UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the quarterly period ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the transition period from __________ to ________
Commission File Number: 1-10646
CENTURA BANKS, INC.
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(Exact name of registrant as specified in its charter)
North Carolina 56-1688522
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(State of Incorporation) (IRS Employer Identification No.)
134 North Church Street, Rocky Mount, North Carolina 27804
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(Address of principal executive office) (Zip Code)
(919) 977-4400
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark has filed all documents and reports required to be filed
by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, NO PAR VALUE 23,962,821
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(Class of Stock) (Shares outstanding as of October 31, 1996)
Exhibit Index on sequential page number 31.
CENTURA BANKS, INC.
FORM 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
September 30, 1996 and 1995, and December 31, 1995 4
Consolidated Statements of Income -
Three months and nine months ended September 30, 1996 and 1995 5
Consolidated Statement of Shareholders' Equity -
Nine months ended September 30, 1996 6
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1996 and 1995 7
Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-27
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 2. Changes in Securities 28
Item 3. Defaults upon Senior Securities 28
Item 4. Submission of Matters to a Vote of Securities Holders 28
Item 5. Other Information 28
Item 6. Exhibits and Reports on Form 8-K 29
SIGNATURES 30
CENTURA BANKS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statement of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
CENTURA BANKS, INC. AND SUBSIDIARY
September 30, December 31,
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(In thousands, except share data) 1996 1995 1995
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ASSETS
Cash and due from banks $ 247,439 $ 190,386 $ 261,974
Due from banks, interest-bearing 10,448 9,075 8,295
Investment securities:
Available for sale (cost of $1,121,166, $590,490,
and $991,603, respectively) 1,109,708 586,515 992,043
Held to maturity (market value of $339,742,
$569,246 and $303,662, respectively) 341,215 571,490 300,919
Federal funds sold 2,260 24,461 32,183
Loans 3,988,039 3,678,772 3,710,043
Less allowance for loan losses 58,546 53,415 53,452
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Net loans 3,929,493 3,625,357 3,656,591
Bank premises and equipment 91,179 84,777 83,946
Other assets 192,437 164,136 167,456
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Total assets $ 5,924,179 $ 5,256,197 $ 5,503,407
=======================================================================================================
LIABILITIES
Deposits:
Demand, noninterest-bearing $ 686,462 $ 577,030 $ 636,796
Interest-bearing 3,536,481 3,144,872 3,180,825
Time deposits over $100 339,670 448,020 474,798
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Total deposits 4,562,613 4,169,922 4,292,419
Borrowed funds 621,248 388,075 497,717
Long-term debt 231,193 208,888 226,866
Other liabilities 78,120 64,933 77,318
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Total liabilities 5,493,174 4,831,818 5,094,320
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 25,000,000 shares
authorized; none issued - - -
Common stock, no par value
50,000,000 shares authorized; shares issued
and outstanding of 23,293,670, 23,780,389
and 23,126,200, respectively 185,694 206,844 184,188
Common stock acquired by ESOP (431) (574) (539)
Unrealized securities gains (losses), net (7,075) (2,382) 621
Retained earnings 252,817 220,491 224,817
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Total shareholders' equity 431,005 424,379 409,087
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Total liabilities and shareholders' equity $ 5,924,179 $ 5,256,197 $ 5,503,407
=======================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
CENTURA BANKS, INC. AND SUBSIDIARY
Three Months Ended Nine Months Ended
September 30, September 30,
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(Dollars in thousands, except share and per share data) 1996 1995 1996 1995
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INTEREST INCOME
Loans, including fees $ 91,168 $ 86,817 $ 263,793 $ 239,765
Investment securities:
Taxable 20,683 16,902 61,909 44,129
Tax-exempt 601 685 2,030 2,213
Short-term investments 422 474 1,057 1,175
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Total interest income 112,874 104,878 328,789 287,282
INTEREST EXPENSE
Deposits 41,537 41,419 120,335 105,917
Borrowed funds 7,074 5,509 22,383 15,210
Long-term debt 3,142 3,222 10,264 8,790
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Total interest expense 51,753 50,150 152,982 129,917
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NET INTEREST INCOME 61,121 54,728 175,807 157,365
Provision for loan losses 2,325 1,902 6,650 5,786
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Net interest income after provision for loan losses 58,796 52,826 169,157 151,579
NONINTEREST INCOME
Service charges on deposit accounts 8,427 7,350 24,757 20,776
Credit card and related fees 1,479 1,262 3,588 3,053
Other service charges, commissions and fees 4,312 2,660 12,128 7,438
Fees for trust services 1,650 1,527 4,941 4,581
Mortgage income 2,673 2,437 8,738 4,366
Other noninterest income 1,184 860 3,061 3,924
Securities gains (losses), net 403 8 1,682 (613)
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Total noninterest income 20,128 16,104 58,895 43,525
NONINTEREST EXPENSE
Personnel 25,529 22,498 74,287 63,248
Occupancy 3,102 2,882 8,936 8,212
Equipment 4,921 4,016 14,357 9,538
Foreclosed real estate losses and related
operating expense 148 173 457 365
Other operating 25,006 14,322 58,177 43,052
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Total noninterest expense 58,706 43,891 156,214 124,415
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Income before income taxes 20,218 25,039 71,838 70,689
Income taxes 7,173 9,099 26,369 25,710
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NET INCOME $ 13,045 $ 15,940 $ 45,469 $ 44,979
===========================================================================================================================
NET INCOME PER COMMON SHARE
Primary $ 0.56 0.65 $ 1.95 1.92
Fully diluted 0.56 0.65 1.95 1.92
===========================================================================================================================
AVERAGE COMMON SHARES OUTSTANDING
Primary 23,382,902 24,478,272 23,294,658 23,421,944
Fully diluted 23,382,902 24,488,290 23,296,975 23,463,288
===========================================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Centura Banks, Inc. and Subsidiary
Nine months ended September 30, 1996
Unrealized
Common Securities
Stock Gains Total
Common Stock Acquired (Losses), Retained Shareholders'
-------------------------------
Shares Amount by ESOP Net Earnings Equity
--------------- ------------- ----------- ------------ ------------- -------------
(Dollars in thousands)
Balance, December 31, 1995 23,126,200 $ 184,188 $ (539) $ 621 $ 224,817 $ 409,087
Net income - - - - 45,469 45,469
Common stock issued:
Stock option plans 212,091 2,752 - - - 2,752
Restricted stock plans - - - - - -
Acquisitions 776,441 28,261 - - - 28,261
Redemption of common stock (821,062) (29,507) - - - (29,507)
Unrealized securities losses, net - - - (7,696) - (7,696)
Other - - 108 - 141 249
Cash dividends declared - - - - (17,610) (17,610)
--------------- ------------- ----------- ------------ ------------- -------------
Balance, September 30, 1996 23,293,670 $ 185,694 $ (431) $ (7,075) $ 252,817 $ 431,005
=============== ============= =========== ============ ============= =============
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Centura Banks, Inc. and Subsidiary
For the Nine Months Ended
September 30,
--------------------------------
(Dollars in thousands) 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 45,469 $ 44,979
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 6,650 5,786
Depreciation and amortization 10,115 7,925
Decrease in deferred income taxes (8,032) (8,097)
Loan fees deferred, net (6,023) (2,622)
Bond premium amortization and discount accretion, net 2,299 1,004
(Gain) loss on sales of investment securities (1,682) 613
Proceeds from sales of mortgage loans held for sale 329,545 305,300
Originations, net of principal repayments, of mortgage loans held for sale (331,366) (340,645)
Increase in accrued interest receivable (4,084) (9,807)
Increase (decrease) in accrued interest payable (3,595) 7,668
Net decrease in other assets and other liabilities 13,607 5,953
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Net cash provided by operating activities 52,902 18,057
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CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (315,656) (343,422)
Purchases of:
Securities available for sale (433,942) (326,733)
Securities held to maturity (212,707) (114,842)
Premises and equipment (14,570) (13,635)
Proceeds from:
Sales of securities available for sale 332,987 195,791
Maturities and issuer calls of securities available for sale 111,905 20,522
Maturities and issuer calls of securities held to maturity 170,759 110,583
Sales of foreclosed real estate 2,830 1,643
Dispositions of premises and equipment 3,585 4,070
Net decrease in federal funds sold 39,798 45,204
Cash acquired, net of cash paid, in purchase acquisitions 3,496 14,132
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Net cash used by investing activities (311,514) (406,687)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 171,048 222,462
Net increase in short-term borrowings 114,811 95,421
Proceeds from issuance of long-term debt 91,600 90,988
Repayment of long-term debt (87,273) (9,199)
Cash dividends paid (17,201) (13,172)
Proceeds from issuance of common stock, net 2,752 2,408
Redemption of common stock (29,507) (35,820)
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Net cash provided by financing activities 246,230 353,088
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Decrease in cash and cash equivalents (12,382) (35,542)
Cash and cash equivalents at January 1 270,269 235,003
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Cash and cash equivalents at September 30 $ 257,887 $ 199,461
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the nine months for:
Interest $ 156,577 $ 121,880
Income taxes 21,485 29,784
Noncash transactions:
Loans securitized into mortgage-backed securities 122,982 56,971
Stock issued in purchase acquisitions 28,261 75,793
Unrealized securities gains (losses), net (12,402) 15,521
Other 6,069 284
Loans transferred to foreclosed property 2,591 1,130
=========== =========
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Centura Banks, Inc. and Subsidiary
Note 1: Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Centura Banks, Inc. ("Centura") and its wholly-owned subsidiary, Centura Bank
(the "Bank"). The Bank has the following wholly-owned subsidiaries: Centura
Securities, Inc., Centura Insurance Services, Inc., CB Services Corp., CBRM,
Inc., Pepco, Inc., and Centura SBIC, Inc. All significant intercompany
transactions are eliminated in consolidation and all adjustments considered
necessary for a fair presentation of the results for the interim periods
presented have been included (such adjustments are normal and recurring in
nature). Operating results for the three and nine month periods ended September
30, 1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996.
