THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, April 16, 1995 TAG: 9504150236
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Long : 142 lines
To celebrate the opening of its newest branch, CENIT Bank will host a gathering of business and civic leaders in Norfolk's Main Street Tower on Tuesday evening.
CENIT's offices in the dark stone-and-glass building will provide the Norfolk-based thrift with a highly visible presence in the center of the city's financial district.
But Tuesday's festivities may be dampened by uncertainty about CENIT's future as an independent institution.
In late February and early March, a Columbia, S.C., partnership accumulated a 9.9 percent stake in CENIT's parent, thrift holding company CENIT Bancorp Inc.
CENIT's stock has traded on the NASDAQ National Market System since 1992.
The partnership, Mid-Atlantic Investors, said in a March filing with the Securities and Exchange Commission that it may encourage CENIT to merge with another company if the transaction were profitable to Mid-Atlantic.
Mid-Atlantic Investors also said it may seek permission from federal regulators to raise its ownership in CENIT beyond 10 percent and may propose or support candidates for election to CENIT's board.
How concerned should CENIT's management and board be about Mid-Atlantic's action?
``Whenever a major shareholder rattles for some changes, it's pretty serious,'' said Edward Dillon, executive editor of Bank Mergers and Acquisitions, a publication compiled by the Charlottesville-based research concern SNL Securities.
As the managements at a handful of thrift holding companies have discovered, having Mid-Atlantic as a shareholder is difficult to ignore.
``They know financial institutions well, and they pick their targets carefully,'' said David West, a banking analyst with the brokerage firm Davenport & Co. of Virginia in Richmond.
Mid-Atlantic managing partner H. Jerry Shearer said last Thursday that he had not yet talked to CENIT's management about the partnership's intentions.
``At some point, I want to talk with them, but I've been very busy on other fronts,'' said Shearer, who spent 35 years as a commercial banker.
CENIT referred questions about Mid-Atlantic's action to president and chief executive officer Michael S. Ives. Ives, who was traveling last week, could not be reached for comment.
Shearer has been kept busy by Mid-Atlantic's battle with the management of another thrift holding company, Bankers First Corp. in Augusta, Ga.
Mid-Atlantic, which bought a 7 percent stake in Bankers First in 1993 and expanded that to 9.9 percent last year, has recommended to Bankers First shareholders that the company find an acquirer.
The partnership also is seeking support from Bankers First shareholders for its nominee to the company's board and for limits on the compensation of Bankers First executives.
Since 1991, Mid-Atlantic has acquired significant stakes in at least five financial institutions in South Carolina and Georgia. To date, it has pushed three of them into mergers with large commercial banks.
One, South Carolina Federal Corp. in Columbia, S.C., was acquired by Charlotte-based First Union Corp. in early 1993. Another, First Savings Bank in Greenville, S.C., was acquired in 1994 by Southern National Corp. of Winston-Salem, N.C.
And earlier this year, First Union agreed to buy United Financial Corp. of South Carolina Inc., in Greenwood, S.C. Mid-Atlantic interrupted a planned merger of United Financial last year by buying a stake in United and demanding that it find an acquirer offering a higher price.
Mid-Atlantic's involvement with CENIT and other thrifts has taken place against a background of massive consolidation in the industry.
Last year, 121 thrifts with combined assets of $91.7 billion were acquired, according to SNL Securities. That compares with 105 thrift acquisitions with assets of $48.1 billion in 1993.
``In the long term, we're going to see the thrift industry assimilated into the commercial banking industry,'' Shearer predicted.
Large commercial banks have gobbled up thrifts as a way to gather deposits and customers without paying the higher prices that bank acquisitions typically require.
Shearer said he and partner Jerry Zucker, chief executive of a manufacturing holding company in North Charleston, S.C., began investing in thrift stocks in the early 1990s because many of them were undervalued. The two partners, he said, ``talk daily and make joint decisions on what to invest in.''
Shearer would not say how many financial institutions Mid-Atlantic has a stake in or why the partnership picked CENIT.
In its search for shares of financial institutions that may be undervalued, Mid-Atlantic uses a large data base of financial information. In addition, ``we look at the merger activity going on in a region,'' Shearer said.
In parts of Virginia, including Hampton Roads, the pace of merger activity has become frenetic.
So far this year, Crestar Financial Corp. has acquired TideMark Bancorp Inc., a Newport News thrift holding company, and First Union has purchased Ameribanc Savings Bank, a Northern Virginia thrift with branches in Hampton Roads.
In addition, Virginia Beach-based Commerce Bank was acquired in January by one of the North Carolina banking companies that recently merged to form Southern National Corp.
With a dozen branches in Hampton Roads and a mix of consumer banking services, CENIT would be attractive to an expansion-minded bank, said securities analysts in Virginia. And CENIT's valuable core deposits will increase significantly later this year when it completes a planned acquisition of Princess Anne Bank in Virginia Beach, analysts said.
Meanwhile, CENIT has eliminated most of the problem loans and foreclosed real estate that hampered its profitability in the late 1980s and early 1990s.
``CENIT has had asset-quality problems in the past, but (chief executive) Mike Ives and (chief financial officer) John Guthrie have done a terrific job turning that around,'' said Laurie Havener, an analyst with Friedman, Billings, Ramsey & Co., an Arlington investment banking and research firm that specializes in thrifts.
Organized in 1889 as Mutual Building Association, CENIT converted from a depositor-owned savings and loan in 1992 to a stock organization with a holding company. In the process, CENIT raised $12.3 million of capital that enabled the company to expand its operations.
But raising capital through a public stock offering made the institution much easier to sell. And a 46 percent increase in the price of CENIT's shares since mid-February suggests that many of the company's shareholders expect an eventual sale. CENIT's shares reached a 52-week high of 3714 last Wednesday and ended the week at 37.
Mid-Atlantic's Shearer said he had not yet decided whether to attend CENIT's annual shareholders' meeting on April 26 in Norfolk.
Shearer also declined to talk about any changes that he and Zucker might like to see at CENIT. The language of the SEC filing in March that disclosed Mid-Atlantic's purchase of CENIT shares was intentionally vague, he said.
``We've learned to word our 13-Ds to give us maximum flexibility,'' he said, referring to the SEC document. ``That doesn't mean that we'll act in the near term. It depends on how things develop.''
When he and Zucker buy a stake in any financial institution, they don't have a predetermined course of action, Shearer said.
Some institutions need time to grow. Others, he said, ``take a lot of patience and shareholder input, and we're not bashful about providing shareholder input.'' ILLUSTRATION: Graphics
KEN WRIGHT/Staff
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