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 September 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 1,657,081
---------
Title of Class Number of Shares Outstanding
as of October 31, 1997
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARIES
Contents
_______________________________________________________________________________
Page
----
PART I - FINANCIAL INFORMATION
Item 1
- ------
Financial Statements
Consolidated Statement of Financial Condition as of September 30, 1997
(Unaudited)and December 31, 1996...............................................1
Unaudited Consolidated Statement of Operations for the Three Months and
Nine Months ended September 30, 1997 and September 30, 1996....................2
Unaudited Consolidated Statement of Changes in Stockholders' Equity for the Nine
Months ended September 30, 1997................................................3
Unaudited Consolidated Statement of Cash Flows for the Nine Months ended
September 30, 1997 and September 30, 1996......................................4
Notes to Unaudited Consolidated Financial Statements.......................... 5
Item 2
- ------
Management's Discussion and Analysis of Financial Condition and Results of
Operations.....................................................................6
PART II - OTHER INFORMATION
Item 1
- ------
Legal Proceedings..........................................................17
Item 2
- ------
Changes in Securities......................................................17
Item 3
- ------
Defaults Upon Senior Securities............................................17
Item 4
- ------
Submission of Matters to a Vote of Security Holders........................17
Item 5
- ------
Other Information..........................................................17
Item 6
- ------
Exhibits and Reports on Form 8-K...........................................17
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)
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Cash $ 13,310 $ 17,475
Federal funds sold and interest earning deposits 8,368 6,003
Securities available for sale at fair value (adjusted
cost of $154,279 and $222,367, respectively) 156,471 224,011
Loans, net:
Held for investment 482,847 422,219
Held for sale 3,356 1,900
Interest receivable 5,221 5,456
Real estate owned, net 1,487 2,769
Federal Home Loan Bank and Federal Reserve Bank stock, at cost 9,211 7,861
Property and equipment, net 13,646 12,664
Goodwill and other intangibles 4,101 4,381
Other assets 3,690 2,361
----- -----
$ 701,708 $ 707,100
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing $ 54,220 $ 46,154
Interest-bearing 455,268 452,811
------- -------
Total deposits 509,488 498,965
Advances from the Federal Home Loan Bank 126,000 148,000
Other borrowings 3,965 -
Securities sold under agreements to repurchase 9,479 7,138
Advance payments by borrowers for taxes and insurance 1,146 631
Other liabilities 2,891 2,758
----- -----
Total liabilities 652,969 657,492
------- -------
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 1,654,391 and 1,635,044 shares,
respectively 17 16
Additional paid-in capital 18,120 17,670
Retained earnings - substantially restricted 33,724 31,040
Common stock acquired by Employees Stock Ownership
Plan (ESOP) (82,719 shares - unallocated) (4,232) -
Common stock acquired by Management Recognition
Plan (MRP) (300) (181)
Net unrealized gain on securities available for sale,
net of income taxes 1,410 1,063
----- -----
Total stockholders' equity 48,739 49,608
------ ------
$ 701,708 $ 707,100
========== =========
The notes to unaudited consolidated financial statements are an integral part of
this statement.
</TABLE> 1
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
Three Months Nine Months
Ended Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest and fees on loans $ 9,882 $ 7,859 $ 28,260 $ 21,880
Interest on mortgage-backed certificates 2,005 3,269 7,013 10,208
Interest on investment securities 683 850 2,108 2,916
Dividends and other interest income 288 278 793 795
--- --- --- ---
Total interest income 12,858 12,256 38,174 35,799
------ ------ ------ ------
Interest on deposits 5,415 4,537 15,612 14,009
Interest on borrowings 2,046 2,598 6,455 6,999
----- ----- ----- -----
Total interest expense 7,461 7,135 22,067 21,008
----- ----- ------ ------
Net interest income 5,397 5,121 16,107 14,791
Provision for loan losses 150 101 450 256
--- --- --- ---
Net interest income after provision
for loan losses 5,247 5,020 15,657 14,535
----- ----- ------ ------
Other income:
Deposit fees 521 366 1,498 986
Gains on sales of loans 174 124 398 494
Gains on sales of securities - 45 90 77
Loan servicing fees and late charges 70 80 250 270
Other 611 438 1,470 1,103
--- --- ----- -----
Total other income 1,376 1,053 3,706 2,930
----- ----- ----- -----
Other expenses:
Salaries and employee benefits 1,846 1,970 5,873 5,785
Equipment, data processing and supplies 653 608 2,009 1,784
Net occupancy expense of premises 467 437 1,385 1,264
Expenses, gains/losses on sales and provision
for losses on real estate owned, net 31 24 172 30
Professional fees 25 108 263 325
Federal deposit insurance premiums 66 2,548 208 3,015
Expenses related to proxy contest and
other matters - - 405 -
Other 891 655 2,385 1,811
--- --- ----- -----
Total other expenses 3,979 6,350 12,700 14,014
----- ----- ------ ------
Income (loss) before income taxes 2,644 (277) 6,663 3,451
Provision for (benefit from) income taxes 935 (162) 2,353 1,142
--- ---- ----- -----
Net income (loss) $ 1,709 $ (115) $ 4,310 $ 2,309
======== ======== ========= =========
Earnings (loss) per common and common
equivalent share $ 1.02 $ (.07) $ 2.54 $ 1.38
======== ======== ========= =========
Dividends per common share $ .25 $ .20 $ .75 $ .50
======== ======== ========= =========
The notes to unaudited consolidated financial statements are an integral part of
this statement.
