 1996 to $480.3 million at June 30, 1997. Adjustable rate
residential permanent one-to-four family loans increased by $60.6 million during
the first six months of 1997 due, in part, to the bulk purchase of $45.5 million
of such loans on properties generally located outside the Company's market area.
Home equity and second mortgage loans increased by $8.7 million during the first
half of 1997. For the six months ended June 30, 1997, loan originations totaled
$78.3 million, loan purchases totaled $66.0 million, and total principal
reductions totaled $91.2 million.
6
<PAGE>
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.
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------------------ -----------------------
(Dollars in Thousands)
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Real estate loans:
Residential permanent 1- to 4-family:
Adjustable rate $ 218,146 41.96% 157,542 33.63%
Fixed rate
Conventional 96,411 18.54 98,952 21.12
Guaranteed by VA or insured by FHA 6,146 1.18 7,004 1.50
----- ---- ----- ----
Total permanent 1- to 4-family 320,703 61.68 263,498 56.25
Residential permanent 5 or more family 6,225 1.20 7,100 1.52
----- ---- ----- ----
Total permanent residential loans 326,928 62.88 270,598 57.77
------- ----- ------- -----
Commercial real estate loans:
Hotels 10,400 2.00 9,651 2.06
Office and warehouse facilities 25,154 4.84 27,178 5.80
Retail facilities 18,041 3.47 18,181 3.88
Other 3,333 .64 3,304 .71
----- --- ----- ---
Total commercial real estate loans 56,928 10.95 58,314 12.45
------ ----- ------ -----
Construction loans:
Residential 1- to 4-family 41,041 7.90 43,807 9.35
Residential 5 or more family 8,315 1.60 8,855 1.89
Nonresidential 1,210 .23 3,365 .72
----- --- ----- ---
Total construction loans 50,566 9.73 56,027 11.96
------ ---- ------ -----
Land acquisition and development loans:
Consumer lots 4,739 .91 5,396 1.15
Acquisition and development 10,161 1.96 16,010 3.42
------ ---- ------ ----
Total land acquisition and development loans 14,900 2.87 21,406 4.57
------ ---- ------ ----
Total real estate loans 449,322 86.43 406,345 86.75
------- ----- ------- -----
Consumer loans:
Boats 6,870 1.32 7,814 1.67
Home equity and second mortgage 38,240 7.36 29,578 6.31
Mobile homes 106 .02 137 .03
Other 6,660 1.28 6,606 1.41
----- ---- ----- ----
Total consumer loans 51,876 9.98 44,135 9.42
------ ---- ------ ----
Commercial business loans 18,694 3.59 17,922 3.83
------ ---- ------ ----
Total loans 519,892 100.00% 468,402 100.00%
------- ====== ------- ======
Less:
Allowance for loan losses 3,710 3,806
Loans in process 36,431 42,309
Unearned discounts, premiums, and loan fees, net (560) 68
---- --
39,581 46,183
------ ------
Total loans, net $ 480,311 $ 422,219
========== ==========
</TABLE>
7
<PAGE>
The following table sets forth information about originations, purchases,
sales, and principal reductions for the Company's loans for the period
indicated.
Six Months Ended
June 30, 1997
----------------
(Dollars in Thousands)
Loans originated:
Real estate:
Permanent:
Residential 1- to 4-family $ 32,984
Residential 5 or more family -
--------
Total 32,984
--------
Commercial real estate 2,582
--------
Construction:
Residential 1- to 4-family 4,973
Residential 5 or more family 1,460
Nonresidential 836
--------
Total 7,269
--------
Land acquisition:
Consumer lots 146
Acquisition and development 1,833
--------
Total 1,979
--------
Total real estate loans originated 44,814
--------
Consumer:
Home equity and second mortgage 15,367
Other 2,652
--------
Total 18,019
--------
Commercial business 15,424
--------
Total loans originated 78,257
--------
Loans purchased 65,999
--------
Total loans originated and purchased 144,256
--------
Principal reductions:
Repayments and other principal reductions 74,882
Real estate loans sold 16,284
--------
Total principal reductions 91,166
--------
Net increase in total loans $ 53,090
========
Net increase in loans held for sale $ 1,600
Net increase in gross loans held for investment 51,490
--------
$ 53,090
========
8
<PAGE>
Deposits
The balance of deposits increased from $499.0 million at December 31, 1996,
to $510.6 million at June 30, 1997. During this period, certificates of deposit
increased from $329.7 million at December 31, 1996, to $343.6 million at June
30, 1997. Also during this period, noninterest-bearing deposits increased from
$46.2 million at December 31, 1996, to $47.7 million at June 30, 1997. The
increase in certificates of deposit is primarily the result of a deposit
promotion run during the second quarter of 1997.