The merger of First Commercial Holding Corporation ("FCHC") with and into
Centura was completed February 27, 1996. As this transaction was accounted for
as a pooling-of-interests, all financial data previously reported prior to the
date of merger has been restated as though FCHC had been combined for the
periods presented. For the completed acquisitions accounted for under the
purchase method of accounting, the financial position and results of operations
of each entity acquired were not included in the consolidated financial
statements until the consummation date of the transaction.
Note 2: Acquisitions
Acquisition activity for 1996 and 1995 is summarized below. Data is as of the
date of acquisition:
Institution Acquisition Date Offices Assets Loans Deposits
(dollars in millions)
Completed Acquisitions
CLG, Inc. ("CLG") (3) 11/1/96 $126 $85 $---
FirstSouth Bank ("FirstSouth") (3) 10/25/96 4 170 132 150
First Community Bank ("First Community") (2) 8/16/96 4 121 83 99
Deposit assumption from Essex Savings Bank, FSB 7/26/96 ---- 71 --- 71
("Essex")
First Commercial Holding Corporation ("FCHC") (1) 2/27/96 8 172 120 140
First Southern Bancorp, Inc. ("First Southern") (2) 6/2/95 8 325 224 266
Cleveland Federal Bank, A Savings Bank 3/30/95 2 86 69 74
("Cleveland") (2)
No Pending Acquisitions
(1) Acquisition accounted for as a pooling- of-interests
(2) Acquisition accounted for as a purchase
(3) Acquisition will be accounted for as a pooling-of-interests. The financial
data presented does not include the financial data of this entity, as the
acquisition was consummated after September 30, 1996.
On November 1, 1996, Centura completed the acquisition of CLG, a privately owned
company that specializes in leasing computer equipment to companies throughout
the United States. Based in Raleigh, North Carolina, CLG has offices in
Charlotte and Wilmington, North Carolina, Columbus, Georgia, and Dallas, Texas.
The transaction was accounted for as a pooling-of-interests. CLG operates as a
wholly-owned subsidiary of Centura Bank.
On October 25, 1996, Centura consummated its merger with FirstSouth, a
state-chartered commercial bank with its headquarters in Burlington, North
Carolina, with and into Centura Bank. Centura issued 1,075,559 shares of Centura
common stock, or .55 shares of Centura common stock for each of the outstanding
shares of FirstSouth common stock. The acquisition was accounted for as a
pooling-of-interests. Centura's board of directors approved the repurchase of up
to 9.9 percent of the shares issued.
On August 16, 1996, Centura consummated its acquisition of First Community, a
North Carolina bank corporation with its principal headquarters in Gastonia,
North Carolina, with and into the Bank. Pursuant to the agreement, shareholders
of First Community received .96 shares of Centura common stock for each share of
First Community outstanding common stock resulting in the issuance of 776,441
shares. The purchase price exceeded the fair value of net assets acquired by
approximately $16 million, which amount was recorded as goodwill. Centura's
board of directors approved the repurchase of up to 100% of the shares issued in
the transaction.
On July 26, 1996, Centura consummated its assumption of deposit liabilities and
the acquisition of certain deposit-related loans of the Wilmington, Raleigh, and
Greensboro locations of Essex Savings Bank, F.S.B. of Virginia Beach, Virginia.
Centura Bank did not purchase the physical branch offices of Essex, but
consolidated the deposits into existing banking facilities. Centura originally
recorded as an other asset a $712,000 core deposit intangible which represents
the present value of the difference in costs between the acquired core deposits
and market alternative funding sources.
On February 27, 1996, Centura consummated its acquisition of FCHC, a Delaware
bank holding company with its principal offices in Asheville, North Carolina,
with and into Centura. In addition, First Commercial Bank, FCHC's wholly owned
North Carolina state bank subsidiary, was merged with and into the Bank. The
merger was consummated through the issuance of .63 shares of Centura's common
stock for each share of outstanding common stock of FCHC or 1,607,564 shares.
Centura's board of directors approved the repurchase of up to 9.9 percent of the
shares issued. The transaction was accounted for as a pooling-of-interests;
therefore, financial data of Centura previously reported prior to the date of
the merger has been restated to include the accounts of both Centura and FCHC.
On June 2, 1995, Centura consummated its acquisition of First Southern, a North
Carolina savings bank holding company headquartered in Asheboro, North Carolina,
with and into Centura. In addition, First Southern Savings Bank, Inc., SSB,
First Southern's wholly-owned North Carolina savings bank subsidiary, was merged
with and into the Bank. Centura issued 2,165,791 shares of common stock for the
outstanding shares of First Southern. Goodwill of approximately $18.8 million
was recorded, representing the excess of the purchase price over the fair value
of net assets acquired. Centura's board of directors approved the repurchase of
up to 100 percent of the shares issued to consummate this transaction.
On March 30, 1995, Centura consummated its acquisition of Cleveland, a
federally-chartered savings bank headquartered in Shelby, North Carolina, with
and into the Bank. The merger was consummated through the issuance of 3.381
shares of Centura's common stock for each share of outstanding common stock of
Cleveland, or 645,719 shares. The purchase price exceeded the fair value of net
assets acquired by $6.9 million, which amount was recorded as goodwill, included
in other assets on the consolidated balance sheet. Centura's board of directors
approved the repurchase of up to 100 percent of the shares issued to consummate
this transaction.
On October 1, 1996, Centura completed the cash transaction to purchase 49
percent of First Greensboro Home Equity, Inc. ("First Greensboro"). First
Greensboro, headquartered in Greensboro, North Carolina, is a mortgage company,
operating 32 offices in 10 states, specializing in alternative equity lending
for homeowners whose borrowing needs are generally not met by traditional
financial institutions. First Greensboro retains the controlling interest of the
company. Centura recorded this investment as an other asset and will recognize
49% of the net income of First Greensboro into the earnings stream as required
under the equity method of accounting for investments. The excess of the
purchase price over the fair market value of the net assets acquired will
appropriately be amortized as a charge against earnings of future periods. Since
this transaction was completed after September 30, 1996, the impact of this
purchase is appropriately not included in the consolidated financial statements
presented.
Note 3: Reclassifications
Certain items in the September 30, 1995 consolidated financial statements have
been reclassified to conform with the September 30, 1996 presentation. Such
reclassifications had no impact on net income or shareholders' equity.
Note 4: Adoption of Statements of Financial Accounting Standards ("SFAS")
In March 1995, the Financial Accounting Standards Board (the "FASB") issued SFAS
No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for those to be disposed of.
This statement requires that long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. An impairment loss should be
recognized if the sum of the undiscounted future cash flows is less than the
carrying amount of the asset. Those assets to be disposed of are to be reported
at the lower of the carrying amount or fair value less costs to sell. As
required, Centura adopted the provisions of this statement in the first quarter
of 1996, but the impact of such adoption was immaterial. However, this statement
could have a material impact on Centura's consolidated financial statements in
future periods should an event or changes in circumstances occur in such future
periods, requiring a review by management for impairment.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." The statement defines a fair value based method of accounting for
an employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans. It also allows an entity to continue to measure compensation
cost for those plans using the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). SFAS No. 123 requires that an employer's financial statements
include certain disclosures about stock-based employee compensation arrangements
regardless of the method used to account for them. Entities electing to remain
with the accounting in APB 25 must make pro forma disclosures of net income and,
if presented, earnings per share, as if the fair value based method of
accounting defined in SFAS No. 123 had been applied. The accounting requirements
of this statement are effective for transactions entered into in fiscal years
that begin after December 15, 1995, though they may be adopted on issuance. The
disclosure requirements of this statement are effective for financial statements
for fiscal years beginning after December 15, 1995, or for an earlier fiscal
year for which this statement is initially adopted for recognizing compensation
cost. Pro forma disclosures required for entities that elect to continue to
measure compensation cost using APB 25 must include the effects of all awards
granted in fiscal years that begin after December 15, 1994. Centura has elected
to continue to measure compensation cost using APB 25, and therefore, will make
any appropriate disclosures in its financial statements for the year ending
December 31, 1996, of net income and earnings per share as if the fair value
based method of accounting defined in SFAS No. 123 had been applied. Management
has not quantified these pro forma disclosures.