</TABLE>
2
<PAGE>
CENIT BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1997
(Dollars in thousands)
<TABLE>
Common Net Unrealized
Stock Gain (Loss) on
Common Additional Acquired Securities
Common Stock Paid-In Retained by ESOP Available for
Stock Shares Amount Capital Earnings and 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 - - - 4,310 - - 4,310
Cash dividends declared - - - (1,626) - - (1,626)
Exercise of stock options
and related tax benefits 19,347 1 450 - - - 451
Net change in unrealized gain (loss)
on securities available for sale,
net of income taxes - - - - - 347 347
Purchase of common stock by ESOP - - - - (4,232) - (4,232)
Other - - - - (119) - (119)
---- --- --- --- ---- --- ------
Balance, September 30, 1997 1,654,391 $ 17 $18,120 $33,724 $(4,532) $1,410 $48,739
========= ===== ======= ======= ======= ====== =======
The notes to unaudited consolidated financial statements are an integral part of
this statement.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CENIT BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Nine months ended September 30,
-------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,310 $ 2,309
Add (deduct) items not affecting cash in the period:
Provision for loan losses 450 256
Provision for losses on real estate owned 67 -
Amortization of loan yield adjustments 115 (30)
Depreciation, amortization and accretion, net 1,724 1,765
Net (gains) losses on sales/disposals of:
Securities (90) (77)
Loans (398) (494)
Real estate, property and equipment 14 (16)
Proceeds from sales of loans held for sale 30,910 37,139
Originations of loans held for sale (31,997) (35,187)
Change in assets/liabilities:
Decrease in interest receivable and other assets (981) (1,519)
Increase in other liabilities 71 1,142
-- -----
Net cash provided by operating activities 4,195 5,288
----- -----
Cash flows from investing activities:
Purchases of securities available for sale (12,094) (63,892)
Principal repayments on securities available for sale 38,328 52,774
Proceeds from maturities and calls of securities available for sale 14,500 22,160
Proceeds from sales of securities available for sale 26,677 14,792
Net increase in loans held for investment (61,012) (64,821)
Net proceeds on sales of real estate owned 1,082 360
Additions to real estate owned (87) (132)
Purchases of Federal Home Loan Bank stock (1,600) (6,651)
Redemption of Federal Home Loan Bank stock 250 3,610
Proceeds from sale of property and equipment 5 -
Purchases of property and equipment (1,836) (1,337)
------ ------
Net cash provided by (used for) investing activities 4,213 (43,137)
----- -------
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants 306 555
Net increase in deposits 10,523 39,840
Proceeds from Federal Home Loan Bank advances 987,000 1,535,000
Repayment of Federal Home Loan Bank advances (1,009,000) (1,537,000)
Net increase in other borrowings 3,965 -
Net increase in securities sold under agreement
to repurchase 2,341 2,626
Cash dividends paid (1,626) (806)
Purchase of common stock by ESOP (4,232) -
Other, net 515 129
--- ---
Net cash provided by (used for) financing activities (10,208) 40,344
------- ------
Increase (decrease) in cash and cash equivalents (1,800) 2,495
Cash and cash equivalents, beginning of period 23,478 20,405
------ ------
Cash and cash equivalents, end of period $ 21,678 $ 22,900
========= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 8,928 $ 9,195
Cash paid during the period for income taxes 2,095 1,595
Schedule of noncash investing and financing activities:
Real estate acquired in settlement of loans $ 1,225 $ 2,441
Loans to facilitate sale of real estate owned 1,406 1,372
The notes to unaudited consolidated financial statements are an integral part of
this statement.
</TABLE>
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
nine month periods ended September 30, 1997 and 1996 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, 1996 consolidated financial statements of
CENIT Bancorp, Inc. (the "Company").
Note 2 - Earnings and Dividends Per Share
Earnings per share for the three and nine months ended September 30, 1997
are determined by dividing income for the periods by 1,676,989 and 1,698,565,
respectively, the weighted average number of shares of outstanding common stock,
adjusted for unallocated common shares held by the Company's ESOP, and common
stock equivalents, where dilutive. Earnings per share for the three and nine
months ended September 30, 1996 are determined by dividing income for the
periods by 1,602,531 and 1,675,619, respectively, the weighted average number of
shares of common stock and common stock equivalents outstanding, where dilutive.
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.
Note 3 - New Accounting Standards
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" (FASB 125), which
provides new accounting and reporting standards for sales, securitizations, and
servicing of receivables and other financial assets and extinguishments of
liabilities. FASB125 is effective for transactions occurring after December 31,
1996, except for the provisions relating to repurchase agreements, securities
lending and other similar transactions and pledged collateral, which have been
delayed until after December 31, 1997 by FASB 127, "Deferral of the Effective
Date of Certain Provisions of FASB Statement No. 125, an amendment of FASB
Statement No. 125." Adoption of FASB125 was not material; FASB127 will be
adopted as required in 1998 and is not expected to be material.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (FASB 128), was issued and is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share ("EPS") and restate all
prior periods. The new requirements replace the current primary EPS and fully
diluted EPS with two new calculations, basic EPS and diluted EPS. Basic EPS,
unlike primary EPS, excludes all dilution caused by any common stock equivalents
(e.g., options on stock). Diluted EPS is calculated similarly to fully diluted
EPS, except diluted EPS uses the average price of the Company's stock during the
accounting period, while fully diluted EPS uses the price of the Company's stock
at the end of the accounting period. If FAS 128 had been in effect during the
first nine months of 1997, the Company would have reported basic EPS of $1.06
and diluted EPS of $1.02 , for the three months ended September 30, 1997, and
basic EPS of $2.64 and diluted EPS of $2.54 for the nine months ended September
30, 1997.
In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (FASB 130), was issued and establishes
standards for reporting and displaying comprehensive income and its components.
FASB 130 requires comprehensive income and its components, as recognized under
the accounting standards, to be displayed in a financial statement with the
prominence as other financial statements. The Company plans to adopt the
standard, as required, beginning in 1998; adoption is not expected to have a
material impact on the Company.
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (FASB 131), also issued in
June 1997, establishes new standards for reporting information about operating
segments in annual and interim financial statements. The standard also requires
descriptive information about the way the operating segments are determined, the
products and services provided by the segments and the nature of differences
5
<PAGE>
between reportable segment measurements and those used for the consolidated
enterprise. This standard is effective for years beginning after December 15,
1997. Adoption in interim financial statements is not required until the year
after initial adoption; however, comparative prior period information is
required. The Company is evaluating the standard and plans adoption as required
in 1998; adoption is not expected to have a significant financial impact on 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 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 September 30, 1997, the Company had total assets of $701.7 million,
compared to $707.1 million at December 31, 1996.