Capital
The Company's and the Banks' capital ratios exceeded applicable regulatory
requirements at June 30, 1997.
In June 1997, the Company's Board of Directors approved a loan to the
Company's Employee Stock Ownership Plan (ESOP) to fund the purchase of up to
five percent of the Company's shares of outstanding common stock. The ESOP
expects to complete the purchase of the shares over the next twelve months. The
ESOP share program is a benefit to employees and helps the Company retain and
attract bankers of the highest quality. Management believes the transaction will
initially be accretive to earnings per share and return on equity as a result of
the decrease in the number of shares and equity outstanding.
In July 1997, the Company also obtained a loan with an unrelated lender to
borrow on an unsecured basis up to $4,000,000.
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
<PAGE>
The following table sets forth information about the Company's
nonperforming loans, REO, and other repossessed assets at the dates indicated.
June 30, December 31,
1997 1996
---- ----
(Dollars in Thousands)
Nonperforming loans:
Real estate loans:
Permanent residential 1- to 4-family
Nonaccrual $ 694 $ 1,172
Accruing loans 90 days or more past due 230 246
-- --- ---
Total 924 1,418
--- -----
Permanent residential 5 or more family
Accruing loans 90 days or more past due 167 -
--- ---
Commercial real estate:
Nonaccrual - 457
--- ---
Construction:
Accruing loans 90 days or more past due - 170
--- ---
Land acquisition and development
Nonaccrual 200 200
Accruing loans 90 days or more pasts due 200 -
--- ---
Total 400 200
--- ---
Consumer loans:
Mobile homes (nonaccrual) 64 83
Credit cards (accruing loans 90 days or
more pasts due) 1 9
Other 15 17
--- ---
Total 80 109
--- ---
Commercial business loans:
Nonaccrual 223 483
--- ---
Total nonperforming loans:
Nonaccrual 1,196 2,412
Accruing loans 90 or more days past due 598 425
----- -----
Total 1,794 2,837
----- -----
Real estate owned, net 1,697 2,769
Other repossessed assets, net 103 55
----- -----
Total nonperforming assets, net $3,594 $ 5,661
====== =======
Total nonperforming assets, net, to total assets .51% .80%
=== ===
The decrease in nonperforming assets from December 31, 1996 to June 30,
1997 of $2.1 million related primarily to both the net decrease in nonaccrual
loans of $1.2 million and the net decrease in REO of $1.1 million, which offset
an increase in accruing loans 90 or more days past due of $173,000 and other
repossessed assets of $48,000.
10
<PAGE>
Allowance for Loan Losses. The following table sets forth activity of the
allowance for loan losses for the periods indicated.
Six months ended June 30,
-------------------------
1997 1996
---- ----
(Dollars in Thousands)
Balance at beginning of period $ 3,806 $ 3,696
Provision for loan losses 300 155
Losses charged to allowance (452) (219)
Recovery of prior losses 56 138
------- -------
Balance at end of period $ 3,710 $ 3,770
======= =======
The Company's provision for loan losses increased to $300,000 for the six
months ended June 30, 1997, as compared to $155,000 in the same period in 1996.
At June 30, 1997, the Company's coverage ratio was 206.8% based on a total
allowance for loan losses of $3,710,000 and total nonperforming loans of
$1,794,000. This compares to a coverage ratio of 234.7% at June 30, 1996.
Average Balance Sheets
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
<PAGE>
<TABLE>
<CAPTION>
For the Three Months For the Three Months
Ended Ended
June 30, 1997 June 30, 1996
----------------------------- ----------------------------
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) $ 469,859 $ 9,502 8.09% $ 319,554 $ 6,948 8.70%
Mortgage-backed certificates 129,576 2,296 7.09 210,157 3,431 6.53
U.S. Treasury and other U.S.