CENTURA BANKS, INC.
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations For the Nine Months Ended September 30, 1996
The following discussion and analysis is presented to assist in the
understanding and evaluation of the financial condition and results of
operations of Centura Banks, Inc. ("Centura"). Centura is a bank holding company
operating in North Carolina.
Much of the financial discussion that follows refers to the impact of Centura's
merger and acquisition activity. See Note 2 of the notes to consolidated
financial statements for detail on the acquisitions. All the financial
institutions acquired were in North Carolina, allowing Centura to leverage upon
its existing market presence, as well as expand into adjacent and complimentary
markets. Centura will continue seeking to acquire healthy thrift and banking
institutions. As evidenced by the fourth quarter acquisition of CLG and purchase
of the 49 percent interest in First Greensboro, Centura will also continue to
evaluate the feasibility of investing in and acquiring non-traditional banking
services allowed under current regulatory guidelines.
The merger of FCHC with and into Centura Bank was completed February 27, 1996.
As this transaction was accounted for as a pooling-of-interests, all financial
data reported prior to the date of merger have been restated as though FCHC had
been combined for the periods presented. The acquisitions completed in 1995 and
the First Community acquisition in 1996 were accounted for under the purchase
method of accounting; accordingly, the financial position and results of
operations of each entity acquired were not included in the consolidated
financial statements until consummation of the purchase. The acquisitions
consummated subsequent to September 30, 1996 are not included in the financial
information and management disclosures.
SUMMARY
Centura recorded net earnings of $45.5 million for the nine months ended
September 30, 1996, an increase of $490,000 or 1.1 percent from the same period
in 1995. Earnings per fully diluted share were $1.95 compared to $1.92 for the
prior period. On September 30, 1996, the President enacted legislation requiring
a one-time special assessment on SAIF-insured deposits ("special assessment"),
and accordingly, Centura accrued an estimate of $7.3 million, $4.2 million net
of tax, against its earnings. Excluding the special assessment, net income for
the nine months was $49.7 million, up $4.7 million or 10.5 percent from the nine
months of 1995, representing a 21 cent improvement in fully diluted earnings per
share to $2.13 per share. Specific highlights for the nine months of 1996 are as
follows:
Return on assets and return on equity for the nine month period ending
September 30, 1996 were 1.09 percent and 14.75 percent respectively.
Excluding the nine month special assessment, return on assets was 1.19
percent and return on equity was 16.12 percent compared to the 1995 nine
month period which generated a return on assets of 1.26 percent and an
equity return of 15.60 percent.
Total revenues, defined as taxable equivalent net interest income plus
noninterest income, increased approximately $34.3 million or 16.8 percent
over the comparable prior period primarily due to higher levels of earning
assets and the increased generation of fee income.
Despite sluggish third quarter insurance and securities production due to
the effects of Hurricane Fran on coastal and eastern North Carolina
markets, noninterest income, before securities transactions, increased
$13.1 million to $57.2 million or 29.6 percent over the $44.1 million
recorded for the same period of 1995. Service charges on deposit accounts
increased $4.0 million. Insurance and brokerage commissions accounted for
$3.2 million of the increase, recording $8.1 million for the nine months of
1996. Mortgage income also increased dramatically, rising to $8.7 million
compared to $4.4 million for the nine month period of 1995. A key component
to the mortgage growth was capitalization of approximately $4.2 million of
mortgage servicing rights compared to $2.7 million during the comparable
period in 1995.
Taxable equivalent net interest income increased $19.0 million between the
nine month periods, despite a 24 basis point drop in the net interest
margin to 4.57 percent for the nine months ended September 30, 1996.
For the nine months ended September 30, 1996, average short-term and
long-term funding sources represented 18.3 percent of interest-bearing
liabilities while for the comparable nine month period of 1995 external
funding was only 14.1 percent of average interest-bearing liabilities.
External funding sources typically carry higher interest rates than
internally generated deposits and for the first nine months of 1996, the
average cost of short and long-term borrowings was 93 basis points over the
average cost of interest bearing deposits.
Nonperforming assets of $20.4 million for September 30, 1996 were
relatively unchanged from the same period in 1995, representing only .34
and .39 percent of total assets, respectively.
The allowance for loan losses was $58.5 million, representing 1.47 percent
of total loans at September 30, 1996, compared to $53.4 million at
September 30, 1995. Net charge-offs, continuing at low levels, were only
.10 percent of average loans for both the nine-month periods presented. The
provision for loan losses was $6.7 million for the nine months ending
September 30, 1996 versus $5.8 million for the same period of 1995.
Excluding the special assessment, noninterest expense for the nine months
ended September 30, 1996, increased over the comparable period in 1995 by
19.7 percent to $148.9 million. The majority of the increase was seen in
personnel. Professional fees included an increase in the usage of
consulting services and expenses related to the February 1996 acquisition
of FCHC and the August 1996 acquisition of First Community. Postage and
supplies expense increased 25.9 percent partially due to customer mailings
to announce new products and to new customers acquired through acquisition.
Centura continues to support the progress of technological and product
initiatives, evidenced particularly within equipment expense, which
increased $4.8 million between the nine month periods.
INTEREST-EARNING ASSETS
For the nine months ended September 30, 1996, average earning assets had
increased to $5.2 billion, an increase of $759 million or 17.2 percent, over the
average of $4.4 billion for the same period in 1995. At September 30, 1996,
earning assets were $5.5 billion, up $581 million or 11.9 percent, over the
level at September 30, 1995.
Loans
Average loan volume increased to $3.8 billion for the first nine months of 1996,
up $371 million or 11.0 percent, over the same period in 1995. The loan growth
trend has been present in all loan categories excluding residential mortgages,
and has been funded principally by deposit growth, as well as increased short
term borrowings. Loans declined to represent 72.7 percent of average earning
assets for the nine months of 1996, compared to 76.8 percent for the same period
of 1995. This decline between the nine month periods was influenced by a slower
pace of loan growth.
Loans at September 30, 1996, were $4.0 billion, an increase of $309 million, or
8.4 percent, compared to $3.7 billion at September 30, 1995, and up $278 million
over loans at December 31, 1995. Loans of approximately $83 million were
acquired in connection with the August purchase of First Community,
predominantly in retail loans. During the first quarter of 1996, approximately
$122 million of residential mortgage loans held in the loan portfolio were
securitized. Loan growth from September 30, 1995 to September 30, 1996 was 6.2
percent without the effect of the First Community acquisition. Table 1
summarizes total loans outstanding and the mix of loans being held. Residential
mortgages decreased as a percent of total loans due to the securitization of
loans mentioned above.
Credit is extended by the Bank almost exclusively to customers in its market
areas of North Carolina. The Bank's loan policies discourage engaging in foreign
lending activities, having exposure in newly established ventures such as high
technology start-up companies or highly speculative real estate development
projects, and participating in highly leveraged transactions. The loan portfolio
is reviewed on an on-going basis to maintain diversification by industry,
minimizing substantial loan concentrations in any one industry.
The growth of the mortgage loan portfolio held by the Bank is managed to reduce
long-term exposure to interest rate risk. The residential mortgage portfolio
generally represents approximately 40 percent of the loan portfolio, though for
1996, it has declined to 34 percent, in part as a result of the securitization
noted above. The volume of originations was $331 million for the first nine
months of 1996. Sales of residential mortgage loans held for sale for the period
ending September 30, 1996 were $330 million indicating a steady turnover process
of loans originated for sale. Sales during the comparable period of 1995 were
approximately $305 million. Centura purchased approximately $191 million of
servicing rights in July 1996 which contributed to the growth in the mortgage
loan portfolio serviced for others to $2.1 billion as compared to $1.5 billion
at September 30, 1995 and $1.7 billion at December 31, 1995.
Mortgage loan activity also impacts noninterest income. Major components of
mortgage income are net servicing revenues, origination fees, servicing release
premiums, and net gains or losses on the sales of mortgage loans. Mortgage
income in total increased $4.3 million to $8.7 million for the first nine months
of 1996 versus $4.4 million for the comparable period last year. With the
increase in the mortgage loan portfolio serviced for others, net servicing
revenue increased to $3.7 million for the nine month period, a $843,000 increase
over the comparable 1995 period. The sales activity for year-to-date September
generated $965,000 in net marketing losses, compared to $3.5 million in losses
for the nine months ended September 30, 1995. Offsetting the impact of these net
marketing losses were gains recorded on loan sales as a result of the
capitalization of mortgage servicing rights totaling $4.2 million for the nine
months of 1996, compared to $2.7 million last year.