Securities Available for Sale
Securities available for sale totaled $156.5 million at September 30, 1997
and are comprised of U. S. Treasury securities, other U. S. Government agency
securities, and mortgage-backed certificates. The net decrease of $67.5 million
from December 31, 1996 resulted primarily from the net effect of $38.3 million
of principal repayments, $14.5 million of proceeds from the maturities or calls
of securities, $12.1 million of U.S. Treasury and other U.S. Government agency
securities purchases, and $26.7 million of proceeds from the sale of securities.
Loans
- -----
The balance of net loans held for investment increased from $422.2 million
at December 31, 1996 to $482.8 million at September 30, 1997. Adjustable rate
residential permanent one- to four-family loans increased by $59.4 million
during the first nine months of 1997 due, in part, to the bulk purchase in 1997
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 $12.7
million during the first nine months of 1997. For the nine months ended
September 30, 1997, loan originations totaled $126.6 million, loan purchases
totaled $73.4 million, and total principal reductions totaled $148.3 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>
September 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 $ 216,964 41.83% $ 157,542 33.63%
Fixed rate
Conventional 93,192 17.97 98,952 21.12
Guaranteed by VA or insured by FHA 5,718 1.10 7,004 1.50
----- ---- ----- ----
Total permanent 1- to 4-family 315,874 60.90 263,498 56.25
Residential permanent 5 or more family 6,949 1.34 7,100 1.52
----- ---- ----- ----
Total permanent residential loans 322,823 62.24 270,598 57.77
------- ----- ------- -----
Commercial real estate loans:
Hotels 10,307 1.99 9,651 2.06
Office and warehouse facilities 26,035 5.02 27,178 5.80
Retail facilities 20,051 3.87 18,181 3.88
Other 2,109 .40 3,304 0.71
----- --- ----- ----
Total commercial real estate loans 58,502 11.28 58,314 12.45
------ ----- ------ -----
Construction loans:
Residential 1- to 4-family 39,826 7.68 43,807 9.35
Residential 5 or more family 8,174 1.58 8,855 1.89
Nonresidential 1,009 .19 3,365 .72
----- --- ----- ---
Total construction loans 49,009 9.45 56,027 11.96
------ ---- ------ -----
Land acquisition and development loans:
Consumer lots 4,696 .91 5,396 1.15
Acquisition and development 6,962 1.34 16,010 3.42
----- ---- ------ ----
Total land acquisition and development
loans 11,658 2.25 21,406 4.57
------ ---- ------ ----
Total real estate loans 441,992 85.22 406,345 86.75
------- ----- ------- -----
Consumer loans:
Boats 6,368 1.23 7,814 1.67
Home equity and second mortgage 42,288 8.15 29,578 6.31
Mobile homes 100 .02 137 0.03
Other 6,565 1.27 6,606 1.41
----- ---- ----- ----
Total consumer loans 55,321 10.67 44,135 9.42
------ ----- ------ ----
Commercial business loans 21,319 4.11 17,922 3.83
------ ---- ------ ----
Total loans 518,632 100.00% 468,402 100.00%
------- ====== ------- ======
Allowance for loan losses 3,792 3,806
Loans in process 32,636 42,309
Unearned discounts, premiums, and loan fees, net (643) 68
---- --
35,785 46,183
------ ------
Total loans, net $ 482,847 $ 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.
Nine Months Ended
September 30, 1997
------------------
(Dollars in Thousands)
Loans originated:
Real estate:
Permanent:
Residential 1- to 4-family $ 52,878
Residential 5 or more fami 840
---
Total 53,718
------
Commercial real estate 6,124
-----
Construction:
Residential 1- to 4-family 7,892
Residential 5 or more family 1,872
Nonresidential 836
---
Total 10,600
------
Land acquisition:
Consumer lots 333
Acquisition and development 3,419
-----
Total 3,752
-----
Total real estate loans originated 74,194
------
Consumer:
Home equity and second mortgage 23,890
Other 4,656
-----
Total 28,546
------
Commercial business 23,831
------
Total loans originated 126,571
-------
Loans purchased 73,395
------
Total loans originated and purchased 199,966
-------
Principal reductions:
Repayments and other principal reductions 117,041
Real estate loans sold 31,261
------
Total principal reductions 148,302
-------
Net increase in total loans $ 51,664
========
Net increase in loans held for sale $ 1,434
Net increase in gross loans held for investment 50,230
------
$ 51,664
========
8
<PAGE>
Deposits
- --------
The balance of deposits increased from $499.0 million at December 31, 1996
to $509.5 million at September 30, 1997. Noninterest-bearing deposits increased
from $46.2 million at December 31, 1996 to $54.2 million at September 30, 1997.
Also during this period, certificates of deposit increased from $329.7 million
at December 31, 1996, to $334.7 million at September 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 September 30, 1997.
In July 1997, the ESOP acquired 82,719 shares of the Company's stock. These
shares are unallocated as of September 30, 1997.
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.
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
(Dollars in Thousands)
<S> <C> <C>
Nonperforming loans:
Real estate loans:
Permanent residential 1- to 4-family
Nonaccrual $ 872 $ 1,172
Accruing loans 90 days or more past due 328 246
--- ---
Total 1,200 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
--- ---
Consumer loans:
Mobile homes (nonaccrual) 62 83
Credit cards (accruing loans 90 days or
more past due) 2 9
Other (nonaccrual) 27 17
-- --
Total 91 109
-- ---
Commercial business loans:
Nonaccrual 225 483
Accruing loans 90 days or more past due 6 -
--- ---
231 483
--- ---
Total nonperforming loans:
Nonaccrual 1,386 2,412
Accruing loans 90 or more days past due 503 425
--- ---
Total 1,889 2,837
Real estate owned, net 1,487 2,769
Other repossessed assets, net 292 55
--- --
Total nonperforming assets, net $3,668 $ 5,661
====== =======
Total nonperforming assets, net, to total assets .52% .80%
=== ===
</TABLE>
The decrease in nonperforming assets from December 31, 1996 to September 30,
1997 of $2.0 million related primarily to a net decrease in nonaccrual loans of
$1.0 million and a net decrease in real estate owned of $1.3 million, which
offset an increase in accruing loans 90 or more days past due of $78,000 and
other repossessed assets of $237,000.