Government agency securities 44,130 698 6.33 64,293 1,043 6.49
Federal funds sold 7,481 103 5.51 8,093 107 5.29
Federal Home Loan Bank and
Federal Reserve Bank stock 9,300 167 7.19 9,061 163 7.20
------- ------ ------- ------
Total interest-earning assets 660,346 12,766 7.73 611,158 11,692 7.65
------- ------ ------- ------
Noninterest-earning assets:
REO 1,828 1,577
Other 37,897 39,483
------ ------
Total noninterest-earning assets 39,725 41,060
------ ------
Total assets $ 700,071 $ 652,218
========== ==========
Interest-bearing liabilities:
Passbook and statement savings $ 45,604 385 3.38% $ 44,765 377 3.37%
Checking accounts 29,141 149 2.04 26,518 173 2.61
Money market deposit accounts 45,223 370 3.27 41,291 330 3.20
Certificates of deposit 325,511 4,238 5.21 280,676 3,731 5.32
------- ----- ------- -----
Total interest-bearing deposits 445,479 5,142 4.62 393,250 4,611 4.69
------- ----- ------- -----
Advances from the Federal Home
Loan Bank 149,154 2,127 5.70 155,019 2,036 5.25
Securities sold under agreements
to repurchase 10,024 116 4.62 13,542 216 6.38
Other borrowings - - - 341 7 8.21
------- ----- ------- -----
Total borrowings 159,178 2,243 5.64 168,902 2,259 5.35
------- ----- ------- -----
Total interest-bearing liabilities 604,657 7,385 4.89 562,152 6,870 4.89
------- ----- ------- -----
Noninterest-bearing liabilities:
Deposits 40,913 37,930
Other liabilities 3,819 5,121
------- -------
Total noninterest-bearing liabilities 44,732 43,051
------- -------
Total liabilities 649,389 605,203
Stockholders' equity 50,682 47,015
------- -------
Total liabilities and stockholders' equity $ 700,071 $ 652,218
========== ==========
Net interest income/interest rate spread $ 5,381 2.84% $ 4,822 2.76%
======= ==== ======== ====
Net interest position/net interest margin $ 55,689 3.26% $ 49,006 3.16%
========== ==== ========== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 109.21% 108.72%
====== ======
<FN>
(1) Includes nonaccrual loans and loans held for sale.
</FN>
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
For the Six Months For the Six Months
Ended Ended
June 30, 1997 June 30, 1996
---------------------------- ----------------------------
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) $ 452,583 $ 18,377 8.12% $ 321,255 $ 14,022 8.73%
Mortgage-backed certificates 145,395 5,009 6.89 209,826 6,938 6.61
U.S. Treasury and other U.S.
Government agency securities 45,218 1,425 6.30 63,548 2,066 6.50
Federal funds sold 6,789 187 5.50 7,272 192 5.28
Federal Home Loan Bank and
Federal Reserve Bank stock 8,915 318 7.13 9,067 325 7.17
------- ------ ------- ------
Total interest-earning assets 658,900 25,316 7.68 610,968 23,543 7.71
------- ------ ------- ------
Noninterest-earning assets:
REO 2,100 1,658
Other 39,131 37,857
------- -------
Total noninterest-earning assets 41,231 39,515
------- -------
Total assets $ 700,131 $ 650,483
========== ==========
Interest-bearing liabilities:
Passbook and statement savings $ 46,294 777 3.36% $ 44,779 757 3.38%
Checking accounts 29,052 302 2.08 26,364 343 2.60
Money market deposit accounts 45,508 745 3.27 41,945 673 3.21
Certificates of deposit 325,196 8,374 5.15 284,713 7,699 5.41
------- ------ ------- -----
Total interest-bearing deposits 446,050 10,198 4.57 397,801 9,472 4.76
------- ------ ------- -----
Advances from the Federal Home
Loan Bank 152,950 4,222 5.52 155,689 4,132 5.31
Securities sold under agreements
to repurchase 8,266 186 4.50 8,460 252 5.96
Other borrowings - - - 440 17 7.73
------- ----- ------- ------
Total borrowings 161,216 4,408 5.47 164,589 4,401 5.35
------- ----- ------- -----
Total interest-bearing liabilities 607,266 14,606 4.81 562,390 13,873 4.93
------- ------ ------- ------
Noninterest-bearing liabilities:
Deposits 39,295 36,620
Other liabilities 3,283 4,471
------- -------
Total noninterest-bearing liabilities 42,578 41,091
------- -------
Total liabilities 649,844 603,481
Stockholders equity 50,287 47,002
------- -------
Total liabilities and stockholders' equity $ 700,131 $ 650,483
========== ==========
Net interest income/interest rate spread $ 10,710 2.87% $ 9,670 2.78%
======== ==== ========= ====
Net interest position/net interest margin $ 51,634 3.25% $ 48,578 3.17%
========== ==== ========== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 108.50% 108.64%
====== ======
<FN>
(1) Includes nonaccrual loans and loans held for sale.