The commercial loan portfolio represented 50.5 percent of the loan portfolio at
September 30, 1996. Over 90 percent of these loans are secured. Unsecured
commercial loans are generally seasonal in nature (to be repaid in one year or
less) and like secured loans, are supported by current financial statements and
cash flow analyses.
Loans and other assets which were not performing in accordance with their
original terms and past-due loans are discussed under the section "Asset Quality
and Allowance for Loan Losses."
During 1996, loans as a percent of average earning assets has been decreasing.
The loans to earning assets ratio between the nine month periods decreased to
72.7 percent for the period ended September 30, 1996 compared to 76.8 percent
for 1995. This turn had a negative effect on the net interest margin, as loans
typically earn higher yields than investments. Taxable equivalent interest
income generated by loans increased $23.9 million for year-to-date September 30,
1996 to $264.1 million compared to $240.1 million for the same period last year.
Increased average loan volume of $371 million accounted for $26.1 million of the
increase in the taxable equivalent interest income. Slight decreases in interest
rates, as evidenced by an 11 basis point decline in the average loan yield to
9.29 percent from the previous nine months of 1995, directly impacted the yields
on the variable rate portion of the loan portfolio, decreasing taxable
equivalent interest income by an additional $2.2 million. Approximately 80
percent of the commercial loan portfolio is variable rate, affected by changes
in the prime rate or other various indices.
Investment Securities
The investment portfolio at September 30, 1996 was $1.5 billion, up 25.3 percent
from the $1.2 billion at September 30, 1995, and represented 24.5 percent and
22.0 percent of total assets at September 30, 1996 and 1995, respectively.
On average, investments for the period ended September 30, 1996 were $1.4
billion , up 38.6 percent from the $1.1 billion for the same period of 1995. As
a percentage of earning assets, average investments increased to 26.8 percent as
compared to 22.7 percent of earning assets, during the comparable period of
1995. Investment securities typically earn lower yields than loans thus
contributing to the decline in the net interest margin between the two periods.
The investment portfolio consists primarily of securities for which an active
market exists. Centura's policy is to invest primarily in securities of the US
Government and its agencies and in high grade municipals so as to minimize any
credit risk in the investment portfolio. At September 30, 1996, approximately 99
percent of the total investment portfolio consisted of obligations of the US
Government and its agencies or investment grade state, county and municipal
securities. The composition of the portfolio was 49 percent mortgage-backed
securities and 44 percent US Government and agencies securities, compared to 36
percent and 48 percent, respectively, at December 31, 1995. Approximately 64
percent of the debt securities were fixed rate investments at September 30,
1996.
The classification of securities as held to maturity ("HTM") or as available for
sale ("AFS") is determined at the date of purchase. At September 30, 1996, 24
percent of the total investment portfolio, versus 49 percent for the comparable
prior period, was classified as investment securities held to maturity (the "HTM
portfolio"), which are stated at net amortized cost. This shift between periods
occurred principally due to the transfer of $243 million of the HTM portfolio to
the AFS category at December 31, 1995, as allowed under the provisions of the
implementation guide published by the Financial Accounting Standards Board.
Centura intends and has the ability to hold such HTM securities until maturity.
At September 30, 1996, the amortized cost of the HTM portfolio was $341.2
million, which was $1.5 million more than its market value.
Investment securities available for sale (the "AFS portfolio"), representing the
remainder of the investment portfolio, are reported at fair value and will be
used as a part of Centura's asset/liability management strategies and may be
sold in response to changes in interest rates, changes in prepayment risk, the
need to increase regulatory capital and other factors. At September 30, 1996,
the recorded fair value of the AFS portfolio of $1.1 billion was $11.5 million
less than cost, which difference has been recorded, net of tax, as a reduction
of shareholders' equity. The increase in market decline between the two
nine-month periods was attributable to the change in the mix of securities held,
the dollar size of the AFS portfolio, and increases in intermediate-term
interest rates. Centura's liquidity position remains strong, alternative funding
sources are abundant, and cash flows are provided by investment maturities in
the AFS and HTM portfolios. This offers Centura flexibility in its
asset/liability management strategies and if necessary, flexibility to invest
and reinvest funds to increase the overall yield earned on investments.
Net realized gains of $1.7 million were generated during the first nine months
of 1996 from sales and issuer call activity, compared to net realized losses of
$613,000 during the comparable 1995 period.
Investment securities contributed $68.0 million in taxable equivalent interest
income for the period ending September 30, 1996, an increase of $18.3 million
over the $49.8 million earned in the comparable period of 1995. This $18.3
million increase was the result of the volume of average investments increasing
38.6 between the nine month periods, and only a four basis point decline in the
yield on the total investment portfolio from 6.55 percent to 6.51 percent. See
Table 3 for support.
FUNDING SOURCES
Total funding sources averaged $5.1 billion for the first nine months of 1996, a
$763 million or 17.6 percent increase from the average volume of $4.3 billion in
the comparable 1995 period. Funding sources include total deposits, short-term
borrowings and long-term debt.
Deposits
For September 30, 1996, average total deposits increased $476 million to $4.3
billion, or 12.5 percent over the nine months of 1995. Average growth in time
deposits accounted for $376 million of the increase between the periods although
time deposits represented approximately 52 percent of total interest-bearing
liabilities for the two nine-month periods. Furthermore, time deposits generally
carry higher costs than other types of deposit funding sources; and given the
competitive market in which Centura operates, the yield on time deposits rose
seven basis points to 5.50 percent for the period ending September 30, 1996
while the total costs of interest-bearing deposits rose only three basis points
to 4.38 percent.
As shown on Table 2, the mix of deposits has remained relatively stable between
the periods ending September 30, 1996 and 1995. Savings and money market
deposits represented 16.7 percent of average total deposits for the period
ending September 30, 1996, down from the comparable 1995 period level of 19.0
percent. With rates rising on time deposits, as expected, time deposits
increased its share of average total deposits to 55.4 percent from 52.4 percent.
The deposit base at September 30, 1996 of $4.6 billion was up $393 million from
the $4.2 billion level held at September 30, 1995 and slightly above the $4.3
billion held at December 31, 1995. First Community accounted for $99 million and
Essex $71 million of the growth between the two periods. Excluding First
Community and Essex, period-end deposits increased 4.2 percent from the
September 30, 1995 level. First Community contributed approximately $41 million
in time deposits and $58 million in less expensive deposit sources while Essex
added predominantly time deposits.
Interest expense on deposits increased $14.4 million to $120.3 million for the
nine months ending September 30, 1996 versus $105.9 million for the comparable
period of 1995. The change in average volume of deposits was responsible for an
increase of $16.0 million in interest expense (predominantly due to time
deposits), while the change in the rates paid for interest-bearing deposits
slowed the increase by $1.8 million. Table 3 details the change in rates paid by
deposit category and the corresponding change in volume.
Other Funding Sources
With increased competition on deposit generation and a strong earning asset
growth of 17.2 percent over the prior period, external funding sources increased
to 16.1 percent of total funding liabilities for the first nine months of 1996,
compared to 12.3 percent for the comparable period in 1995. The use of both
short-term and long-term debt has been in line with asset/liability strategies.
Consequently, short-term borrowed funds averaged $581.2 million, compared to the
$348.5 million average volume for the period ending September 30, 1995. Interest
expense on short-term borrowings increased by a net $7.2 million, comprised of a
$9.1 million increase due to higher volume and a $1.9 million decline due to
lower interest rates. The average rate paid for these funds declined 69 basis
points to 5.14 percent. The average volume of long-term debt, consisting
predominantly of FHLB advances, increased to $239.6 million during the first
nine months of 1996 compared to $184.7 million for the comparable prior nine
months. Interest expense on long-term debt increased by $1.5 million,
principally due to the higher volume.
NET INTEREST INCOME AND NET INTEREST MARGIN
As detailed in Table 3, taxable equivalent net interest income for the nine
months of 1996 increased by $19.0 million, or 11.8 percent, to $180.2 million,
from $161.2 million in the comparable period of 1995. For the period ended
September 30, 1996, average earning assets increased $759 million or 17.2
percent while interest-bearing liabilities increased $698 million or 18.4
percent. Accordingly, volume contributed $16.7 million to the increase in
taxable equivalent net interest income, with the largest increases reflected in
loans, investments and time deposits. The net impact of the rate environment on
net interest income was an increase of $2.3 million. The margin decreased 24
basis points for the period ended September 30, 1996 from the same nine-month
period of 1995. Much of the decline in the margin was due to a 21 basis point
decrease in the earning asset yield to 8.52 percent, which reflects the shift of
earning asset dollars from the higher yielding loans to lower yielding
investments. Loan growth, however, remained quite strong at 11.0 percent. The
4.55 percent paid for funding sources remained stable between the nine-month
periods, dropping only three basis points.