10
<PAGE>
Allowance for Loan Losses. The following table sets forth activity of the
allowance for loan losses for the periods indicated.
Nine months ended September 30,
-------------------------------
1997 1996
---- ----
(Dollars in Thousands)
Balance at beginning of period $ 3,806 $ 3,696
Provision for loan losses 450 256
Losses charged to allowance (571) (399)
Recovery of prior losses 107 446
--- ---
Balance at end of period $ 3,792 $ 3,999
======= =======
The Company's provision for loan losses increased to $450,000 for the nine
months ended September 30, 1997 as compared to $256,000 in the same period in
1996. At September 30, 1997, the Company's coverage ratio was 200.0% based on a
total allowance for loan losses of $3.8 million and total nonperforming loans of
$1.9 million. This compares to a coverage ratio of 132.9% at September 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
September 30, 1997 September 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) $ 487,000 $ 9,882 8.12% $ 363,986 $ 7,859 8.64%
Mortgage-backed certificates 112,393 2,005 7.13 194,063 3,269 6.74
U.S. Treasury and other U.S.
Government agency securities 43,936 683 6.22 53,285 850 6.38
Federal funds sold 8,560 119 5.56 7,259 97 5.35
Federal Home Loan Bank and
Federal Reserve Bank stock 9,253 169 7.31 10,014 181 7.23
----- --- ------ ---
Total interest-earning assets 661,142 12,858 7.78 628,607 12,256 7.80
------- ------ ------- ------
Noninterest-earning assets:
REO 1,586 2,402
Other 38,219 37,149
------ ------
Total noninterest-earning assets 39,805 39,551
------ ------
Total assets $ 700,947 $ 668,158
========== ==========
Interest-bearing liabilities:
Passbook and statement savings $ 44,116 377 3.42% $ 45,536 391 3.43%
Checking accounts 28,939 149 2.06 27,035 165 2.44
Money market deposit accounts 47,981 402 3.35 42,031 336 3.20
Certificates of deposit 336,156 4,487 5.34 274,148 3,645 5.32
------- ----- ------- -----
Total interest-bearing deposits 457,192 5,415 4.74 388,750 4,537 4.67
------- ----- ------- -----
Advances from the Federal Home
Loan Bank 131,978 1,894 5.74 181,087 2,518 5.56
Securities sold under agreements
to repurchase 9,734 116 4.77 6,960 75 4.31
Other borrowings 1,893 36 7.61 237 5 8.44
----- -- --- -
Total borrowings 143,605 2,046 5.70 188,284 2,598 5.52
------- ----- ------- -----
Total interest-bearing liabilities 600,797 7,461 4.97 577,034 7,135 4.95
------- ----- ------- -----
Noninterest-bearing liabilities:
Deposits 45,883 39,336
Other liabilities 4,185 3,672
----- -----
Total noninterest-bearing liabilities 50,068 43,008
------ ------
Total liabilities 650,865 620,042
Stockholders' equity 50,082 48,116
------ ------
Total liabilities and stockholders' equity $ 700,947 $ 668,158
========== ==========
Net interest income/interest rate spread $ 5,397 2.81% $ 5,121 2.85%
======= ==== ======== ====
Net interest position/net interest margin $ 60,345 3.27% $ 51,573 3.26%
========== ==== ========== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 110.04% 108.94%
====== ======
(1) Includes nonaccrual loans and loans held for sale.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months For the Nine Months
Ended Ended
September 30, 1997 September 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) $ 464,181 $ 28,260 8.12% $ 335,603 $ 21,880 8.69%
Mortgage-backed certificates 134,392 7,013 6.96 204,506 10,208 6.66
U.S. Treasury and other U.S.
Government agency securities 44,791 2,108 6.28 60,102 2,916 6.47
Federal funds sold 7,386 305 5.51 7,267 289 5.30
Federal Home Loan Bank and
Federal Reserve Bank stock 9,029 488 7.21 9,385 506 7.19
----- --- ----- ---
Total interest-earning assets 659,779 38,174 7.71 616,863 35,799 7.74
------- ------ ------- ------
Noninterest-earning assets:
REO 1,927 1,908
Other 38,781 37,648
------ ------
Total noninterest-earning assets 40,708 39,556
------ ------
Total assets $ 700,487 $ 656,419
========== ==========
Interest-bearing liabilities:
Passbook and statement savings $ 45,560 1,154 3.38% $ 45,033 1,148 3.40%
Checking accounts 29,014 451 2.07 26,590 508 2.55
Money market deposit accounts 46,341 1,147 3.30 41,974 1,010 3.21
Certificates of deposit 328,889 12,860 5.21 281,166 11,343 5.38
------- ------ ------- ------
Total interest-bearing deposits 449,804 15,612 4.63 394,763 14,009 4.73
------- ------ ------- ------
Advances from the Federal Home
Loan Bank 145,882 6,117 5.59 162,943 6,651 5.44
Securities sold under agreements
to repurchase 8,761 301 4.58 9,230 327 4.72
Other borrowings 638 37 7.73 372 21 7.53
--- -- --- --
Total borrowings 155,281 6,455 5.54 172,545 6,999 5.41
------- ----- ------- -----
Total interest-bearing liabilities 605,085 22,067 4.86 567,308 21,008 4.94
------- ------ ------- ------
Noninterest-bearing liabilities:
Deposits 41,515 37,532
Other liabilities 3,789 4,203
----- -----
Total noninterest-bearing liabilities 45,304 41,735
------ ------
Total liabilities 650,389 609,043
Stockholders' equity 50,098 47,376
------ ------
Total liabilities and stockholders' equity $ 700,487 $ 656,419
========== ==========
Net interest income/interest rate spread $ 16,107 2.85% $ 14,791 2.80%
======== ==== ========= ====
Net interest position/net interest margin $ 54,694 3.26% $ 49,555 3.20%
========== ==== ========== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 109.04% 108.74%
====== ======
(1) Includes nonaccrual loans and loans held for sale.
</TABLE>
13
<PAGE>
Comparison of Operating Results for the Three Months Ended
September 30, 1997 and September 30, 1996.