</FN>
</TABLE>
13
<PAGE>
Comparison of Operating Results for the Three Months Ended June 30, 1997
and June 30, 1996.
General
The Company's pre-tax income for the three months ended June 30, 1997, was
$2.4 million compared to $1.9 million during the same period in the prior year.
This increase is primarily attributable to a $559,000 increase in net interest
income and a $378,000 increase in other income, the effect of which more than
offset a $324,000 increase in other expenses and a $97,000 increase in provision
for loan losses.
Net Interest Income
The Company's net interest income before provision for loan losses
increased by $559,000, or 11.6%, for the quarter ended June 30, 1997, as
compared to that of the previous year. This increase resulted primarily from a
$1.1 million increase in interest income which exceeded a $515,000 increase in
interest expense. The increase in interest income was primarily attributable to
an increase in the average balance on loans. The increase in interest expense
was primarily due to an increase in the average balance of certificates of
deposit.
Interest on the Company's portfolio of mortgage-backed certificates
decreased by approximately $1.1 million from $3.4 million for the quarter ended
June 30, 1996, to $2.3 million for the comparable 1997 period. This decrease
resulted from an $80.6 million decrease in the average balance of the portfolio
offset by an increase in the average yield of the portfolio from 6.53% in the
quarter ended June 30, 1996, to 7.09% in the comparable 1997 period. The
decrease in the average balance of mortgage-backed certificates was due to sales
and repayments.
Interest on loans increased by $2.6 million in the quarter ended June 30,
1997, compared to the comparable 1996 period. This increase was primarily
attributable to a $150.3 million increase in the average balance of loans. The
yield on the Company's loan portfolio decreased from 8.70% in the quarter ended
June 30, 1996, to 8.09% in the comparable 1997 period primarily as a result of
purchased loans with lower yields being added to the loan portfolio.
Interest on investment securities for the quarter ended June 30, 1997,
decreased by $345,000 compared to the same period in 1996 primarily due to a
$20.2 million decrease in the average balance of investment securities.
Interest on deposits increased by $531,000 in the quarter ended June 30,
1997, compared to the comparable 1996 period. This increase was primarily
attributable to a $44.8 million increase in the average balance of certificates
of deposit in the quarter ended June 30, 1997, compared to the comparable 1996
period, offset by a decrease in the average cost of certificates of deposit from
5.32% in the quarter ended June 30, 1996, to 5.21% in the comparable 1997
period. During the second half of 1996, the Company assumed $68.1 million of
deposits from Essex Savings Bank, FSB ("Essex").
The Company's net interest margin increased from 3.16% for the quarter
ended June 30, 1996, to 3.26% for the quarter ended June 30, 1997. This increase
was the result of an increase in the Company's interest rate spread from 2.76%
in the quarter ended June 30, 1996, to 2.84% in the comparable 1997 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 increased by $97,000 to $150,000
for the three months ended June 30, 1997, compared to the same period in 1996.
Net loans charged off during the quarter ended June 30, 1997, were $339,000
compared to $53,000 in the comparable 1996 period.
Other Income
Total other income increased from $981,000 in the quarter ended June 30,
1996, to $1,359,000 in the comparable 1997 period.
Deposit fees increased by $181,000, primarily as the result of increases in
usage fees from the Company's automated teller network and increases in checking
account fees. Merchant processing fees increased by $129,000, and discounts
related to the purchase of accounts receivable through the Business Manager
program at Princess Anne increased by $57,000. These increases were offset by a
reduction of $71,000 in gains on sales of mortgage loans.
14
<PAGE>
Income from this area of the Companys operations often fluctuates from quarter
to quarter depending on the level of loans sold to others. The Company believes
that this decrease in income from this area in the second quarter of 1997 is not
indicative of a fundamental change in this area of operation.
