U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20459
FORM 10-Q
Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarter Ended: March 31, 1996
Commission File No.: 33-95246
SOUTHERN FINANCIAL BANCORP, INC.
(State or other jurisdiction of incorporation or organization): Virginia
(IRS Employer Identification Number): 54-1779978
(Address of principal executive office): 37 East Main Street
Warrenton, VA 22186
Registrant's Telephone Number, including area code: (540) 349-3900
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 _____
As of March 31, 1996, there were issued and outstanding 1,391,153 shares of the
registrant's Common Stock and 16,634 shares of preferred stock.
<PAGE>
<TABLE>
SOUTHERN FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
(UNAUDITED)
March 31, December 31,
ASSETS 1996 1995
<S> <C> <C>
Cash and Due from Banks $4,181,140 $3,894,884
Overnight Earning Deposits 2,213,957 1,795,902
Investment Securities
Available-for-Sale 4,237,184 2,827,625
Mortgage-Backed Securities
Available-for-Sale 972,163 1,045,098
Mortgage-Backed Securities 56,126,277 45,997,777
Loans Held for Sale 586,000 170,000
Loans Receivable, Net 104,228,701 104,251,481
Federal Home Loan Bank Stock, at Cost 917,600 950,000
Bank Premises and Equipment, Net 1,096,829 1,146,553
Interest Receivable 1,193,103 1,167,022
Real Estate Owned 357,023 357,023
Other Assets 1,067,577 1,197,385
Total Assets $177,177,554 $164,800,750
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $153,259,232 $143,813,686
Advances from Federal Home Loan Bank 6,500,000 4,000,000
Advances from Borrowers for Taxes
and Insurance 234,618 113,631
Other Liabilities 1,174,142 1,098,362
Total Liabilities 161,167,992 149,025,679
Preferred Stock 166 166
Common Stock 13,912 13,912
Capital in Excess of Par Value 12,796,014 12,796,014
Retained Earnings 3,354,290 3,050,284
Net Unrealized (Loss)/Gain on Securities
Available-for-Sale (54,830) 14,685
Treasury Stock (99,990) (99,990)
Total Stockholders' Equity 16,009,562 15,775,071
Total Liabilities and
Stockholders' Equity $177,177,554 $164,800,750
<F1>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
SOUTHERN FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
INTEREST INCOME
Loans $2,581,623 $1,936,862
Mortgage-Backed Securities and
Other Investments 931,074 964,103
Total Interest Income 3,512,697 2,900,965
INTEREST EXPENSE
Deposits 1,781,108 1,453,171
Borrowings 83,325 126,765
Total Interest Expense 1,864,433 1,579,936
Net Interest Income 1,648,264 1,321,029
Provision for Loan Losses 160,000 0
Net Interest Income after Provision
for Loan Losses 1,488,264 1,321,029
OTHER INCOME
Gain on Sale of Loans 75,081 76,740
Fee Income 155,403 141,443
0ther 24,388 10,533
Total Other Income 254,872 228,716
OPERATING EXPENSE
Employee Compensation and Benefits 491,557 386,570
Premises and Equipment 325,973 255,348
Deposit Insurance Assessments 81,330 74,081
Professional Fees 23,000 23,490
Other 238,047 193,319
Total Operating Expense 1,159,907 932,808
Income Before Income Taxes 583,229 616,937
Provision for Income Taxes 192,500 240,600
Net Income $ 390,729 $ 376,337
Earnings per Share:
Primary Earnings per Share $0.26 $0.27
Fully Diluted Earnings per Share $0.26 $0.26
Weighted Average Number of Primary
Common Shares Outstanding 1,466,095 1,402,291
<F1>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
SOUTHERN FINANCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 390,729 $ 376,337
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization of Bank Premises
and Equipment 56,456 61,773
Net Amortization of Premiums (Discounts) on
Loans and Securities 63,845 38,458
Provision for Loan Losses 160,000 0
Provision for Deferred Income Taxes (36,505) (15,000)
Gain on Sale of Loans (75,081) (76,740)
Amortization of Deferred Loan Fees (123,640) (155,524)
Loans Originated for Sale (3,424,284) (2,858,950)
Proceeds from Sales of Loans Held for Sale 3,083,365 3,738,390
Increase in Interest Receivable (26,081) (115,497)
Decrease in Other Assets 171,280 155,239
Increase in Other Liabilities 75,780 207,964
Net Cash Provided by Operating Activities 315,864 1,356,450
Cash Flows from Investing Activities:
Loans Originated (13,667,770) (11,385,915)
Principal Collected on Loans 13,649,514 5,339,348
Purchase of Loans 0 (2,942,820)
Purchase of Investment Securities (1,499,810) 0
Purchase of Mortgage-Backed Securities (13,201,345) 0
Principal Collected on Mortgage-Backed
Securities 3,102,380 1,140,737
Net (Increase) Decrease in Overnight
Earning Deposits (418,055) 1,742,177
Investment in Real Estate Owned 0 (385,222)
Purchase of Bank Premises and Equipment (6,732) (24,506)
Redemption of Federal Home Loan Bank Stock 32,400 0
Purchase of Federal Home Loan Bank Stock 0 (136,100)
Net Cash (Used in) Investing Activities (12,009,418) (6,652,301)
Cash Flows from Financing Activities:
Net Increase in Deposits 9,445,546 7,303,551
Increase/(Decrease) in Advances from
Federal Home Loan Bank 2,500,000 (2,000,000)
Increase in Advances from Borrowers for
Taxes and Insurance 120,987 112,695
Proceeds from Stock Options Exercised 0 12,080
Dividends on Preferred and Common Stock (86,723) (61,078)
Net Cash Provided by Financing Activities 11,979,810 5,367,248
Net Increase in Cash and Due from Banks 286,256 71,397
Cash and Due from Banks, Beginning of Period 3,894,884 1,053,446
Cash and Due from Banks, End of Period $ 4,181,140 $ 1,124,843
<F1>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
SOUTHERN FINANCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 information or
footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity
with generally accepted accounting principles. However, all
adjustments which are, in the opinion of management, necessary
for a fair presentation have been included. All adjustments
are of a normal recurring nature. The results of operations
for the three month period ended March 31, 1996 are not
necessarily indicative of the results of the full year. These
consolidated financial statements should be read in
conjunction with the consolidated financial statements and the
notes included in Southern Financial Bancorp, Inc.'s Annual
Report for the six months ended December 31, 1995.