- ------------------------------------------
General
- -------
The Company's pre-tax income for the three months ended September 30, 1997
was $2.6 million compared to a pre-tax loss of $277,000 during the same period
in the prior year. This increase in income is largely attributable to a $2.4
million decrease in other expenses resulting primarily from the 1996 $2.3
million special assessment charged to the Company in connection with the federal
legislation to recapitalize the Savings Association Insurance Fund ("SAIF") of
the Federal Deposit Insurance Corporation. The Company also had an increase in
net interest income of $276,000, an increase in other income of $323,000 and a
$49,000 increase in provision for loan losses.
Net Interest Income
- -------------------
The Company's net interest income before provision for loan losses
increased by $276,000, or 5.4%, for the quarter ended September 30, 1997 as
compared to that of the previous year. This increase resulted primarily from a
$602,000 increase in interest income which exceeded a $326,000 increase in
interest expense. The increase in interest income was primarily attributable to
an increase in the average balance of loans. The increase in interest expense
was primarily due to an increase in the average balance of certificates of
deposits.
Interest on the Company's portfolio of mortgage-backed certificates
decreased by approximately $1.3 million from $3.3 million for the quarter ended
September 30, 1996 to $2.0 million for the comparable 1997 period. This decrease
resulted from an $81.7 million decrease in the average balance of the portfolio
offset by an increase in the average yield of the portfolio from 6.74% in the
quarter ended September 30, 1996, to 7.13% in the comparable 1997 period. The
decrease in the average balance of mortgage-backed certificates was due to sales
and repayments.
Interest and fees on loans increased by $2.0 million in the quarter ended
September 30, 1997, compared to the comparable 1996 period. This increase was
primarily attributable to a $123.0 million increase in the average balance of
loans. The yield on the Company's loan portfolio decreased from 8.64% in the
quarter ended September 30, 1996, to 8.12% in the comparable 1997 period
primarily as a result of purchased loans outside the market area with lower
yields being added to the loan portfolio.
Interest on investment securities for the quarter ended September 30, 1997,
decreased by $167,000 compared to the same period in 1996 primarily due to a
$9.3 million decrease in the average balance of investment securities.
Interest on deposits increased by $878,000 in the quarter ended September
30, 1997 compared to the comparable 1996 period. This increase was primarily
attributable to a $62.0 million increase in the average balance of certificates
of deposit in the quarter ended September 30, 1997, compared to the comparable
1996 period. During September 1996, the Company assumed $62.8 million of
deposits from Essex Savings Bank, FSB ("Essex"). Interest on borrowings
decreased by $552,000 primarily due to a $49.1 million decrease in the average
balance of advances from the Federal Home Loan Bank.
The Company's net interest margin was 3.27% for the quarter ended September
30, 1997 and 3.26% for the quarter ended September 30, 1996. 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 $49,000 to $150,000
for the three months ended September 30, 1997, compared to the same period in
1996. Net loan losses charged to the allowance during the quarter ended
September 30, 1997 were $68,000 compared to $128,000 of net recoveries of prior
losses in the comparable 1996 period.
Other Income
- ------------
Total other income increased from $1.1 million in the quarter ended
September 30, 1996 to $1.4 million in the comparable 1997 period.
Deposit fees increased by $155,000, or 42.3%, primarily as the result of
increases in usage fees from the Company's automated teller network which
increased by $115,000. Merchant processing fees increased by $214,000, and
discounts
14
<PAGE>
related to the purchase of accounts receivable through the Business Manager
program at Princess Anne increased by $81,000. Gains on sales of loans increased
by $50,000. These increases were offset by a $123,000 reduction in commercial
mortgage brokerage fees. These fees often fluctuate from quarter to quarter
depending on the level of loans placed with others.
Other Expenses
- --------------
Total other expenses decreased by $2.4 million for the quarter ended
September 30, 1997 compared to the comparable 1996 period. During the third
quarter of 1996, the Company incurred a special one-time assessment of $2.3
million charged to the Company in connection with the federal legislation to
recapitalize the SAIF.
Salaries and employee benefits decreased by $124,000, or 6.3%, compared to
the same period in 1996, due, in part, to lower commissions as a result of the
decrease in commercial mortgage brokerage activity in the third quarter of 1997.
Merchant processing expenses increased by $189,000 due to increases in volume,
and intangible amortization increased by $60,000 associated with the Essex
branch purchase and deposit assumption which occurred in September 1996.
Professional fees decreased by $83,000 during the third quarter of 1997 compared
to the third quarter of 1996 primarily as a result of a recovery of legal costs
relating to previous problem assets.
Comparison of Operating Results for the Nine Months Ended September 30, 1997 and
September 30, 1996.
- -------------------
General
- -------
The Company's pre-tax income for the nine months ended September 30, 1997
was $6.7 million compared to $3.5 million during the same period in the prior
year. This increase is attributable to a $1.3 million decrease in other expenses
which includes $405,000 of expenses related to the Company's proxy contest and
other matters in 1997 and $2.3 million of expense associated with the special
one-time SAIF assessment in 1996, a $776,000 increase in other income, and a
$1.3 million increase in net interest income, the effects of which more than
offset a $194,000 increase in provision for loan losses.
Net Interest Income
- -------------------
The Company's net interest income before provision for loan losses
increased by $1.3 million, or 8.9%, for the nine months ended September 30,
1997, as compared to that of the previous year. This increase resulted primarily
from a $2.4 million increase in interest income, which exceeded a $1.1 million
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 $3.2 million from $10.2 million for the nine months
ended September 30, 1996, to $7.0 million for the comparable 1997 period. This
decrease resulted from a $70.1 million decrease in the average balance of the
portfolio, offset by an increase in the average yield of the portfolio from
6.66% in the nine months ended September 30, 1996, to 6.96% in the comparable
1997 period. The decrease in the average balance of mortgage-backed certificates
was due to sales and repayments.
Interest and fees on loans increased by $6.4 million in the nine months
ended September 30, 1997 compared to the comparable 1996 period. This increase
was attributable to a $128.6 million increase in the average balance of loans.