Other Expenses
Total other expenses increased by $324,000 for the quarter ended June 30,
1997, compared to the comparable 1996 period.
Salaries and employee benefits increased by $53,000, or 2.80% compared to
the same period in 1996. The expansion of the retail banking network was
partially responsible for increases of equipment, data processing and supply
expense by $99,000 and net occupancy expense of premises by $38,000. Merchant
processing expenses increased by $122,000 due to increases in volume, and
intangible amortization increased by $60,000 associated with the Essex branch
purchase and deposit assumption which occurred in the second half of 1996.
Expenses associated with REO increased by $101,000. Offsetting these increases
was a decrease in federal deposit insurance premiums of $164,000 due to a lower
deposit insurance assessment rate during 1997 as compared to 1996.
Comparison of Operating Results for the Six Months Ended June 30, 1997
and June 30, 1996.
General
The Company's pre-tax income for the six months ended June 30, 1997, was
$4.0 million compared to $3.7 million during the same period in the prior year.
This increase is primarily attributable to a $1.0 million increase in net
interest income and a $453,000 increase in other income, the effects of which
more than offset a $1.1 million increase in other expenses and a $145,000
increase in provision for loan losses.
Net Interest Income
The Company's net interest income before provision for loan losses
increased by $1.0 million, or 10.8%, for the six months ended June 30, 1997, as
compared to that of the previous year. This increase resulted primarily from a
$1.8 million increase in interest income, which exceeded a $733,000 increase in
interest expense. The increase in interest income was primarily attributable to
an increase in the average balance on loans. The increase in interest expense
was primarily due to an increase in the average balance of certificates of
deposit.
Interest on the Company's portfolio of mortgage-backed certificates
decreased by approximately $1.9 million from $6.9 million for the six months
ended June 30, 1996, to $5.0 million for the comparable 1997 period. This
decrease resulted from a $64.4 million decrease in the average balance of the
portfolio offset by an increase in the average yield of the portfolio from 6.61%
in the six months ended June 30, 1996, to 6.89% in the comparable 1997 period.
The decrease in the average balance of mortgage-backed certificates was due to
sales and repayments.
Interest on loans increased by $4.4 million in the six months ended June
30, 1997, compared to the comparable 1996 period. This increase was primarily
attributable to a $131.3 million increase in the average balance of loans. The
yield on the Company's loan portfolio decreased from 8.73% in the six months
ended June 30, 1996, to 8.12% in the comparable 1997 period primarily as a
result of purchased loans with lower yields being added to the loan portfolio.
Interest on investment securities for the six months ended June 30, 1997
decreased by $641,000 compared to the same period in 1996 primarily due to an
$18.3 million decrease in the average balance of investment securities.
Interest on deposits increased by $726,000 in the six months ended June 30,
1997, compared to the comparable 1996 period. This increase was primarily
attributable to a $40.5 million increase in the average balance of certificates
of deposit in the six months ended June 30, 1997, compared to the comparable
1996 period, offset by a decrease in the average cost of certificates of deposit
from 5.41% in the six months ended June 30, 1996, to 5.15% in the comparable
1997 period. During the second half of 1996, the Company assumed $68.1 million
of deposits from Essex.
15
<PAGE>
The Company's net interest margin increased from 3.17% for the six months
ended June 30, 1996, to 3.25% for the six months ended June 30, 1997. This
increase was the result of an increase in the Company's interest rate spread
from 2.78% in the six months ended June 30, 1996, to 2.87% in the comparable
1997 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 increased by $145,000 to $300,000
for the six months ended June 30, 1997, compared to the same period in 1996. Net
loans charged off during the six months ended June 30, 1997, were $396,000
compared to $81,000 in the comparable 1996 period.
Other Income
Total other income increased from $1.9 million in the six months ended
June 30, 1996, to $2.3 million in the comparable 1997 period.
Deposit fees increased by $356,000, primarily as the result of increases in
usage fees from the Company's automated teller network and increases in checking
account fees. Merchant processing fees increased by $237,000, and discounts
related to the purchase of accounts receivable through the Business Manager
program at Princess Anne increased by $84,000. These increases were offset by a
reduction of $146,000 in the gains on sales of mortgage loans and a $127,000
reduction in commercial mortgage brokerage fees. Income from these two areas of
the Company's operations often fluctuates depending on the level of loans sold
to or placed with others. The Company believes that this decrease in income from
these two areas in the first half of 1997 is not indicative of a fundamental
change in these areas of operation.