On December 1, 1995 Southern Financial Bancorp, Inc. (the
"Bancorp") acquired all of the outstanding shares of Southern
Financial Bank (the "Bank"). Southern Financial Bank,
formerly Southern Financial Federal Savings Bank, converted
from a savings bank to a state chartered commercial bank
effective December 1, 1995. Also, on December 1, 1995
Southern Financial Bancorp, Inc. changed its fiscal year end
to December 31 from June 30.
NOTE 2 - MORTGAGE-BACKED SECURITIES
The portfolio of mortgage-backed securities which are
classified as held-to-maturity consist of the following
securities:
<TABLE>
<CAPTION>
3/31/96 3/31/96 12/31/95 12/31/95
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
<S> <C> <C> <C> <C>
FHLMC $ 8,646,166 $ 8,600,441 $ 9,397,071 $ 9,346,718
FNMA 22,616,574 22,302,506 12,065,698 11,879,879
GNMA 49,203,743 48,724,775 17,612,470 17,554,923
CMO 6,922,534 6,860,000 6,922,534 6,892,830
TOTAL $56,126,277 $55,584,776 $45,997,777 $45,674,350
</TABLE>
Of the securities classified as held-to-maturity, $5.0
million, or 10.7%, have fixed rates of interest and original
maturities of 15 years. The rates on $10.4 million, or 18.5%,
of the portfolio are tied to the 11th District and national
cost of funds indices and adjust monthly. The rates on the
balance of the portfolio, $40.7 million, are tied to the one
year constant maturity treasury index and adjust annually or
more frequently.
The portfolio of mortgage-backed securities classified as
available-for-sale consists of the following securities:
<TABLE>
<CAPTION>
3/31/96 3/31/96 12/31/95 12/31/95
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
<S> <C> <C> <C> <C>
FHLMC 0 0 0 0
FNMA 982,187 972,163 1,039,353 1,045,098
GNMA 0 0 0 0
TOTAL 982,187 972,163 1,039,353 1,045,098
</TABLE>
The securities classified as available-for-sale have a fixed
rate of interest and an original maturity of 15 years.
NOTE 3 - LOANS RECEIVABLE
<TABLE>
Loans receivable consist of the following:
<CAPTION>
3/31/96 12/31/95
<S> <C> <C>
Mortgages
Residential $37,925,713 $37,583,119
Nonresidential 39,806,244 36,742,339
Construction
Residential 10,542,550 13,164,850
Nonresidential 12,147,280 16,490,213
Business and consumer 12,682,549 12,025,981
Total loans receivables 113,104,336 116,006,502
Less:
Undisbursed portion of
loans in process (7,144,025) (10,110,438)
Deferred loan fees (410,397) (454,334)
Allowance for loan losses (1,321,213) (1,190,249)
Loans receivable, net $104,228,701 $104,251,481
</TABLE>
<TABLE>
The following sets forth information regarding the allowance for
loan losses:
<CAPTION>
Three months Six months
ended ended
3/31/96 12/31/95
<S> <C> <C>
Balance, beginning of period $1,190,249 $1,057,445
Charge offs, net (29,036) (17,196)
Provision charged
to operations 160,000 150,000
Balance, end of period $1,321,213 $1,190,249
</TABLE>
NOTE 4 - ADVANCES FROM FEDERAL HOME LOAN BANK
At March 31, 1996, advances from the Federal Home Loan Bank
("FHLB") of Atlanta totalled $6,500,000 which consisted of
$4,500,000 of advances which reprice daily but may be prepaid
at any time without penalty and $2,000,000 of fixed rate
advances maturing in January, 1998. At December 31, 1995,
advances from the FHLB of Atlanta totalled $4,000,000.
These advances are made under a credit availability agreement
with the FHLB of Atlanta totaling $25,000,000. The agreement
does not have a maturity date and advances are made at the
FHLB of Atlanta's discretion.
NOTE 5 - STOCKHOLDERS' EQUITY
At March 31, 1996 and December 31, 1995, the Bancorp had
16,634 shares of 6% cumulative convertible preferred stock
issued and outstanding. Par value is $0.01 per share. Five
hundred thousand shares are authorized. Each share of the
Bancorp's preferred stock is convertible to 1.46 shares of
common stock. The preferred stock has an annual dividend rate
of 6%. Dividends are payable quarterly and are cumulative.
At March 31, 1996 and December 31, 1995, the Bancorp had
1,391,153 shares of common stock issued and outstanding. The
par value is $0.01 per share. There were 5,000,000 shares
authorized by the Bancorp's charter. The Bancorp's board of
directors declared a 10 percent stock dividend in July, 1995
and a four-for-three stock split in February, 1995, which was
effected in the form of a dividend. Prior period earnings per
share amounts have been restated to reflect the effect of
these distributions.
<PAGE>
SOUTHERN FINANCIAL BANCORP, INC.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The total assets of Southern Financial Bancorp, Inc. (the
"Bancorp") at March 31, 1996 were $177.2 million, an increase of
$12.4 million, or 7.5%, from total assets of $164.8 million at
December 31, 1995. Total liabilities increased by $12.2 million,
or 8.2%, to $161.2 million at March 31, 1996 from $149.0 million at
December 31, 1995.
The increase in total assets occurred primarily due to an
increase of $10.1 million, or 22.2% in mortgage-backed securities
to $56.1 million at March 31, 1996 from $46.0 million at December
31, 1995. This increase reflects the purchase of $13.2 million of
mortgage-backed securities during the three months ended March 31,
1996.