There will continue to be pressure on the net interest margin given the strong
competition for deposits, the corresponding need to utilize other higher-cost
funding sources and given the downward pressure on asset earning power in a
steady to falling rate environment.
ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES
Nonperforming assets continue to be controlled; consequently, additions to the
allowance for loan losses are principally in response to loan growth. The
provision for loan losses was $6.7 million for the nine months ending September
30, 1996, up $864,000 compared to $5.8 million for the same period of last year.
The provision expense exceeded gross charge-offs by $1.3 million. Net
charge-offs for the nine months of 1996, continuing at low levels, were $2.8
million, or .10 percent of average loans, compared to $2.5 million, or .10
percent of average loans for the prior year's period. Net charge-offs for the
year ended December 31, 1995 were .13 percent of average loans. The allowance
for loan losses was $58.5 million at September 30, 1996, representing 1.47
percent of loans outstanding, compared to $53.4 million, or 1.45 percent of
loans outstanding a year ago, and compared to $53.5 million or 1.44 percent of
loans outstanding at December 31, 1995. For additional information with respect
to the activity in the allowance for loan losses, see Table 4 entitled "Analysis
of Allowance for Loan Losses".
Table 5, "Nonperforming Assets and Past Due Loans," discloses the components and
balances of nonperforming assets. Nonperforming assets increased to $20.4
million at September 30, 1996 or .34 percent of total assets at the end of the
period. Nonperforming loans were $17.1 million at September 30, 1996, compared
to $17.2 million the same time in 1995, and were below the $19.3 million at
December 31, 1995. Foreclosed property of $3.3 million increased slightly from
the $2.8 million at December 31, 1995. Nonperforming assets have been controlled
as a result of sound lending policy, strong collection and workout efforts, and
close monitoring of commercial real estate in particular. At September 30, 1996,
the allowance for loan losses is 3.43 times nonperforming loans, up from 3.11
times at September 30, 1995 and up from 2.78 times at December 31, 1995. Based
on the current loan portfolio and levels of current problem assets and potential
problem loans, management believes the allowance for loan losses to be adequate.
Accruing loans past due ninety or more days were $9.0 million, $4.4 million and
$6.1 million at September 30, 1996, September 30, 1995 and December 31, 1995,
respectively, which represented .22 percent, .12 percent and .17 percent of
outstanding loans, respectively. Accrual of interest on loans is discontinued,
and the loans classified as nonaccrual, when management has serious doubts that
additional interest will be collected in a reasonable period of time.
While nonperforming asset trends have generally been improving, there are still
exposures. Remaining nonperforming assets may prove to be more stubborn to
resolve. Future writedowns and losses associated with the valuation or
disposition of real estate owned directly affect net earnings. Growth of the
loan portfolio opens opportunity for new problems to develop. Finally, the
impact of ever-changing economic conditions and changes in interest rates and/or
inflation on the operations of Centura's customers is unknown, but gives
opportunity for increased nonperforming asset levels.
POTENTIAL PROBLEM LOANS
In addition to the nonperforming assets and past due loans shown in Table 5,
"Nonperforming Assets and Past Due Loans," management believes that an estimated
$10 to $15 million of additional potential problem loans may exist, depending
upon economic conditions generally and the particular situations of various of
its borrowers whose loans are currently "performing" in accordance with their
contractual terms.
NONINTEREST INCOME AND EXPENSE
Noninterest income ("NII") increased $15.4 million, or 35.3 percent, to $58.9
million for the nine months of 1996. For 1996, noninterest income represented
24.6 percent of the $239.1 million of total revenues (defined as noninterest
income plus taxable equivalent net interest income) which increased from 21.3
percent during the comparable period last year. Service charges on deposits
increased $4.0 million, principally due to NSF charges, but declined to 42.0
percent of total noninterest income compared to 47.7 percent for the nine months
ended September 30, 1995. The continued emphasis on expanding financial
services, primarily brokerage activities, resulted in a $3.2 million increase in
insurance and brokerage fees compared to the same period last year. Other
deposit fees increased $1.5 million primarily due to an increase in ATM fees and
network charges. Gains on security sales of $1.7 million compared to losses of
$613,000 for the nine-month period of 1995 also contributed to the increase.
Mortgage income for the nine-month period of 1996 increased to $8.7 million from
$4.4 million for the comparable period in 1995. Mortgage income is described in
detail under "Interest-earning Assets: Loans."
The efficiency ratio for the nine months ended September 30, 1996 was 65.50
percent, up from 60.78 percent for the same period in 1995. Excluding the
special assessment, the efficiency ratio was 62.30 percent for the current
period. Centura's technology and product initiatives such as branch automation,
and telephone banking, have contributed to the rise in the efficiency ratio.
Management expects many of these projects to be completed during 1997 and
therefore bring benefits to both noninterest income and noninterest expense
levels. Excluding the special assessment, noninterest expense ("NIE") increased
19.7 percent, or $24.5 million over the prior nine months to $148.9 million for
the nine month period of 1996. Personnel expenses, mainly in salaries,
contributed $11.0 million of this increase as the number of full-time
equivalents continues to rise due to acquisition and the staffing of the grocery
store locations. In an effort to keep pace with changing technology, Centura
rents much of the equipment used to support such initiatives as branch
automation. As a result, rental expense accounted for most of the $4.8 million
increase in equipment expense. Professional fees, which included additions for
consulting services and expenses related to the February 1996 acquisition of
FCHC and the August 1996 acquisition of First Community, increased $3.1 million
to $8.9 million for the nine months of 1996. Product promotions, efforts to
retain customers of acquired entities, and the rollout of the grocery in-store
locations beginning in July of 1996 contributed to the $2.4 million increase in
office supplies, postage, and telephone.
INCOME TAX EXPENSE
The amount of income tax expense for the nine months of 1996 was $26.4 million
compared to $25.7 million in the prior period. The current effective tax rate is
36.71 percent, up slightly from 36.37 percent at September 30, 1995.
EQUITY AND CAPITAL RESOURCES
Shareholders' equity increased to $431.0 million at September 30, 1996, compared
to $424.4 million at September 30, 1995. The ratio of shareholders' equity to
period-end assets was 7.28 percent, down from 8.07 percent at period end
September 30, 1995. Shareholders' equity has increased over the last year by
only $6.6 million particularly as a result of the timing of the redemption of
common stock relative to the 1996 acquisitions. Centura's board of directors
approved the repurchase of up to 100 percent of the shares issued in connection
with its purchase acquisitions (Cleveland, First Southern, and First Community)
and up to 9.9 percent of the shares in connection with two of its pooling
acquisitions (FCHC and FirstSouth). Under all repurchase actions, since
inception of the plan in November 1994, Centura has repurchased approximately
3.1 million shares. The unrealized losses net of tax on securities available for
sale were $7.1 million at September 30, 1996 compared to a $2.4 million gain,
net of tax, for the comparable period last year.
Centura's common stock is traded on the New York Stock Exchange under the symbol
CBC. At September 30, 1996, Centura had 23,293,670 shares outstanding. Annual
cash dividends have increased consistently and have been paid without
interruption over the past 29 years. Generally, dividends are paid on or about
the 15th day of the final month in the quarter. Cash dividends paid for the nine
months of 1996 were $17.2 million, or $.75 per share, compared to $13.2 million,
or $.62 per share, for the comparable period last year. Of the cash dividends
paid to date for 1996, $5.4 million were declared and accrued during the fourth
quarter of 1995.
Centura maintains higher capital ratios than the minimum required by regulatory
guidelines, which has positioned Centura to endure changes in the economy while
providing opportunities for growth, both internally and through additional
acquisitions. At September 30, 1996, Tier 1 capital was $367.9 million and total
capital was $418.5 million. Centura's capital ratios are outlined in Table 6
entitled "Capital Ratios."
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Liquidity is the ability to raise funds through attracting new deposits,
borrowing funds, issuing new capital or selling assets. Liquidity is managed
through the selection of the asset mix and the maturity mix of liabilities. As
part of this process, funding needs and alternatives are continually evaluated.
Centura's liquidity is provided by its portfolio of investment securities,
interest income from investment securities, principal and interest payments on
loans, turnover of mortgage loans held for sale, core deposits generated through
the normal customer base or through acquisitions, brokered certificates of
deposit, the retention of earnings, and the borrowing of additional funds if the
need arises. Deposits and other funding sources are used to fund loans and
investments, meet deposit withdrawals and maintain reserve requirements.