The yield on the Company's loan portfolio decreased from 8.69% in the nine
months ended September 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 nine months ended September 30,
1997 decreased by $808,000 compared to the same period in 1996 primarily due to
a $15.3 million decrease in the average balance of investment securities.
Interest on deposits increased by $1.6 million in the nine months ended
September 30, 1997, compared to the comparable 1996 period. This increase was
primarily attributable to a $47.7 million increase in the average balance of
certificates of deposit in the nine months ended September 30, 1997, compared to
the comparable 1996 period, offset by a decrease in the average cost of
certificates of deposit from 5.38% in the nine months ended September 30, 1996,
to 5.21% in the comparable 1997 period. In September 1996, the Company assumed
$62.8 million of deposits from
15
<PAGE>
Essex. Interest on borrowings decreased by $544,000 primarily due to a $17.1
million decrease in the average balance of advances from the Federal Home Loan
Bank.
The Company's net interest margin increased from 3.20% for the nine months
ended September 30, 1996, to 3.26% for the nine months ended September 30, 1997.
This increase was the result of an increase in the Company's interest rate
spread from 2.80% in the nine months ended September 30, 1996, to 2.85% 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 $194,000 to $450,000
for the nine months ended September 30, 1997, compared to the same period in
1996. Net loan losses charged to the allowance during the nine months ended
September 30, 1997, were $464,000 compared to $47,000 of net recoveries of prior
losses in the comparable 1996 period.
Other Income
- ------------
Total other income increased from $2.9 million in the nine months ended
September 30, 1996 to $3.7 million in the comparable 1997 period.
Deposit fees increased by $512,000, primarily as the result of increases in
usage fees from the Company's automated teller network of $319,000 and increases
in checking account fees of $155,000. Merchant processing fees increased by
$452,000, and discounts related to the purchase of accounts receivable through
the Business Manager program at Princess Anne increased by $162,000. These
increases were offset by a reduction of $96,000 in the gains on sales of loans
and a $249,000 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.
Other Expenses
- --------------
Total other expenses decreased by $1.3 million for the nine months ended
September 30, 1997 compared to the comparable 1996 period. The nine months ended
September 30, 1997 includes $405,000 of expenses relating to the Company's 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. The
nine months ended September 30, 1996 includes a special one-time assessment of
$2.3 million charged to the Company in connection with the federal legislation
to recapitalize the SAIF.
Salaries and employee benefits increased by $88,000, or 1.52%, 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 $225,000 and net occupancy
expense of premises by $121,000. Merchant processing expenses increased by
$406,000 due to increases in volume and intangible amortization increased by
$180,000 associated with the Essex branch purchase and deposit assumption which
occurred in September 1996. Expenses associated with real estate owned increased
by $142,000. Professional fees decreased by $62,000 primarily as a result of a
recovery of legal costs relating to previous problem assets.
Liquidity
- ---------
The principal sources of funds for the Company for the nine months ended
September 30, 1997 included $987.0 million in proceeds from FHLB advances, $38.3
million in principal repayments of securities available for sale, $26.7 million
in proceeds from sales of securities available for sale, $30.9 million in
proceeds from the sale of loans, and $14.5 million from proceeds from maturities
and calls of securities available for sale. Funds were used primarily to repay
FHLB advances totaling $1.0 billion, to fund a $61.0 million net increase in
loans held for investment, to fund purchases of securities available for sale
totaling $12.1 million, and to originate loans held for sale of $32.0 million.
16
<PAGE>
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,
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 8.9% and 9.5% at
September 30, 1997 and December 31, 1996, respectively.
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
- -----------------------------------------
Exhibits - 3.4
Bylaws of CENIT Bancorp, Inc.
17
<PAGE>
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: November 3, 1997 /S/ Michael S. Ives
Michael S. Ives
President and Chief Executive Officer
DATE: November 3, 1997 /S/ John O. Guthrie
John O. Guthrie
Senior Vice President and
Chief Financial Officer
18
<PAGE>
CENIT BANCORP, INC.
BYLAWS
(as amended as of October 28, 1997)
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders of the Corporation, for the
election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen (13) months
subsequent to the later of the date of incorporation of the Corporation or the
last annual meeting of stockholders.
Section 2. Special Meetings.
Special meetings of stockholders of the Corporation may be called only
by the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exist any vacancies
in previously authorized directorships at the time any such resolution is
presented to the Board for adoption) (hereinafter the "Whole Board").
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or by the Certificate of Incorporation of
the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken; except
that if the date of any adjourned meeting is more than thirty (30) days after
the date for which the meeting was originally noticed, or if a new record date
is fixed for the adjourned meeting, written notice of the place, date, and time
of the adjourned meeting shall be given in conformity herewith. At any adjourned
meeting, any business may be transacted which might have been transacted at the
original meeting.
1
<PAGE>
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting (after giving effect to
the provisions of Article IV(C) of the Certificate of Incorporation of the
Corporation), present in person or by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law. Where a separate vote by a class or classes of shares is
required, a majority of the shares of such class or classes present in person or
represented by proxy shall constitute a quorum entitled to take action with
respect to that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote
(after giving effect to the provisions of Article IV(C) of the Certificate of
Incorporation of the Corporation) who are present, in person or by proxy, may
adjourn the meeting to another place, date, or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the shares
entitled to vote (after giving effect to the provisions of Article IV(C) of the
Certificate of Incorporation of the Corporation) who are present, in person or
by proxy, shall call to order any meeting of the stockholders and act as
chairman of the meeting. In the absence of the Secretary of the Corporation, the
secretary of the meeting shall be such person as the chairman appoints. The
chairman of the meeting shall also have the power to appoint such other officers
of the meeting as he or she shall deem appropriate.
Section 6. Conduct of Business.