Loans receivable decreased by $0.1 million to $104.2 million
at March 31, 1996 from $104.3 million at December 31, 1995.
Although total loans receivable remained relatively constant a
shift occurred in the composition of the categories. The principal
change was an increase in non-residential permanent loans of $3.1
million and comparable net decrease in non-residential construction
loans, reflecting the conversion of three loans from construction
to permanent.
Investment securities available-for-sale increased by $1.4
million, or 50.0 %, to $4.2 million at March 31, 1996 from $2.8
million at December 31, 1995. Investment securities available-for-
sale consists entirely of Federal Home Loan Mortgage Corporation
("FHLMC") preferred stock and is recorded at current market value.
The increase in total assets was funded by an increase in
customer deposits of $9.5 million , or 6.6%, to $153.3 million at
March 31, 1996 from $143.8 million at December 31, 1995. Also,
Federal Home Loan Bank ("FHLB") of Atlanta advances increased by
$2.5 million to $6.5 million at March 31, 1995. The advances from
the FHLB of Atlanta at March 31, 1996 consisted of $4.5 million of
advances which mature in one year or less and $2.0 million of
advances which mature in January, 1998.
The primary sources of funds for operations of the Bancorp
include principal repayments and sales of loans and mortgage-backed
securities, new savings deposits and borrowings. The Bancorp had
outstanding loan commitments approximating $7.5 million at March
31, 1996. Also, the Bancorp had commitments to other lenders to
sell approximately $2.0 million of loans as of March 31, 1996. In
the opinion of management, the Bancorp's liquid assets are adequate
to meet commitments for loan fundings and other obligations and
expenditures.
Results of Operations
The Bancorp's principal sources of revenues are interest and
fees on loans and mortgage-backed securities and interest or
dividends on investments as well as service fees on deposit
accounts. In the three months ended March 31, 1996 the Bancorp's
revenues were also positively impacted by gains on sales of loans.
Net income is affected by operating expenses and interest paid on
deposits and borrowings from the FHLB of Atlanta.
The following table presents, for periods indicated, average
monthly balances of and weighted average yields on interest-earning
assets and average balances and weighted average effective interest
paid on interest-bearing liabilities. During the period
calculations utilize month end balances.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
Average Average
Average Yield/ Average Yield/
Balance Rate Balance Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-Earning Assets:
Loans Receivable $105,070 9.83% $81,928 9.46%
Mortgage-Backed Securities 51,938 6.22 55,175 6.13
Investments 6,817 7.28 5,181 9.17
Total Interest-Earning
Assets 163,825 8.58 142,284 8.16
Interest-Bearing Liabilities:
Deposits 148,671 4.83 122,281 4.75
Borrowings 6,833 5.44 7,750 6.54
Total Interest-Bearing
Liabilities 155,504 4.86 130,031 4.86
Average Dollar Difference
Between Interest-Earning
Assets and Interest-Bearing
Liabilities $8,321 $12,253
Interest Rate Spread 3.72% 3.30%
Interest Margin 4.02% 3.71%
</TABLE>
The following table presents information regarding changes in
interest income and interest expense for the periods indicated.
For each category of interest-earning asset and interest-bearing
liability, information is provided on changes attributable to
changes in volume (changes in volume multiplied by old rate),
changes in rates (changes in rates multiplied by old volume), and
changes in rate-volume (change in rates multiplied by the change in
volume).
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 1996
Versus
March 31, 1995
(Dollars in Thousands)
Rate/
Volume Rate Volume Net
<S> <C> <C> <C> <C>
Interest Income:
Loans Receivable $547 $76 $22 $645
Mortgage-Backed Securities (50) 12 (1) (39)
Investments 38 (24) (8) 6
Total Interest Income 535 64 13 612
Interest Expense:
Deposits 299 24 5 328
Borrowings (26) (21) 4 (43)
Total Interest Expense 273 3 9 285
Net Interest Income $262 $61 $4 $327
</TABLE>
The Bancorp recorded net income of $391,000 for the three
months ended March 31, 1996, compared to $376,000 for the three
months ended March 31, 1995, an increase of $15,000. Primary
earnings per share were $0.26 and $0.27 for the three months ended
March 31, 1996 and 1995, respectively. Weighted average shares of
common stock outstanding were 1,391,153 and 1,368,984 for the same
periods in 1996 and 1995, respectively. As explained in footnote
5, in order to provide consistency, the weighted average number of
common shares outstanding for current and prior periods have been
adjusted to give effect to a stock split in February, 1995 and a
10% stock dividend in July, 1995.
Net interest income before provision for loan losses for the
three months ended March 31, 1996 was $1,648,000, an increase of
$327,000, or 24.8%, from $1,321,000 for the three months ended
March 31, 1995. The increase resulted primarily from a growth in
average interest-earning assets and to a lesser extent an increase
in interest margin. Total interest-earning assets in the three
months ended March 31, 1996 averaged $163.8 million as compared to
$142.3 million for the same period in 1995. For the three months
ended March 31, 1996, the interest rate spread was 3.72%, an
increase of 42 basis points from 3.30% for the three months ended
March 31, 1995. The yield on interest-earning assets increased by
42 basis points from 8.16% for the three months ended March 31,
1995 to 8.58% for the three months ended March 31, 1996. The cost
of interest bearing liabilities remained at 4.86% for the three
months ended March 31, 1996 as compared to the same period in 1995.
Total interest income increased by $612,000, or 21.1%, to
$3,513,000 for the three months ended March 31, 1996 from
$2,901,000 for the three months ended March 31, 1995. This
increase was primarily due to the increase of $23.2 million in
average loans receivable to $105.1 for the three months ended March
31, 1996 from $81.9 million for the three months ended March 31,
1995. The yield on average loans receivable for the three months
ended March 31, 1996 was 9.83% an increase of 37 basis points from
9.46% for the three months ended March 31, 1995. Mortgage-backed
securities averaged $51.9 million for the three months ended March
31, 1996, a decrease of $3.3 million from $55.2 million for the
three months ended March 31, 1995. The related yield, however, was
6.22%, up from 6.13% for the three months ended March 31, 1995.