The Bank has multiple funding sources that could be used to increase liquidity
and provide additional financial flexibility. These sources consist primarily of
established federal funds lines with major banks totaling approximately $1.1
billion, and the ability to borrow approximately $500 million from the Federal
Home Loan Bank ($204 million outstanding to FHLB at September 30, 1996). The
Bank also has the ability to issue debt up to a maximum of $300 million under a
registered offering by the Bank for unsecured bank notes due from 30 days to 15
years from the date of issue. Each bank note would be a direct, unconditional
and unsecured general obligation solely of the Bank and would not be an
obligation of or guaranteed by Centura. Interest rate and maturity terms would
be negotiated between the Bank and the purchaser, within certain parameters set
forth in the offering circular. The bank note program began to be used in the
first quarter of 1995. In January 1995, Centura obtained a two-year unsecured
line of credit of $35 million bearing a variable interest rate, which is being
used as needed to assist in funding the share repurchase actions related to the
1995 and 1996 acquisitions. The credit line was subsequently increased to a
total maximum of $60 million. There was $52 million outstanding under this line
of credit at September 30, 1996; there was nothing outstanding at September 30,
1995.
The investment and loan portfolios are the primary types of earning assets for
Centura. While the investment portfolio is structured with minimum credit
exposure to Centura, the loan portfolio is the primary asset subject to credit
risk. Credit risk is controlled and monitored through the use of lending
standards, thorough review of potential borrowers and on-going review of
performing loans.
Centura's Asset/Liability Management Committee's objective is to control
Centura's interest rate risk. The Committee monitors and adjusts Centura's
exposure to interest rates based on corporate policy and expected market
conditions and utilizes a computer simulation model to determine the effect on
Centura's net interest income and the effect on the market value of Centura's
equity under various interest rate assumptions. Traditional interest sensitivity
gap analyses do not adequately measure a corporation's exposure to changes in
interest rates as those analyses do not incorporate the interrelationships
between interest rates charged or paid, balance sheet trends, changes in
prepayments and management actions. Each of these factors can affect Centura's
actual earnings. Centura's computer simulation model incorporates these factors
and projects income over a 12-month horizon under a variety of higher and lower
interest rate environments. This analysis shows that as interest rates increase,
Centura will experience an increase in net interest income.
Using the market value of equity approach, a change in interest rates will have
very little effect on the market value of Centura's equity. Centura is operating
within the exposure guidelines approved by management, which prescribes that
changes in net interest income after tax should approximate changes in the cost
of capital and the market value of equity should not be materially effected by a
change in interest rates. Management of Centura believes that Centura is
currently positioned to react quickly to changes in interest rates.
Table 8 entitled "Interest Sensitivity Analysis" illustrates Centura's interest
sensitivity gap for assets and liabilities held at September 30, 1996. As
mentioned above, this type of gap analysis is appropriate only for review of
Centura's interest sensitivity position at a point in time, and the indicated
results on the net interest margin should not be projected into the future.
Off-balance sheet derivative financial instruments, such as interest rate swaps,
interest rate floor and cap arrangements and interest rate futures and option
contracts ("swaps, floors, caps, futures and options," respectively), are
available to Centura to assist in managing interest rate risks. Centura has
principally used interest rate swaps. Swaps are used to reduce interest rate
risk with the objective of stabilizing net interest income over time. Floors are
used to protect certain designated variable rate financial instruments from the
downward effects of their repricing in the event of a decreasing rate
environment. Caps are used to protect certain designated financial instruments
from the negative repricing effects of an increasing rate environment. Options
provide the right, but not the obligation, to put or call securities back to
another third party at an agreed upon price under the specific terms of each
agreement. Table 7 entitled "Off-Balance Sheet Derivative Financial Instruments"
summarizes Centura's off-balance sheet derivative financial instruments at
September 30, 1996.
Management is not aware of any events that are reasonably likely to have a
material effect on Centura's liquidity, capital resources or operations. In
addition, management is not aware of any regulatory recommendations which, if
implemented, would have a material effect on Centura.
THIRD QUARTER RESULTS
Net income for the third quarter of 1996 was $13.0 million and fully diluted
earnings per share was $0.56 compared to $15.9 million and $0.65 for the quarter
ending September 30, 1995, respectively. Excluding the special assessment, net
income was $17.3 million, up $1.4 million or 8.5 percent from the previous
quarter in 1995. Accordingly, fully diluted earnings per share would have
increased $0.18 to $0.65 for the current quarter. As shown in Table 3, the net
interest margin improved three basis points despite a decline in interest rates
between the two periods. The average yield on earning assets fell 25 basis
points to 8.50 percent for the third quarter of 1996 while the cost of
interest-bearing liabilities declined 34 basis points to 4.49 percent. Taxable
equivalent interest income was $114.3 million, up $8.1 million from the
comparable period in 1995, while interest expense increased only $1.6 million to
$51.8 million for the quarter ending September 30, 1996. Growth in average
volumes accounted for $4.5 million of the increase, while the impact of interest
rate changes accounted for a $2.0 million increase. Average earning assets grew
10.6 percent to $5.3 billion for the third quarter 1996 compared to $4.8 billion
for third quarter 1995. Interest-bearing deposits growth was 7.1 percent between
the periods resulting in an average volume of $3.8 billion for the third quarter
of 1996.
Net charge-offs as a percent of average loans increased slightly to .13 percent
for the third quarter of 1996 compared to .08 percent for the same period in
1995. Gross charge-offs were $1.9 million for the three months ended September
30, 1996 and $1.7 million for the three months ended September 30, 1995.
Recoveries between the periods declined $326,000 to $630,000 at September 30,
1996. The provision expense for the third quarter of 1996 was $2.3 million or
$379,000 above gross charge-offs compared to $1.9 million provision for the
third quarter of 1995.
Noninterest income ("NII") for the third quarter of 1996 increased $4.0 million
to $20.1 million from the comparable period last year. As expected, the majority
of the change occurred in service charges on deposit fees, brokerage and
insurance commissions, and other service charges which includes ATM fees and
interchange income. Hurricane Fran, which impacted many of the markets served by
Centura, slowed insurance and brokerage production for the three months ending
September 30, 1996 but commissions of $2.7 million were still $950,000 over the
1995 quarter.. Service charges on deposits increased $1.1 million to $8.4
million. The new ATM fee structure and increased efforts to promote such
products as the pocket check contributed to the $702,000 improvement in other
service charges and fees.
Excluding the special assessment, noninterest expense ("NIE") increased 17.2
percent over the third quarter of 1995 to $51.4 million for the three months
ended September 30, 1996 compared to $43.9 million for the three months ended
September 30, 1995. Salaries and benefits increased $3.0 million for the third
quarter of 1996 with the introduction of the grocery in-store locations and the
timing of the 1996 purchase acquisition. Professional fees were up $1.4 million
partly due to the FirstSouth acquisition. With increased emphasis on new
products and customer utilization of telephone banking as an alternative
delivery channel, telephone and postage expenses increased approximately
$512,000 between the quarters. With total revenue growth (taxable equivalent) of
14.5 percent lagging the 17.2 percent increase in NIE, excluding the special
assessment, the efficiency ratio excluding the special assessment was
unfavorably impacted by 188 basis points, climbing to 62.22 percent for the
third quarter of 1996.
CURRENT ACCOUNTING ISSUES
As required, Centura adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," in the first quarter of 1996. SFAS
No. 122, "Accounting for Mortgage Servicing Rights, an amendment of FASB
Statement No. 65," was adopted July, 1995. See Note 4 to the consolidated
financial statements for information regarding the adoption of SFAS No. 123,
"Accounting for Stock-Based Compensation," as well as for information related
to the adoption of SFAS No. 121 and 122.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishment of liabilities. Those standards are based on
the consistent application of a financial-components approach that focuses on
control. After a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and liabilities it has incurred and
derecognizes financial assets it no longer controls and liabilities that have
been extinguished. The Statement provides the guidance for distinguishing sales
of financial assets from transfers that are secured borrowings. The Statement is
effective for transfers and servicing of financial assets and extinguishment of
liabilities occurring after December 31, 1996 and is to be applied
prospectively. Earlier or retroactive adoption of this Statement is not
permitted. Centura has not determined what effect, if any, this statement will
have on its consolidated financial statements.
In July 1996, the Emerging Issues Task Force provided guidance concerning the
costs for modifications to computer software to accommodate the year of 2000.
The costs of the modifications should be treated as regular maintenance and
repair and be charged to expense as incurred. Centura's computer systems are
generally based on two digit years and will need this additional programming to
recognize the start of a new century. Management has not quantified the costs of
this additional programming.
The FASB also issues exposure drafts for proposed statements of financial
accounting standards. Such exposure drafts are subject to comment from the
public, to revisions by the FASB, and to final issuance by the FASB as
statements of financial accounting standards. Management considers the effect of
any proposed statements on Centura and monitors the status of changes to issued
exposure drafts and to proposed effective dates.