(a) The Board of Directors may, to the extent not prohibited by law,
adopt by resolution such rules and regulations for the conduct of any meeting of
the stockholders as it shall deem appropriate. Except to the extent inconsistent
with such rules and regulations as adopted by the Board of Directors, the
chairman of any meeting of stockholders shall have the right and authority to
prescribe such rules, regulations and procedures and to do all such acts as, in
the judgment of such chairman, are appropriate for the proper conduct of the
meeting. Such rules, regulations or procedures, whether adopted by the Board of
Directors or
2
<PAGE>
prescribed by the chairman of the meeting, may to the extent not prohibited by
law include, without limitation, the following: (i) the establishment of an
agenda or order of business for the meeting; (ii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iii)
limitations on attendance at or participation in the meeting to stockholders of
record of the Corporation, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting shall determine; (iv) restrictions
on entry to the meeting after the time fixed for the commencement thereof; and
(v) limitations on the time allotted, if any, to questions or comments by
participants in the meeting. Unless, and to the extent, determined by the Board
of Directors or the chairman of the meeting, meetings of stockholders shall not
be required to be held in accordance with the rules of parliamentary procedure.
Any person in attendance at a meeting of stockholders shall, at the time of
gaining recognition from the chairman, state the name of the speaker, the number
of shares owned by the speaker, and if appearing in a representative capacity,
produce satisfactory written evidence of the right of representation signed by a
stockholder of record. Upon a failure to comply with this requirement, the
chairman of the meeting may ignore the speaker, and, if deemed necessary,
request the sergeant-at-arms to remove the proposed speaker from the meeting.
(b) At any annual meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered or mailed to and received
at the principal executive offices of the Corporation not less than one hundred
twenty (120) days in advance of the date of the Corporation's proxy statement
released to stockholders in connection with the previous year's annual meeting
of the stockholders. A stockholder's notice to the Secretary shall set forth as
to each matter such stockholder proposes to bring before the annual meeting (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the Corporation's books, of the
stockholder who proposes such business, (iii) the class and number of shares of
the Corporation's capital stock that are beneficially owned by such stockholder
and (iv) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
brought before or conducted at an annual meeting except in accordance with the
provisions of this Section 6(b). The officer of the Corporation or other person
presiding over the annual meeting shall, if the facts so warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 6(b) and, if he should so
determine, shall so declare to the meeting, and any such business so determined
to be not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions, a stockholder shall also comply with
all applicable requirements of the
3
<PAGE>
Securities and Exchange Act of 1934 and the rules and regulations thereunder
with respect to the matters set forth in this Section 6(b).
At any special meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors.
(c) Only persons who are nominated in accordance with the procedures
and qualifications set forth in these Bylaws shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders at which directors are to
be elected only (i) by or at the direction of the Board of Directors or (ii) by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section 6(c). Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made by timely notice in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered or mailed to and received at the principal executive offices of the
Corporation not less than one hundred twenty (120) days in advance of the date
of the Corporation's proxy statement released to stockholders in connection with
the previous year's annual meeting of the stockholders. Such stockholder's
notice shall set forth (i) as to each person whom such stockholder proposes to
nominate for election or re-election as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to Rule
14A under the Securities Exchange Act of 1934, as amended (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); (ii) as to each person whom such
stockholder proposes to nominate for election or re-election as a director, all
biographical, financial and other information, and all certifications, reports
and submissions required by the Office of Thrift Supervision, Federal Reserve
Board, Virginia Bureau of Financial Institutions or any other regulatory agency
with supervisory authority over the Corporation or any of its subsidiaries, or
any successor to such a regulatory agency, with respect to the designation of a
new director of a holding company or financial institution regulated by such a
regulatory agency; (iii) as to each person whom such stockholder proposes to
nominate for election or re-election as a director, all information as shall be
necessary to demonstrate that such person meets the qualifications set forth in
Article II, Section 10 of these Bylaws; and (iv) as to the stockholder giving
the notice (x) the name and address, as they appear on the Corporation's books,
of such stockholder and (y) the class and number of shares of the Corporation's
capital stock that are beneficially owned by such stockholder. At the request of
the Board of Directors, any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the provisions
of this Section 6(c). The officer of the Corporation or other person presiding
over the meeting shall, if the facts so warrant,
4
<PAGE>
determine that a nomination was not made in accordance with such provisions and,
if he should so determine, shall so declare to the meeting, and the defective
nomination shall be disregarded. Notwithstanding the foregoing provisions, a
stockholder shall also comply with all applicable requirements of the Securities
and Exchange Act of 1934 and the rules and regulations thereunder with respect
to the matters set forth in this Section 6(c).
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting.
Each stockholder shall have one (1) vote for every share of stock
entitled to vote which is registered in his or her name on the record date for
the meeting, except as otherwise provided herein or in the Certificate of
Incorporation or required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; except that upon demand
therefore by a stockholder entitled to vote or his or her proxy, a stock vote
shall be taken. Every stock vote shall be taken by ballots, each of which shall
state the name of the stockholder or proxy voting and such other information as
may be required under the procedure established for the meeting. Every vote
taken by ballots shall be counted by an inspector or inspectors appointed by the
chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
5
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Section 9. No Consent of Stockholders in Lieu of Meeting.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, any action required or permitted to be taken
by the stockholders of the Corporation must be effected at an annual or special
meeting of stockholders of the Corporation and may not be effected by any
consent in writing by such stockholders.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
The business and affairs of the Corporation shall be under the
direction of its Board of Directors. The number of directors who shall
constitute the Whole Board shall be such number as the Board of Directors shall
from time to time have designated, except that in the absence of any such
designation, such number shall be eleven (11). The Board of Directors shall
annually elect a Chairman from among its members.
The directors, other than those who may be elected by the holders of
any class or series of preferred stock, shall be divided, with respect to the
time for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of stockholders,
the term of office of the second class to expire at the second annual meeting of
stockholders and the term of office of the third class to expire at the third
annual meeting of stockholders, with each director to hold office until his or
her successor shall have been duly elected and qualified. At each annual meeting
of stockholders (or special meeting in lieu thereof), commencing with the first
annual meeting, directors elected to succeed those directors whose terms then
expire shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders after their election, with each director to hold
office until his or her successor shall have been duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any class or series of
preferred stock, and unless the Board of Directors otherwise determines, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
may be filled only by a majority vote of the directors then in office, though
less than a quorum, and directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of authorized directors constituting the Board shall shorten the term of any
incumbent director.
6
<PAGE>
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meeting.