Total interest expense increased by $284,000, or 18.0%, to
$1,864,000 for the three months ended March 31, 1996 from
$1,580,000 for the three months ended March 31, 1995. Customer
deposits averaged $148.7 million for the three months March 31,
1996, up $26.4 million from $122.3 million for the three months
ended March 31, 1995. The average effective rate paid on deposits
increased by 8 basis points to 4.83% in the 1996 period from 4.75%
in the 1995 period. FHLB of Atlanta advances averaged $6.8 million
for the three months ended March 31, 1996, a decrease of $1.0
million from $7.8 million for the three months ended March 31,
1995. The average effective rate paid on FHLB of Atlanta advances
decreased to 5.44% for the three months ended March 31, 1996 from
6.54% for the same period in 1995.
The provision for loan losses for the three months ended March
31, 1996 was $160,000, while for the three months ended March 31,
1995 no provision for loan losses was taken. In recognition of any
nonperforming loans and the inherent risk in lending, the Bancorp
has established a provision for loan losses. The provision for
loan losses is a reserve of funds established to absorb the
inherent risk in lending, after evaluating the loan portfolio,
considering current economic conditions, changes in the nature and
volume of lending and past loan loss experience. During the three
months ended March 31, 1996, the Bancorp's volume of nonresidential
mortgages and commercial loans held in portfolio increased by $3.7
million, or 7.6%. These loans tend to carry a higher risk
classification. Consequently, the Bancorp felt it prudent to
increase the provision for loan losses. In management's opinion
the allowance for loan losses is adequate to absorb potential
losses in the current loan portfolio. The allowance for loan
losses at March 31, 1996 was $1.3 million or 1.2% of total loans
receivable.
Total other income for the three months ended March 31, 1996
was $255,000 as compared to $229,000 for the three months ended
March 31, 1995, an increase of $26,000. Fee income increased by
$14,000 to $155,000 for the three months ended March 31, 1996 from
$141,000 for the three months ended March 31, 1995. Fee income,
consisting primarily of transaction fees on deposit accounts,
increased due to increased volume in these types of accounts. Gain
on sale of loans decreased to $75,000 for the three months ended
March 31, 1996 from $77,000 for the three months ended March 31,
1995.
Total operating expense increased by $227,000, or 24.3%, to
$1,160,000 for the three months ended March 31, 1996 from $933,000
for the three months ended March 31, 1995. Employee compensation
and benefits increased by $105,000, or 27.1%, and premises and
equipment, which includes data processing costs, increased by
$71,000, or 27.8%. These increases principally reflect the cost of
opening two new branches in April, 1995.
Other expenses increased by $45,000, or 23.3%, to $238,000 for
the three months ended March 31, 1996 from $193,000 for the three
months ended March 31, 1995. This increase was primarily due to
the costs related to the growth in the customer deposit base
including advertising, postage and supplies. The cost of deposit
insurance, which is based on the dollar volume of deposit accounts,
increased by $7,000 to $81,000 for the three months ended March 31,
1996 from $74,000 for the three months ended March 31, 1995
reflecting an increase in the deposit account base by 20.2% to
$153.3 million at March 31, 1996 from $127.5 million at March 31,
1995.
Regulatory Capital Requirements
<TABLE>
At March 31, 1996, the Bancorp exceeded all regulatory capital
standards, which were as follows:
<CAPTION>
Actual Capital Required Capital Excess Capital
(amounts in thousands)
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Leverage
Capital $15,713 9.20% $5,124 3.00% $10,589 6.20%
Tier I
Capital $15,713 14.19% $4,429 4.00% $11,284 10.19%
Tier I and II
Capital $17,034 15.38% $8,859 8.00% $ 8,175 7.38%
</TABLE>
Impact of Inflation and Changing Prices
The consolidated financial statements and accompanying notes
presented herein have been prepared in accordance with generally
accepted accounting principles which require the measurement of
financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing
power of money over time due to inflation.
Unlike many industrial companies, substantially all of the
assets and virtually all of the liabilities of the Bancorp are
monetary in nature. As a result, interest rates have a more
significant impact on the Bancorp's performance than the effects of
general levels of inflation. Interest rates may not necessarily
move in the same direction or in the same magnitude as the prices
of goods and services. However, non-interest expenses do not
reflect general levels of inflation.
<PAGE>
SOUTHERN FINANCIAL BANCORP, INC.
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on April 18,
1996 at 3:00 p.m. at Fauquier Springs Country Club,
Warrenton, Virginia. The following is a summary of items
voted upon at the meeting:
1. The following Directors were elected to serve
three year terms:
Virginia Jenkins
Michael P. Rucker
2. The appointment of Arthur Andersen, LLP as
independent auditors for the year ending December
31, 1996 was ratified by the following vote: For
1,183,735; Against 673; Abstain 220.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits Required
Exhibit 10. Material Contracts. Employment agreement dated
April 18, 1996 between Southern Financial Bank and Georgia S.
Derrico, Chairman and Chief Executive Offficer.
Exhibit 27. Financial Data Schedule
Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended March 31, 1996.
<PAGE>
SOUTHERN FINANCIAL BANCORP, INC.
Part III. 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.
SOUTHERN FINANCIAL BANCORP, INC.
(Registrant)
Date 5/13/96 By Georgia S. Derrico
Georgia S. Derrico
Chairman and
Chief Executive Officer
(Duly Authorized Representative)
Date 5/13/96 By Manfred Liebsch
Manfred Liebsch
Controller
Principal Accounting Officer
(Duly Authorized Representative)
<PAGE>
SOUTHERN FINANCIAL BANCORP, INC.