TABLE 1
- --------------------------------------------------------------------------------
LOANS
September 30, 1996 September 30, 1995 December 31, 1995
(Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial, financial and agricultural $725,683 18.2% $654,324 17.8% $631,116 17.0%
Commercial mortgage 782,461 19.6 704,685 19.2 717,321 19.3
Real estate construction 504,270 12.7 402,247 10.9 419,845 11.3
------------------------------------------------------------------------------------
Commercial loan portfolio 2,012,414 50.5 1,761,256 47.9 1,768,282 47.6
Consumer 259,057 6.5 250,335 6.8 260,235 7.0
Residential mortgage 1,373,762 34.4 1,453,865 39.5 1,445,011 39.0
Leases 301,257 7.6 172,369 4.7 196,136 5.3
Other 41,549 1.0 40,947 1.1 40,379 1.1
- ----------------------------------------------------------------------------------------------------------------------------------
Total loans $3,988,039 100.0% $3,678,772 100.0% $3,710,043 100.0%
==================================================================================================================================
Residential mortgage servicing
portfolio for others $2,108,000 $1,522,000 $1,723,000
==================================================================================================================================
TABLE 2
- --------------------------------------------------------------------------------
AVERAGE DEPOSIT MIX FOR THE NINE MONTHS ENDED
September 30, 1996 September 30, 1995
(Dollars in thousands) Balance % of Total Balance % of Total
- ---------------------------------------------------------------------------------------------------------
Demand, noninterest bearing $ 604,635 14.1% $ 539,353 14.1%
Interest checking 589,365 13.8 549,076 14.5
Money market 413,137 9.7 393,573 10.4
Savings 299,427 7.0 324,649 8.6
- ---------------------------------------------------------------------------------------------------------
Time deposits:
Certificates of deposit less than 100K 1,678,375 39.3 1,380,864 36.4
Certificates of deposit greater than 100K 397,221 9.3 341,192 9.0
IRA 289,876 6.8 267,441 7.0
- ---------------------------------------------------------------------------------------------------------
Total time deposits 2,365,472 55.4 1,989,497 52.4
- ---------------------------------------------------------------------------------------------------------
Total average deposits $4,272,036 100.0% $3,796,148 100.0%
=========================================================================================================
TABLE 3
- -------------------------------------------------------------------------
NET INTEREST INCOME ANALYSIS - TAXABLE EQUIVALENT BASIS
Centura Banks, Inc. and Subsidiary
Nine months ended Nine months ended
September 30, 1996 September 30, 1995
- ---------------------------------------------------------------------------------------------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
Loans $ 3,756,919 $ 264,073 9.29% $ 3,385,603 $ 240,135 9.40%
Taxable securities 1,348,181 64,902 6.42 965,422 46,495 6.42
Tax-exempt securities 45,359 3,128 9.19 48,007 3,284 9.12
Short-term investments 25,745 1,057 5.39 24,714 1,175 6.27
------------ --------- ---------- ---------
Interest-earning assets, gross 5,176,204 333,160 8.52 4,423,746 291,089 8.73
Net unrealized gain (loss) on available
for sale securities (5,680) (12,337)
Other assets, net 409,375 368,353
------------ ----------
Total assets $ 5,579,899 $ 4,779,762
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking $ 589,365 $ 8,181 1.85% $ 549,076 $ 9,561 2.33%
Money market 413,137 10,134 3.28 393,573 9,561 3.25
Savings 299,427 4,629 2.07 324,649 6,031 2.48
Time 2,365,472 97,391 5.50 1,989,497 80,764 5.43
------------ --------- ----------- ---------
Total interest-bearing deposits 3,667,401 120,335 4.38 3,256,795 105,917 4.35
Borrowed funds 581,223 22,383 5.14 348,544 15,210 5.83
Long-term debt 239,640 10,264 5.72 184,709 8,790 6.36
------------ --------- ----------- ---------
Interest-bearing liabilities 4,488,264 152,982 4.55 3,790,048 129,917 4.58
Demand, noninterest-bearing 604,635 539,353
Other liabilities 75,126 64,952
Shareholders' equity 411,874 385,409
------------ -----------
Total liabilities and
shareholder's equity $ 5,579,899 $ 4,779,762
============ ===========
Interest rate spread 3.97% 4.15%
Net yield on interest-
earning assets $ 5,176,204 $ 180,178 4.57% $ 4,423,746 $ 161,172 4.81%
============ ========= =========== ========
Taxable equivalent adjustment $ 4,371 $ 3,807
========= ========
TABLE 3, continued
- --------------------------------------------------------------------
NET INTEREST INCOME ANALYSIS - TAXABLE EQUIVALENT BASIS
Centura Banks, Inc. and Subsidiary
Three months ended Three months ended
September 30, 1996 September 30, 1995
- -------------------------------------------------------------------------------------------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
Loans $ 3,886,601 $ 91,256 9.25% $ 3,637,859 $ 86,944 9.42%
Taxable securities 1,351,378 21,657 6.41 1,081,958 17,708 6.55
Tax-exempt securities 40,657 936 9.21 44,701 1,093 9.78
Short-term investments 29,753 422 5.55 32,242 474 5.75
----------- --------- ---------- ---------
Interest-earning assets, gross 5,308,389 114,271 8.50 4,796,760 106,219 8.75
Net unrealized gain (loss) on available
for sale securities (12,128) (5,994)
Other assets, net 425,632 399,364
----------- ----------
Total assets $ 5,721,893 $ 5,190,130
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking $ 589,497 $ 2,606 1.76% $ 555,717 $ 3,185 2.27%
Money market 529,595 4,950 3.72 379,166 3,053 3.19
Savings 293,518 1,478 2.00 324,570 1,955 2.39
Time 2,375,436 32,503 5.44 2,276,021 33,226 5.79
----------- --------- ----------- ---------
Total interest-bearing deposits 3,788,046 41,537 4.36 3,535,474 41,419 4.65
Borrowed funds 561,180 7,074 5.01 377,270 5,509 5.79
Long-term debt 234,582 3,142 5.33 206,417 3,222 6.19
----------- --------- ----------- ---------
Interest-bearing liabilities 4,583,808 51,753 4.49 4,119,161 50,150 4.83
Demand, noninterest-bearing 641,677 576,268
Other liabilities 75,943 71,186
Shareholders' equity 420,465 423,515
----------- -----------
Total liabilities and
shareholder's equity $ 5,721,893 $ 5,190,130
=========== ===========
Interest rate spread 4.01% 3.92%
Net yield on interest-
earning assets $ 5,308,389 $ 62,518 4.63% $ 4,796,760 $ 56,069 4.60%
=========== ======== =========== =========
Taxable equivalent adjustment $ 1,397 $ 1,341
======== =========
TABLE 4
- --------------------------------------------------------------------------------
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
At and for the nine months At and for the year ended
ended September 30, ended December 31,
(Dollars in thousands) 1996 1995 1995
- --------------------------------------------------------------------------------------------------------------------
Allowance for loan losses at beginning of period $ 53,452 $ 46,701 $ 46,701
Allowance for acquired financial institutions 1,240 3,460 3,460
Provision for loan losses 6,650 5,786 7,709
Loans charged off (5,371) (4,877) (8,232)
Recoveries on loans previously charged off 2,575 2,345 3,814
- --------------------------------------------------------------------------------------------------------------------
Net charge-offs (2,796) (2,532) (4,418)
- --------------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of period $ 58,546 $ 53,415 $ 53,452
====================================================================================================================
Loans at period-end $ 3,988,039 $ 3,678,772 $ 3,710,043
Average loans 3,756,919 3,385,603 3,460,353
Nonperforming loans 17,057 17,194 19,260
Allowance for loan losses to loans at period-end 1.47% 1.45 1.44
Net charge-offs to average loans 0.10% 0.10 0.13
Allowance for loan losses to nonperforming loans 3.43x 3.11 2.78
====================================================================================================================
TABLE 5
- --------------------------------------------------------------------------------
NONPERFORMING ASSETS AND PAST DUE LOANS
September 30, December 31,
------------------------- ------------
(Dollars in thousands) 1996 1995 1995
- --------------------------------------------------------------------------------------------
Nonaccrual loans $ 16,448 $ 16,863 $ 18,306
Restructured loans 609 331 954
-----------------------------------------
Nonperforming loans 17,057 17,194 19,260
Foreclosed property 3,300 3,176 2,823
- --------------------------------------------------------------------------------------------
Total nonperforming assets $ 20,357 $ 20,370 $ 22,083
============================================================================================
Nonperforming assets to:
Loans and foreclosed property 0.51% 0.55 0.59
Total assets 0.34 0.39 0.40
============================================================================================
Accruing loans past due ninety days $ 9,010 $ 4,444 $ 6,130
============================================================================================
TABLE 6
- --------------------------------------------------------------------------------
CAPITAL RATIOS
Tier I Capital Total Capital Tier I Leverage
September 30, 1996 9.11% 10.37% 6.50%
December 31, 1995 9.65 10.90 6.67
Sepember 30, 1995 10.48 11.73 7.23
Minimum requirement 4.00 8.00 3.00-5.00
TABLE 7
- --------------------------------------------------------------------------------
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swap agreements at September 30, 1996 are summarized below:
Weighted Average
Weighted Average Rate Remaining Estimated
Notional During the Quarter __ Contractual Fair Value
Amount Received Paid Term (Years) Gain (Loss)
- -------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
INTEREST RATE SWAPS
Corporation pays fixed rates $ 250,000 5.65% 6.48% 1.4 $ (1,285)
Corporation pays variable rates 70,000 6.73% 5.63% 4.6 238
----------- ----------
Total interest rate swaps $ 320,000 $ (1,047)
=========== ==========
Interest rate cap and floor agreements at September 30, 1996 are
summarized below:
Weighted Average
Remaining Estimated
Notional Average Current Index Contractual Carrying Fair Value
Amount Rate * Rate Term (Years) Value Gain (Loss)
- -------------------------------------------------------------------------------------------------------------------------
Interest Rate Floors $ 180,000 5.87% 5.63% 3.0 $ 880 $ 795
============ ===========
Interest Rate Caps $ 26,000 7.39% 5.63% 6.3 $ 807 $ 5
=========== ============ ===========
* Average rate represents the average of the strike rates above or below which
Centura will receive payments on the outstanding cap or floor agreements.