Special meetings of the Board of Directors may be called by one-half
(1/2) of the directors then in office (rounded up to the nearest whole number),
by the Chairman of the Board or by the President of the Corporation, and shall
be held at such place, on such date, and at such time as they or he or she shall
fix. Notice of the place, date, and time of each such special meeting shall be
given to each director by whom it is not waived by mailing written notice not
less than five (5) days before the meeting or by telegraphing or telexing or by
facsimile transmission of the same not less than twenty-four (24) hours before
the meeting. Unless otherwise indicated in the notice thereof, any and all
business may be transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the authorized
number of directors then constituting the Board shall constitute a quorum for
all purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 6. Participation in Meetings by Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all person
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
7
<PAGE>
Section 8. Powers.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges
on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any other
person for the time being;
(5) To confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers, employees and agents
of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with these
Bylaws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
8
<PAGE>
Section 10. Qualification of Directors.
No person shall be qualified to stand for election as a member of the
Board of Directors, or to continue to serve as a member of the Board of
Directors, unless he or she is domiciled in or has a principal residence in a
county or city in which the Corporation or any of its subsidiaries has an
office, or in any county or city that is contiguous to a county or city in which
the Corporation or any of its subsidiaries has an office.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. Any committee
so designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
9
<PAGE>
Section 3. Nominating Committee.
The Board of Directors shall appoint a Nominating Committee of the
Board, consisting of three (3) members, one of which shall be the President of
the Corporation if, and only so long as, the President remains in office as a
member of the Board of Directors. The Nominating Committee shall have authority
(a) to review any nominations for election to the Board of Directors made by a
stockholder of the Corporation pursuant to Section 6(c)(ii) of Article I of
these Bylaws in order to determine compliance with such Bylaw, and (b) to
recommend to the Whole Board nominees for election to the Board of Directors to
replace those directors whose terms expire at the next ensuing annual meeting of
stockholders.
ARTICLE IV - OFFICERS
Section 1. Generally.
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a President and Chief Executive
Officer (the "President"), one or more Vice Presidents, a Secretary, and a
Treasurer, and from time to time may choose such other officers as it may deem
proper. An officer may be chosen from among the directors.
Any number of offices may be held by the same person.
(b) The term of office of all officers shall be until the next annual
election of officers and until their respective successors are chosen, but any
officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of directors then constituting the Board of
Directors.
(c) Each officer chosen by the Board of Directors shall have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this Article IV. Such officers shall also have such
powers and duties as from time to time may be conferred upon them by the Board
of Directors or by any committee thereof.
Section 2. President.
The President shall be the chief executive officer of the Corporation
and, subject to the control of the Board of Directors, shall have general power
over the management and oversight of the administration and operation of the
Corporation's business and general supervisory power and authority over its
policies and affairs. He shall see that all orders and resolutions of the Board
of Directors and of any committee thereof are carried into effect.
10
<PAGE>
Section 3. Vice President.
The Vice President or Vice Presidents shall perform the duties of the
President in his absence or during his disability to act. In addition, the Vice
Presidents shall perform the duties and exercise the powers usually incident to
their respective offices and/or such other duties and powers as may be properly
assigned to them from time to time by the Board of Directors or the President.
Section 4. Secretary.
The Secretary or an Assistant Secretary shall issue notices of
meetings, shall keep minutes of such meetings, shall have charge of the
corporate seal and the corporate books, and shall perform such other duties and
exercise such other powers as are usually incident to such offices and/or such
other duties and powers as are properly assigned thereto by the Board of
Directors or the President.
Section 5. Treasurer.
The Treasurer shall have charge of all monies and securities of the
Corporation, other than monies and securities of any division of the Corporation
which has a treasurer or financial officer appointed by the Board of Directors,
and shall keep regular books of account. The funds of the Corporation shall be
deposited in the name of the Corporation by the Treasurer with such banks or
trust companies as the Board of Directors from time to time shall designate. He
shall sign or countersign such instruments as require his signature, shall
perform all such duties and have all such powers as are usually incident to such
office and/or such other duties and powers as are properly assigned to him by
the Board of Directors or the President, and may be required to give bond for
the faithful performance of his duties in such sum and with such surety as may
be required by the Board of Directors.
Section 6. Assistant Secretaries and Other Officers.
The Board of Directors may appoint one or more assistant Secretaries
and one or more assistant Treasurers, which officers shall have such powers and
shall perform such duties as are provided in these Bylaws or as may be properly
assigned to them by the Board of Directors or the President.
Section 7. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or
any officer of the Corporation authorized by the President shall have the power
to vote and otherwise act on behalf of the Corporation, in person or by proxy,
at any meeting of stockholders of or with respect to any action of stockholders
of any other corporation in which this Corporation may
11
<PAGE>
hold securities and otherwise to exercise any and all rights and powers which
this Corporation may possess by reason of its ownership of securities in such
other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
Transfer of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date for any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; except that if no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the date next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held, and, for determining stockholders entitled to receive
payment of any dividend or other distribution or allotment of rights or to
exercise any rights of change, conversion or exchange of stock or for any other
purpose, the record date shall be at the close of business on the day on which
the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
except that the Board of Directors may fix a new record date for the adjourned
meeting.
12
<PAGE>
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or other
courier. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails or by telegram or
mailgram or other courier, shall be the time of the giving of the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
13
<PAGE>
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person who has been selected with reasonable care by or on behalf of the
Corporation as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these Bylaws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII - AMENDMENTS
These Bylaws may be altered, amended, added to, rescinded or repealed
at any meeting of the Board of Directors or of the stockholders, provided notice
of the proposed change was given in the notice of the meeting or, in the case of
a meeting of the Board of Directors, in a notice given not less than two days
prior to the meeting; except that notwithstanding any other provisions of these
Bylaws or any provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the Voting Stock (as defined in the Certificate of
Incorporation) required by law, the Certificate of Incorporation, any Preferred
Stock Designation (as defined in the Certificate of Incorporation) or these
Bylaws, the affirmative votes of the holders of at least 80% of the voting power
of the then outstanding shares of Voting Stock, voting together as a single
class,
14
<PAGE>
shall be required in order for these Bylaws to be altered, amended, added to,
rescinded or repealed by the stockholders of the Corporation.
15
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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