EXHIBIT INDEX
Exhibit No.: 10
Description: Employment Agreement between Southern Financial Bank
and Georgia S. Derrico, Chairman and Chief Executive Officer
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of the
18th day of April, 1996, between Southern Financial Bank, with its
principal offices in Warrenton, Virginia (hereinafter called the
"Bank") and Georgia S. Derrico (hereinafter called "Executive").
WITNESSETH THAT:
WHEREAS, the parties desire to enter into this Agreement
setting forth the terms and conditions of the employment
relationship between the Bank and the Executive;
WHEREAS, the Board of Directors of the Bank (the "Board")
believes it is in the best interest of the Bank to enter into this
Agreement with the Executive in order to attempt to assure
management continuity of the Bank; and
WHEREAS, the Board of Directors of the bank has approved and
authorized the execution of this Agreement with the Executive.
NOW, THEREFORE, to assure the Bank that it will have the
continued dedication of Executive and the availability of her
advice and counsel and to induce Executive to remain in the employ
of the Bank, and for other good and valuable consideration, the
Bank and Executive hereby agree as follows:
1. Definitions.
(i) "Cause," when used in connection with the
termination of Executive's employment by the Bank, shall mean (a)
the willful and continued failure by Executive substantially to
perform her duties and obligations to the Bank (other than any such
failure resulting from any physical or mental condition, whether or
not such condition constitutes a Disability) which failure
continues after the Bank has given written notice thereof to
Executive which notice specifies the aspects in which Executive has
failed to perform her duties or obligations to the Bank or (b) the
willful engaging by Executive in misconduct which is materially
injurious to the Bank, monetarily or otherwise. For purposes of
this definition, no act, or failure to act, on Executive's part
shall be considered "willful" unless done, or omitted to be done,
by Executive in bad faith and without reasonable belief that her
action or omission was in the best interests of the Bank.
(ii) "Change in Control" shall mean the occurrence of any
of the following:
(a) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act, an "Acquiring Person") becomes the
"beneficial owner" (as such term is defined in Rule 13d-3
promulgated under the Exchange Act, a "Beneficial Owner"), directly
or indirectly, of securities of the Bank representing 25% or more
of the combined voting power of the Bank's then outstanding
securities;
(b) an Acquiring Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Bank representing 10%
or more of the combined voting power of the Bank's then outstanding
securities and either the Board or the U.S. Office of Thrift
Supervision makes a determination that such acquisition constitutes
or will constitute the acquisition of control of the Bank for
purposes of this Agreement;
(c) the Bank's stockholders approve an agreement to merge or
consolidate the Bank with another corporation (other than a
corporation 50% or more of which is controlled by, or is under
common control with, the Bank) and, during the period commencing
six months before such approval and ending two years after such
approval, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a
majority thereof; or
(d) the Bank sells 80% or more of its assets to an Acquiring
Person.
However, a Change in Control shall not occur by reason of any
transaction in which Executive, or a group of individuals or
entities including Executive, participates as an Acquiring Person
in the events described in clauses (a), (b) or (d) of this Section
1(ii) or owns, directly or indirectly, a majority of a corporation
described in clause (c) of this Section 1(ii).
(iii) "Committee" shall mean the Compensation Committee
of the Board.
(iv) "Compensation" shall mean the sum of (a)
Executive's annual base salary at the highest rate earned by her at
any time during the twelve months immediately preceding a
Termination Date plus (b) the highest annual bonus earned by
Executive with respect to any of the three calendar years preceding
the Termination Date.
(v) "Contract Period" shall mean the period commencing
on the date hereof and terminating on the third anniversary of the
date hereof; provided, that on each anniversary of the date hereof
the Contract Period shall be automatically extended unless either
party has prior to such anniversary date given written notice to
the other that it does not desire the Contract Period to be so
extended.
(vi) "Disability" shall mean a physical or mental
condition which in the judgment of the Executive renders the
Executive unable to substantially perform the requirements of the
positions of Chief Executive Officer and Chairman of the Board of
Directors of the Bank.
(vii) "Effective Period" shall mean the period
commencing on the date of a Change in Control and terminating on
the first anniversary of such Change in Control.
(viii) "Good Reason" when used with reference to a
termination by Executive of her employment with the Bank shall
mean:
(a) the assignment to Executive of any duties inconsistent
with, or the reduction of powers or functions associated with, her
positions, duties, responsibilities and status with the Bank
immediately prior to a Change in Control, or any removal of
Executive from, or any failure to reelect Executive to, any
positions or offices Executive held immediately prior to a Change
in Control;
(b) a reduction by the Bank of Executive's base salary as in
effect immediately prior to a Change in Control;
(c) a change in Executive's principal work location;
(d) (i) the failure by the Bank to continue in effect any
employee benefit plan, program or arrangement in which Executive
was participating immediately prior to a Change in Control (or, for
each such plan, a substitute plan, program or arrangement providing
Executive with substantially similar benefits) or (ii) the taking
of any action, or the failure to take any action, by the Bank which
could adversely affect Executive's benefits under, any such plan,
program or arrangement;
(e) the failure by the Bank to pay Executive any portion of
Executive's current compensation, or any portion of Executive's
compensation deferred under any plan, agreement or arrangement of
or with the Bank, within seven (7) days of the date such
compensation is due;
(f) the failure by the Bank to obtain an assumption of the
obligations of the Bank under this Agreement by any successor to
the Bank; or
(g) any termination of Executive's employment by the Bank
during the Contract Period which is not effected pursuant to the
requirements of this Agreement.
(ix) "Termination Date" shall mean the effective date as
provided hereunder of the termination of Executive's employment.
(x) "Without Cause" when used in conjunction with the
termination of Executive's employment by the Bank, shall mean any
termination of employment of Executive by the Bank which is not a
termination of employment for Cause.
2. Employment. The Bank agrees to employ the Executive as
its Chief Executive Officer during the Contract Period and the
Executive accepts such position. As Chief Executive Officer, the
Executive shall render administrative and management services to
the Bank such as are customarily performed by persons situated in
a similar executive capacity. The Executive shall perform her
duties under this Agreement in accordance with such reasonable
standards established from time to time by the Board. [During the
Contract Period, the Bank agrees to use its best efforts to cause
the Executive to be nominated for and appointed to the position of
Chairman of the Board of the Bank.]
