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 VIRGINIA BEACH, Va., Nov. 15 /PRNewswire/ -- Essex Financial Partners, L.P. (AMEX: ESX) and its subsidiaries ("EFP") today announced a $505,000 consolidated loss for the third quarter of 1993. EFP's consolidated net loss for the quarter ended Sept. 30, 1993, resulted in a net loss of 24 cents per Class A limited partnership unit as compared to a net loss of $2.95 per unit for the quarter ended Sept. 30, 1992. The consolidated loss was attributable predominantly to interest expense of $260,000 on Essex Financial Partners, L.P.'s (the "Partnership") 10-year and 7-year notes delivered to PaineWebber Capital Inc. ("PWC") in connection with the restructuring completed in May 1993, a provision of $125,000 for additional potential losses related to amounts receivable from the former general partner, and additional amortization to reflect the continued impairment of loan premiums, purchased mortgage servicing rights ("PMSRs"), and excess servicing fees receivable of $84,000, $128,000, and $169,000, respectively. Although EFP will not continue to suffer consolidated losses of the same magnitude resulting from amortization for the impairment of PMSRs because Essex Mortgage Corporation's PMSRs have been sold, the interest expense associated with the 7-year and 10-year notes will create continuing consolidated losses for EFP, except to the extent offset by earnings at Essex Savings Bank, F.S.B. ("ESB").
 Significantly, ESB recognized net income of $50,000 for the third quarter of 1993 despite the aforementioned impairment adjustments to excess servicing and loan premiums, and lower servicing volumes created by the sale of the PMSRs. A major factor contributing to ESB's profitability is improved asset quality and lower provisions for losses on loans and foreclosed properties. In addition, the third quarter was the first full quarter of operation since the merger of EFP's savings bank subsidiaries and significant reductions in non-interest expenses have been achieved through the merger and the streamlining of ESB's operations. Furthermore, in order to improve ESB's net interest spread, the majority of its subordinated capital notes, approximately $2.8 million with interest rates of 11.5 percent and 12.0 percent, were redeemed in the third quarter of 1993. ESB is in the process of repositioning its branches to enhance profitability and has expanded loan production at Essex First Mortgage Corporation, its mortgage banking subsidiary, through the opening of three new loan production offices since June 1993. Accordingly, management believes ESB's return to core profitability during the third quarter of 1993 should be indicative of improved performance in the future if the asset quality, expense reduction, and loan production trends continue.
 The continued trend toward improved asset quality is reflected in the declining balance of EFP's non-performing assets, net of specific reserves, which have decreased from $24.3 million at Dec. 31, 1992, to $21.8 million at Sept. 30, 1993. Furthermore, loans in the 30-59 day and 60-89 day delinquency categories continue to decline, as loans in these delinquency categories decreased from $6.7 million at Dec. 31, 1992, to $3.6 million at Sept. 30, 1993. Non-performing assets at Sept. 30, 1993, included one $2.6 million real estate commercial loan. Subsequent to Sept. 30, 1993, management has obtained a letter of intent providing for $1.75 million of that loan to be assumed by a new borrower, and the remaining $875,000 will be restructured for the existing borrower. This transaction would result in a further reduction of $1.75 million in non-performing assets.
 In April 1993, Essex Home Mortgage Servicing Corporation ("Essex Home"), ESB's mortgage loan servicing subsidiary, began a marketing effort to acquire subservicing contracts as a means of generating loan servicing fees and ancillary income. In the third quarter of 1993, Essex Home entered into a subservicing contract for a loan portfolio that approximated $380 million as of Sept. 30, 1993. Furthermore, Essex Home has entered into four additional subservicing contracts, which when combined with the aforementioned subservicing contract are expected to provide significant flow basis servicing. Discussions with other potential parties for which Essex Home would subservice are in the preliminary stages.
 In order to focus its market emphasis in the states of North Carolina and Virginia, ESB has engaged an investment banking firm to solicit offers for and evaluate a possible sale of its three Florida branches. Management is also pursuing a reinvestment strategy whereby excess capital generated from the possible sale of its Florida branches would be used to acquire savings banks or branches in North Carolina or Virginia. In addition, ESB has notified its bank customers that its Asheville, N.C., branch will be closed by Dec. 31, 1993.
 ESB continues to be "adequately capitalized" under the prompt corrective action regulations, and thus is not subject to supervisory action under these regulations. However, the Office of Thrift Supervision ("OTS") has informed ESB that it continues to be deemed an association "requiring more than normal supervision" under Regulatory Bulletin No. 3a-1. The bulletin provides that any association requiring more than normal supervision shall not increase its total assets during any quarter in excess of an amount equal to net interest credited on deposit liabilities during the quarter. Management has submitted a new business plan for OTS approval which, among other considerations, projects an increase in assets. No assurance can be given that this approval will be granted. Management is of the opinion that the absence of such approval could have an adverse impact on future operation ?Furthermore, ESB is currently undergoing an examination by tO?TS.
 EFP's capital deficit increased from approximately $1.0 million at June 30, 1993, to a deficit of approximately $1.5 million at Sept. 30, 1993. Notwithstanding the deficit capital position of EFP, the Partnership's wholly owned thrift holding company subsidiary, Essex Bancorp, has total shareholder's equity of $16.7 million at
Sept. 30, 1993. However, because of the restrictions on the uses of cash by the Partnership under the two notes delivered to PWC in connection with the restructuring and the debt service associated with these notes, which totaled $17.6 million excluding premiums at Sept. 30, 1993, the Partnership does not anticipate making cash distributions until the 10-year and 7-year notes are paid in full. Given that Essex Bancorp's $16.7 million of consolidated equity (which consists primarily of the equity of ESB) is less than the Partnership's obligations to PWC, the Partnership's subsidiaries must substantially improve upon their historical performance to provide the Partnership with sufficient liquidity to retire its $17.6 million of obligations, plus accrued interest, to PWC. These debt repayments must be accomplished before any distributions to limited partners will be possible. Management believes that the possibility of the Partnership retiring its $17.6 million of obligations, plus accrued interest, to PWC in the foreseeable future is remote. As a result, the possibility of distributions to limited partners in the foreseeable future is also remote.
 -0- 11/15/93
 /CONTACT: Essex Financial Partners, L.P., Investor Relations, 804-431-5612/

CO: Essex Financial Partners, L.P. ST: Virginia IN: FIN SU: ERN

MH-DC -- DC030 -- 4622 11/15/93 16:01 EST
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Publication:PR Newswire
Date:Nov 15, 1993

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