At September 30, 1996 Centura had three put options totaling 175 ten-year
Treasury futures contracts. Each contract represents a $100,000 notional amount
and gives Centura the right but not the obligation to exercise the respective
contract. Cumulatively at September 30, 1996, the options had a carrying value
of $41,800 and an estimated fair value of $62,400.
TABLE 8
INTEREST SENSITIVITY ANALYSIS
Centura Banks, Inc. and Subsidiary
As of September 30, 1996
--------------------------------------------------------------------------------------------
1-30 31-60 61-90 91-180 181-365 Total Under Total Over
(thousands) Days Days Days Days Days One Year One Year Total
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST-EARNING ASSETS
Loans $ 2,261,574 $ 118,493 $ 111,764 $ 235,209 $ 404,180 $ 3,131,220 $ 856,819 $ 3,988,039
Investment securities 70,014 74,792 72,966 132,604 262,311 612,687 838,236 1,450,923
Other short-term investments 12,708 - - - - 12,708 - 12,708
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets $ 2,344,296 $ 193,285 $ 184,730 $ 367,813 $ 666,491 $ 3,756,615 $ 1,695,055 $ 5,451,670
Notional amount of interest rate swaps 95,000 85,000 50,000 20,000 - 250,000 70,000 320,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets and
off-balance sheet financial instruments 2,439,296 278,285 234,730 387,813 666,491 4,006,615 1,765,055 5,771,670
====================================================================================================================================
INTEREST-BEARING LIABILITIES
Time deposits over $100 $ 30,000 $ 23,892 $ 5,672 $ 37,182 $ 100,374 $ 197,120 $ 142,550 $ 339,670
All other deposits (1) 1,764,954 122,294 178,142 576,208 576,208 3,217,806 318,675 3,536,481
Short-term borrowed funds 384,004 82,000 25,000 80,244 50,000 621,248 - 621,248
Long-term debt 91,353 86,600 25,000 1,500 15,000 219,453 11,740 231,193
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $ 2,270,311 $ 314,786 $ 233,814 $ 695,134 $ 741,582 $ 4,255,627 $ 472,965 $ 4,728,592
Notional amount of interest rate swaps 10,000 75,000 10,000 20,000 65,000 180,000 140,000 320,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities and
off-balance sheet financial instruments 2,280,311 389,786 243,814 715,134 806,582 4,435,627 612,965 5,048,592
====================================================================================================================================
Interest sensitivity gap per period $ 158,985 $(111,501)$ (9,084) $(327,321) $(140,091)$ (429,012)
Cummulative interest sensitivity gap 158,985 47,484 38,400 (288,921) (429,012)
Cumulative ratio of interest-sensitive
assets to interest-sensitive liabilities 1.07x 1.02x 1.01x 0.92x 0.90x
(1) Not all core deposits are immediately repriceable and, therefore, they are
spread based on actual maturity. Noninterest-bearing deposit accounts are
excluded.
(2) Expected maturities may differ from contractual maturities because issuers
or borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties. Deposit run-off is estimated based
on historical information and market analysis. The aging of
mortgage-backed securities is based on their weighted average maturities at
September 30, 1996 and median market prepayment rates.
CENTURA BANKS, 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 Securities Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit Exhibit
No. Description of Exhibit Reference
4.1 Excerpts from Centura's Articles of Incorporation and
Bylaws relating to rights of holders of Registrant's capital stock 4.1(1)
4.2 Specimen certificate of Centura common stock 4.2 (2)
27 Financial Data Schedule - included in the electronically filed document as required.
(1)Included as the identified exhibit in Centura Banks, Inc. Form 2-4
dated March 8, 1990, as amended by amendment No. 1 dated May 14, 1990,
and incorporated herein by reference.
(2)Included as the identified exhibit in Centura Banks, Inc. Annual
Report on Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference.
(b) Reports on Form 8-K -
1)A report on Form 8-K dated July 2, 1996 was filed under Item 5, Other
Events, indicating the Registrant's announcement on July 2, 1996 of
earnings for the three and six month periods ended June 30, 1996.
2)A report on Form 8-K dated July 12, 1996 was filed under Item 5, Other
Events to announce that the Registrant had temporarily suspended its
purchases of Centura common stock in the open market under rules
promulgated by the Securities and Exchange Commission, particularly
because the Registrant had mailed the prospectus and proxy statement in
connection with the proposed acquisition of First Community Bank.
3)A report on Form 8-K dated July 29, 1996 was filed under Item 2,
Acquisition or Disposition of Assets to announce that the Registrant
had successfully completed the transaction to assume deposits of the
Greensboro, Raleigh and Wilmington, North Carolina locations of Essex
Savings Bank, F.S.B.
4)A report on Form 8-K dated August 16, 1996 was filed under Item 2,
Acquisition or Disposition of Assets to announce that the Registrant
has successfully completed the merger with First Community Bank in
Gastonia, North Carolina. The merger was consummated through the
issuance of .96 shares of Centura common stock for each share of
outstanding First Community stock and resulted in the recognition of
approximately $16 million of goodwill.
5)A report on Form 8-K dated August 22, 1996 was filed under Item 2,
Acquisition or Disposition of Assets to announce that the Registrant
entered into an agreement to acquire CLG, Inc., a privately owned
company specializing in leasing computer and technological equipment
throughout the United States. The Registrant also announced that it
will resume its repurchase of Centura common stock in the open market
effective August 23, 1996 and that it expects to continue its open
market purchases until the mailing of the prospectus and proxy
statement in connection with the proposed merger with FirstSouth Bank
in Burlington, North Carolina.
6)A report on Form 8-K dated September 4, 1996 was filed under Item 2,
Acquisition or Disposition of Assets, to provide unaudited pro forma
condensed balance sheets as of June 30, 1996 and unaudited pro forma
combined condensed income statements for the six months ended June 30,
1996 to security holders and investors giving effect to the affiliation
with Centura Banks, Inc. of First Community Bank, Gastonia, North
Carolina, presented under the purchase method of accounting.
Additionally, the Registrant provided the unaudited pro forma condensed
balance sheet as of June 30, 1996 and the unaudited pro forma combined
condensed income statements for the six months ended June 30, 1996 and
for each of the years in the three-year period ended December 31, 1995,
combining the historical financial statements of Centura with
FirstSouth Bank in Burlington, North Carolina, giving effect to the
merger of both entities using the pooling-of-interests method of
accounting.
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:
CENTURA BANKS, INC.
Registrant
Date: November 13, 1996 By: /s/Frank L. Pattillo
--------------------
Frank L. Pattillo
Senior Executive Vice President
and Chief Financial Officer
CENTURA BANKS, INC.
EXHIBIT INDEX
Sequential
Exhibit Description of Exhibit Page No.
- ----------------------------------------------------------------------------------------------------
4.1 Excerpts from Centura's Articles of Incorporation and Bylaws
relating to rights of holders of Registrant's capital stock *(1)
4.2 Specimen certificate of Centura common stock *(2)
27 Financial Data Schedule **
*Incorporated by reference from the following documents as noted:
(1)Included as the identified exhibit in Centura Banks, Inc. Form 2-4
dated March 8, 1990, as amended by amendment No. 1 dated May 14, 1990,
and incorporated herein by reference.
(2)Included as the identified exhibit in Centura Banks, Inc. Annual
Report on Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference.
**Included in the electronically-filed document as required.