3. Compensation.
(a) The Bank agrees to pay the Executive during the Contract
Period base salary at a rate of not less than $165,000 per annum
(the "Base Salary"). The Base Salary shall be payable not less
frequently than monthly in accordance with the practices of the
Bank as in effect from time to time. The amount of Base Salary
shall be reviewed by the Board not less often than annually and may
be increased (but not decreased) from time to time by such amounts
as the Board in its discretion may decide.
(b) During the Contract Period, the Executive shall be
entitled to participate in an equitable manner with all other
officers of the Bank in discretionary bonuses as authorized and
declared by the Board to its executive employees. No other
compensation provided for in this Agreement shall be deemed a
substitute for the Executive's right to participate in such bonuses
when and as declared by the Board.
(c) During the Contract Period, the Executive shall be
entitled to participate in any stock option, stock purchase,
pension, thrift, deferred profit-sharing, group life insurance,
medical coverage, education or other retirement or employee benefit
plan that the Bank may adopt for the benefit of its executive
employees.
(d) During the Contract Period, the Executive shall be
eligible to participate in any fringe benefit plan or program which
may be or become applicable to the Bank's executive employees,
which shall include use of an automobile, a reasonable expense
account, the payment of reasonable expenses for attending annual
and periodic meetings of trade associations and any other benefits
which are commensurate with the responsibilities and functions to
be performed by the Executive under this Agreement.
(e) In addition to the benefits provided to the Executive
pursuant to Sections 3(c) and (d) above, the Executive shall also
be entitled to any benefits provided for in the Bank's employee or
personnel manual.
4. Vacations; Leaves of Absence. At such reasonable times as
the Board shall in its discretion permit, the Executive shall be
entitled, without loss of pay, to absent herself voluntarily from
the performance of her employment under this Agreement, all such
voluntary absences to count as vacation time, provided that,
(a) The Executive shall be entitled to an annual vacation in
accordance with policies established in the Bank's employee or
personnel manual;
(b) The timing of vacation shall be scheduled in a reasonable
manner by the Executive; and
(c) In addition to the aforesaid paid vacations, the
Executive shall be entitled, without loss of pay, to absent herself
voluntarily from the performance of her employment with the Bank
for such additional periods of time and for such valid and
legitimate reasons as the Board in its discretion may determine.
Further, the Board shall be entitled to grant to the Executive a
leave or leaves of absence with or without pay at such time or
times and upon such terms and conditions as the Board, in its
discretion, may determine.
5. Termination of Employment During the Contract Period.
During the Contract Period and prior to a Change in Control, the
Executive's employment with the Bank may be terminated at any time
by the Board or by the Executive for any reason or without reason;
provided, that the Executive shall provide the Bank with at least
90 days prior written notice (or such shorter period as the Board
and the Executive may agree) of her termination of her employment
with the Bank. The Executive shall be entitled to the following
benefits and payments upon a termination of her employment with the
Bank during the Contract Period and prior to a Change in Control:
(a) In the event of the termination of the employment of the
Executive with the Bank by the Bank for Cause or by the Executive
(whether or not for Good Reason), the Executive shall be entitled
to all compensation and benefits earned by her and unpaid at the
time of such termination, and shall not be entitled to any further
compensation or benefits hereunder.
(b) In the event of the termination of the employment of the
Executive with the Bank by the Bank Without Cause, the Executive
shall be entitled to:
(i) the continuation of the Base Salary for the
remainder of the Contract Period; and
(ii) until the earlier of (a) the expiration of the
Contract Period or (b) Executive's commencement of full time
employment with a new employer, Executive's continued participation
in all life, medical, dental, prescription drug and long- and
short-term disability insurance plans, programs or arrangements in
which the Executive was entitle to participate at any time during
the twelve month period prior to the Termination Date, provided
that Executive's continued participation is possible under the
general terms and provisions of such plans, programs or
arrangements. In the event that Executive's participation in any
such plan, program or arrangement is prohibited, the Bank shall
arrange to provide Executive with benefits substantially similar to
those which Executive is entitled to received under such plans,
programs or arrangements for such period.
[Executive shall not be required to mitigate the amount of the
payment and benefits provided for in this Section 5(b) by seeking
other employment or otherwise. Except as provided for in this
Section 5(b) shall not be reduced by any compensation or other
amounts paid to or earned by Executive as the result of employment
with another employer after the Termination Date or otherwise.]
(c) In the event of the termination of the employment of the
Executive as a result of the death or Disability of the Executive
during the Contract Period, she shall be entitled to benefits under
the life insurance and disability plans, programs and arrangements
in which she is entitled to participate pursuant to the terms of
this Agreement, and she shall not be entitled to any further
compensation or benefits hereunder.
6. Termination of Employment of Executive By the Bank During
the Effective Period.
(i) During the Effective Period, the Bank shall have the
right to terminate Executive's employment hereunder for Cause or
Without Cause by following the procedures hereinafter specified.
(ii) During the Effective Period, Executive's employment
may not be terminated for Cause unless and until a notice of intent
to terminate Executive's employment for Cause, specifying the
particulars of conduct of Executive forming the basis for such
termination, is given to Executive by the Committee and,
subsequently, a majority of the Board finds, after reasonable
notice to Executive (but in no event less than fifteen (15) days'
notice) and an opportunity for Executive and her counsel to be
heard by the Board, that termination of Executive's employment for
Cause is justified. Termination of Executive's employment for
Cause shall become effective after such finding has been made by
the Board and five (5) business days after the Board gives to
Executive notice thereof, specifying in detail the particulars of
the conduct of Executive found by the Board to justify such
termination for Cause.
(iii) During the Effective Period, the Bank shall have
the absolute right to terminate Executive's employment Without
Cause at anytime by vote of a majority of the Board. Termination
of Executive's employment Without Cause shall be effective five (5)
business days after the Board gives to Executive notice thereof,
specifying that such termination is Without Cause.