Other Expenses
Total other expenses increased by $1.1 million for the six months ended
June 30, 1997, compared to the comparable 1996 period. The six months ended June
30, 1997 includes $405,000 of expenses relating to the Companys recent proxy
contest and other matters. These expenses resulted from proxy solicitation
expenses and from legal and other expenses related to investigations of possible
violations of banking and securities laws by entities outside the Company.
Salaries and employee benefits increased by $213,000, or 5.58%, partially
related to the expansion of the retail banking network. The expansion of the
retail banking network was also partially responsible for increases of
equipment, data processing and supply expense by $180,000 and net occupancy
expense of premises by $91,000. Merchant processing expenses increased by
$216,000 due to increases in volume and intangible amortization increased by
$120,000 associated with the Essex branch purchase and deposit assumption which
occurred in the second half of 1996. Offsetting these increases was a decrease
in federal deposit insurance premiums of $324,000 due to a lower deposit
insurance assessment rate during 1997 as compared to 1996.
Liquidity
The principal sources of funds for the Company for the six months ended
June 30, 1997, included $686.0 million in proceeds from Federal Home Loan Bank
(FHLB) advances, $26.7 million in principal repayments of securities available
for sale, $26.7 million in proceeds from sales of securities available for sale,
and $15.8 million in proceeds from the sale of loans. Funds were used primarily
to repay FHLB advances totaling $703.0 million, to fund a $58.1 million net
increase in loans held for investment, to fund purchases of investment
securities available for sale totaling $8.1 million, and to originate loans held
for sale of $17.2 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.
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,
16
<PAGE>
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 9.3% and 9.5% at
June 30, 1997 and December 31, 1996, respectively.
17
<PAGE>
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
At the Company's annual meeting held on April 23, 1997 (the "Annual
Meeting"), the Company's stockholders reelected four directors of the Company,
David L. Bernd, Patrick E. Corbin, John A. Tilhou and David R. Tynch. The voting
results in the election for directors were as follows:
FOR WITHHELD
David L. Bernd 723,776 28,570
Patrick E. Corbin 723,876 28,470
John A. Tilhou 723,876 28,470
David R. Tynch 723,876 28,470
Bonnie N. Curling 583,685 7,900
William S. Dodson 583,651 7,934
Burt E. Miller 583,685 7,900
The terms of office of each of the other directors of the Company continued
following the Annual Meeting. These directors are Frank R. Kollmansperger, Jr.,
William H. Hodges, C. L. Kaufman, Jr., Anne B. Shumadine, Michael S. Ives,
Roger C. Reinhold and J. Morgan Davis.
At the Annual Meeting, CENIT's stockholders also rejected a proposal that
the Board of Directors of the Company engage an investment banker to conduct and
publicly report a valuation of the Company, by a vote of 663,765 shares in favor
of the proposal and 670,777 shares against the proposal, and 9,389 abstentions.
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: August 5, 1997 /S/Michael S. Ives
Michael S. Ives
President and Chief Executive Officer
DATE: August 5, 1997 /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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 14,654
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,372
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 168,034
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 487,540
<ALLOWANCE> 3,710
<TOTAL-ASSETS> 709,550
<DEPOSITS> 510,618
<SHORT-TERM> 143,154
<LIABILITIES-OTHER> 4,422
<LONG-TERM> 0
0
0
<COMMON> 16
<OTHER-SE> 51,340
<TOTAL-LIABILITIES-AND-EQUITY> 709,550
<INTEREST-LOAN> 18,377
<INTEREST-INVEST> 6,434
<INTEREST-OTHER> 505
<INTEREST-TOTAL> 25,316
<INTEREST-DEPOSIT> 10,198
<INTEREST-EXPENSE> 14,606
<INTEREST-INCOME-NET> 10,710
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 90
<EXPENSE-OTHER> 8,721
<INCOME-PRETAX> 4,019
<INCOME-PRE-EXTRAORDINARY> 2,601
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,601
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.52
<YIELD-ACTUAL> 3.25
<LOANS-NON> 1,794
<LOANS-PAST> 598
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,806
<CHARGE-OFFS> 452
<RECOVERIES> 56
<ALLOWANCE-CLOSE> 3,710
<ALLOWANCE-DOMESTIC> 3,710
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