(iv) Upon a termination of Executive's employment for
Cause during the Effective Period, Executive shall have no right to
receive any compensation or benefits hereunder. Upon a termination
of Executive's employment Without Cause during the Effective
Period, Executive shall be entitled to receive the benefits
provided in Section 8 hereof.
7. Termination of Employment by Executive During Effective
Period. During the Effective Period, Executive shall be entitled
to terminate her employment with the Bank and, if such termination
is for Good Reason or on account of Disability, to receive the
benefits provided in Section 8 hereof. Executive shall give the
Bank notice of voluntary termination of employment, which notice
need specify only Executive's desire to terminate her employment
and, if such termination is for Good Reason or Disability, set
forth in reasonable detail the facts and circumstances claimed by
Executive to constitute Good Reason or Disability. Termination of
Executive's employment by Executive pursuant to this Section 7
shall be effective five (5) business days after Executive gives
notice thereof to the Bank. The Executive shall not be entitled to
the benefits provided in Section 8 upon her death during the
Effective Period.
8. Benefits Upon Termination in Certain Circumstances. Upon
the termination of the employment of Executive by the Bank pursuant
to Section 6(iii) hereof or by Executive for Good Reason or
Disability pursuant to Section 7 hereof, Executive shall be
entitled to receive the following payments and benefits:
(i) The Bank shall pay to Executive, not later than the
Termination Date, a lump sum cash amount equal to the sum of (a)
the full base salary earned by Executive through the Termination
Date and unpaid at the Termination Date, calculated at the highest
rate of base salary in effect at any time during the twelve months
immediately preceding the Termination Date, (b) any bonus earned by
Executive but not paid at the Termination Date, (c) the amount of
any base salary attributable to vacation earned by Executive but
not taken before the Termination Date, (d) 1/12 of the amount of
the bonus earned by Executive with respect to the calendar year
ending immediately prior to the Termination Date times the number
of months, including partial months, from the beginning of the
calendar year including the Termination Date through the
Termination Date, and (e) all other amounts earned by Executive and
unpaid at the Termination Date.
(ii) The Bank shall pay to Executive, not later than the
Termination Date, a lump sum cash amount equal to the product of
three (3) times Executive's Compensation.
(iii) The Bank shall maintain in full force and effect
for Executive's continued benefit until the earlier of (a) the
expiration of three years after the Termination Date or (b)
Executive's commencement of full time employment with a new
employer, all life, medical, dental, prescription drug and long-
and short-term disability insurance plans, programs or arrangements
in which Executive was entitled to participate at any time during
the twelve month period prior to the Termination Date, provided
that Executive's continued participation is possible under the
general terms and provisions of such plans, programs or
arrangements. In the event that Executive's participation in any
such plan, program or arrangement is prohibited, the Bank shall
arrange to provide Executive with benefits substantially similar to
those which Executive is entitled to receive under such plans,
programs or arrangements for such period.
(iv) The Bank shall pay to Executive the cost, in an
amount not to exceed 20% of Executive's annual base salary as in
effect immediately prior to the Change in Control, of professional
outplacement services rendered to Executive within 6 months
following termination of the employment of Executive as and when
such costs are incurred.
(v) Executive shall not be required to mitigate the
amount of any payment provided for in this Section 8 by seeking
other employment or otherwise. Except as provided in Section
8(iii), the amount of any payment provided for in this Section 8
shall not be reduced by any compensation or other amounts paid to
or earned by Executive as the result of employment with another
employer after the Termination Date or otherwise.
(vi) Any payment made pursuant to this Section 8 must be
in compliance with 12 U.S.C. 1828(k) and any regulations
promulgated thereunder. If any payment is in violation of such
Section or regulations, the Executive shall waive her right to such
payments.
9. Legal Fees and Expenses. The Bank shall pay to the
Executive all reasonable legal fees and expenses incurred by the
Executive in enforcing this Agreement if it is determined that the
Executive's employment with the Bank was terminated by the Bank
Without Cause or, during the Effective Period, by the Executive for
Good Reason (including all such fees and expenses, if any, incurred
in contesting or disputing any such termination or in seeking to
obtain or enforce any right or benefit provided to the Executive by
this Agreement or under any other plan, program or arrangement of
the Bank or agreement with the Bank). The Executive shall be
entitled to interest, computed at the "applicable Federal rate"
(within the meaning of Section 7872 (f) (2) (A) of the Internal
Revenue Code of 1986) for term loans, with respect to any amount
for which she is entitled to reimbursement hereunder, from the date
on which the Executive paid such amount until the reimbursement
date.
10. Payment Obligations Absolute. The Bank's obligation to
pay Executive the amounts provided for hereunder shall be absolute
and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Bank may have against
her or anyone else. All amounts payable by the Bank hereunder
shall be paid without notice or demand.
11. Tax Adjustment. (a) The amount of payments provided for
herein shall be increased to the extent necessary to pay (i) any
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as it may from time to time be amended (the "Code"), on the
payments and benefits provided for herein and (ii) any such excise
tax and any other taxes (including, without limitation, federal and
state income and employment taxes on the payments provided for in
this Section 11. The Bank shall pay to Executive the payments
provided for in this Section 11 as soon as practical following the
determination of the tax counsel referred to below. If any such
excise tax is imposed as a result of the combination of payments or
benefits provided hereunder and payments or benefits not provided
hereunder, then in calculating the amount of payments required
pursuant to this Section 11, the excise tax shall be treated as
first being imposed as a result of payments and benefits provided
hereunder, including the payments provided pursuant to this Section
11. Tax counsel selected by Executive and reasonable acceptable to
the Bank shall determine whether the increase provided for by this
Section 11(a) shall be required. All determinations of tax counsel
shall be binding on the Bank and Executive. Tax counsel shall
determine that payments shall be increased only if, and to the
extend that, it is more likely than not that the payments or
benefits provided for herein, including in this Section 11, are
subject to a tax imposed by the Code. In making the determinations
required by this Section 11, tax counsel may rely on benefit
consultants, accountants or other experts. The Bank hereby agrees
to pay for all reasonable fees and expenses of such tax counsel and
other experts and shall indemnify and hold such counsel and other
experts harmless from any and all cost, expense, liability or
damage arising out of any determinations made by such counsel or
other experts pursuant to this Section 11.
(b) If, subsequent to the payment to Executive of payments
pursuant to this Section 11, the tax counsel referred to in this
Section 11 reasonable determines that the amount of the payments
paid pursuant to this Section 11 are greater than, or less than,
the amount required to have been paid, Executive shall reimburse
the Bank an amount, or the Bank shall pay to Executive an
additional amount, respectively, based upon such determination.
12. Required Provisions.
(a) The Bank may terminate the Executive's employment at any
time, but any termination by the Bank, other than termination For
Cause, shall not prejudice Executive's right to compensation or
other benefits to which she thereby becomes entitled under this
Agreement. Executive shall not have the right to receive
compensation or other benefits pursuant to this Agreement as a
result of, or for any period after, termination For Cause.
(b) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of the Bank's affairs
by a notice served under Section 8 (e)(3) or (g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. 1818 (e)(3) and (g)(1)), the
Bank's obligations under this Agreement shall be suspended as of
the date of service unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, the Bank may, in its
discretion, (i) pay the Executive all or part of the compensation
withheld while its obligations hereunder were suspended and (ii)
reinstate (in whole or in part) any of its obligations which were
suspended.
(c) If the Executive is removed and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an order
issued under Section 8 (e)(4) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1818 (e)(4) or (g)(1)), all obligations of
the Bank under this Agreement shall terminate as of the effective
date of the order, but vested rights of the Executive shall not be
affected.
(d) If the Bank is in default (as defined in Section 3 (x)(1)
of the Federal Insurance Deposit Act), all obligations under this
Agreement shall terminate as of the date of default, but vested
rights of the Executive shall not be affected. Furthermore, this
Section 12(d) shall not apply to the extent that this Agreement was
subject to the prior written approval of the Director or his or her
designee.
(e) All obligations of the Bank under this Agreement shall be
terminated, except to the extent determined that continuation of
the contract is necessary for the continued operation of the Bank,
(i) by the Director or his or her designee, at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation
enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in Section 13(c) of the
Federal Deposit Insurance Act; or (ii) by the Director or his or
her designee, at the time the Director or his or her designee
approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the
Director to be in an unsafe or unsound condition. Any rights of
the Executive that have already vested, however, shall not be
affected by such action.
13. Successor; Binding Agreement.
(i) The Bank shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, liquidation or
otherwise) to all or substantially all of the business and/or
assets of the Bank to agree to assume and to assume all of the
obligations of the Bank under this Agreement upon or prior to such
succession taking place. A copy of such assumption and agreement
shall be delivered to Executive promptly after its execution by the
successor. Failure of the Bank to obtain such agreement upon or
prior to any such successions shall be a breach of this Agreement
and shall constitute Good Reason for Executive to terminate her
employment with the Bank under this Agreement. For purposes of
implementing the foregoing, the date on which any such successions
becomes effective shall be deemed the Termination Date. As used in
this Agreement, "Bank" shall mean the Bank as hereinbefore defined
and any successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Section 13
(i) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(ii) This Agreement is personal to Executive and Executive
may not assign or transfer any part of her rights or duties
hereunder, or any compensation due to her hereunder, to any other
person, except that this Agreement shall inure to the benefit of
and be enforceable by Executive's personal or legal
representatives, executors, administrators, heirs, distributees,
devisees, legatees or beneficiaries.
14. Modification; Waiver. No provisions of this Agreement
may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in a writing signed by
Executive and by such director of the Bank as may be specifically
designated by the Board. Waiver by any party of any breach of or
failure to comply with any provision of this Agreement by the other
party shall not be construed as, or constitute waiver of such
provision, or a waiver of any other breach or, or failure to comply
with, any other provision of this Agreement.
15. Notice. All notices, requests, demands and other
communications required or permitted to be given by either party to
the other party to this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or
received by certified or registered mail, return receipt requested,
postage prepaid, at the address of the other party as follows:
If to the Bank to:
Southern Financial Bank
Attention: Board of Directors or Secretary
37 E. Main Street
Warrenton, VA 22186
If to Executive to:
Georgia S. Derrico
2954 Burrland
The Plains, VA 22171
Either party hereto may change its address for purposes of
this Section 15 by giving fifteen (15) days' prior notice to the
other party hereto.
16. Headings. The headings in this Agreement are inserted for
convenience and reference only and shall not be a part of or
control or affect the meaning of this Agreement.
17. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original.
18. Governing Law. This Agreement has been executed and
delivered in the State of Virginia, and its validity,
interpretation, performance, and enforcement shall be governed by
laws of said State but only to the extent not superseded by federal
law. The required provisions in this Agreement were inserted
pursuant to existing applicable federal regulations. Any future
regulatory changes which amend or repeal the required provision in
a manner favorable to Executive shall be automatically incorporated
into this Agreement upon the effective date of such regulatory
change.
19. Payroll and Withholding Taxes. The Bank may withhold
from any amounts payable to Executive hereunder all federal, state,
city or other taxes that the Bank may reasonable determine are
required to be withheld pursuant to any applicable law or
regulation.
20. Entire Agreement. Except as explicitly provided for
herein, this Agreement supersedes any and all other oral or written
agreements heretofore made relating to the subject matter hereof
and constitutes the entire agreement of the parties relating to the
subject matter hereof. In particular, this Agreement supersedes
and replaces in its entirety the Employment Agreement dated as of
August 1985, between the Executive and the Bank.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SOUTHERN FINANCIAL BANK
By: Joyce V. Clatterbuck
Corporate Secretary
Georgia S. Derrico
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