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 30,1997
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 25,839,816
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(Class of Stock) (Shares outstanding as of October 31, 1997)
Exhibit Index on sequential page number 33.
CENTURA BANKS, INC.
FORM 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
September 30, 1997 and 1996, and December 31, 1996 4
Consolidated Statements of Income -
Three months and nine months ended September 30, 1997 and 1996 5
Consolidated Statement of Shareholders' Equity -
Nine months ended September 30, 1997 6
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1997 and 1996 7
Notes to Consolidated Financial Statements 8-11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-29
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Changes in Securities 30
Item 3. Defaults upon Senior Securities 30
Item 4. Submission of Matters to a Vote of Securities Holders 31
Item 5. Other Information 31
Item 6. Exhibits and Reports on Form 8-K 31
SIGNATURES 32
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 SUBSIDIARIES
September 30, December 31,
-------------------------- ---------------
(In thousands, except share data) 1997 1996 1996
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ASSETS
Cash and due from banks $ 303,724 $ 254,327 $ 283,224
Due from banks, interest-bearing 15,114 17,185 11,254
Investment securities:
Available for sale (cost of $1,448,475, $1,134,145
and $1,317,449, respectively) 1,460,930 1,122,585 1,320,074
Held to maturity (market value of $233,938,
$354,107 and $258,052, respectively) 232,417 355,855 257,806
Federal funds sold 7,774 6,335 21,413
Loans 4,511,074 4,206,297 4,109,454
Less allowance for loan losses 62,282 60,329 58,715
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Net loans 4,448,792 4,145,968 4,050,739
Bank premises and equipment 114,952 111,730 112,198
Other assets 307,578 217,458 237,264
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Total assets $ 6,891,281 $ 6,231,443 $ 6,293,972
==================================================================================================
LIABILITIES
Deposits:
Demand, noninterest-bearing $ 824,703 $ 711,082 $ 721,029
Interest-bearing 3,973,992 3,652,688 3,665,587
Time deposits over $100 411,141 364,553 346,453
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Total deposits 5,209,836 4,728,323 4,733,069
Borrowed funds 732,013 621,248 685,291
Long-term debt 337,975 321,419 310,802
Other liabilities 81,993 92,070 89,575
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Total liabilities 6,361,817 5,763,060 5,818,737
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 25,893,357, 25,965,353
and 25,668,524, respectively 190,083 201,089 187,563
Common stock acquired by ESOP (287) (431) (395)
Unrealized securities gains (losses), net 7,826 (7,143) 1,568
Retained earnings 331,842 274,868 286,499
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Total shareholders' equity 529,464 468,383 475,235
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Total liabilities and shareholders' equity $ 6,891,281 $ 6,231,443 $ 6,293,972
======================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
CENTURA BANKS, INC. AND SUBSIDIARIES
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
(Dollars in thousands, except share and per share data) 1997 1996 1997 1996
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INTEREST INCOME
Loans, including fees $ 103,936 $ 96,644 $ 298,163 $ 279,924
Investment securities:
Taxable 26,856 21,151 76,644 63,247
Tax-exempt 596 638 1,875 2,127
Short-term investments 456 562 1,271 1,367
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Total interest income 131,844 118,995 377,953 346,665
INTEREST EXPENSE
Deposits 46,904 43,134 134,719 124,987
Borrowed funds 11,150 7,078 29,824 22,403
Long-term debt 6,331 4,989 16,600 15,275
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Total interest expense 64,385 55,201 181,143 162,665
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NET INTEREST INCOME 67,459 63,794 196,810 184,000
Provision for loan losses 3,486 2,400 9,569 6,850
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Net interest income after provision for loan losses 63,973 61,394 187,241 177,150
NONINTEREST INCOME
Service charges on deposit accounts 10,744 8,618 29,588 25,357
Credit card and related fees 1,951 1,479 4,721 3,588
Other service charges, commissions and fees 5,424 4,312 15,766 12,128
Fees for trust services 1,830 1,650 5,730 4,941
Mortgage income 2,801 2,708 8,268 8,895
Other noninterest income 7,012 5,962 18,996 16,953
Securities gains, net 161 403 35 1,682
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Total noninterest income 29,923 25,132 83,104 73,544
NONINTEREST EXPENSE
Personnel 28,608 27,432 83,521 80,660
Occupancy 3,618 3,260 10,399 9,448
Equipment 5,455 4,831 15,920 14,119
Foreclosed real estate losses and related
operating expense 265 148 987 457
Other operating 23,223 27,902 68,370 67,437
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Total noninterest expense 61,169 63,573 179,197 172,121
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Income before income taxes 32,727 22,953 91,148 78,573
Income taxes 11,027 8,237 31,594 28,957
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NET INCOME $ 21,700 $ 14,716 $ 59,554 $ 49,616
===========================================================================================================================
NET INCOME PER COMMON SHARE
Primary $ 0.82 $ 0.57 $ 2.26 $ 1.91
Fully diluted 0.82 0.57 2.26 1.91
===========================================================================================================================
AVERAGE COMMON SHARES OUTSTANDING
Primary 26,456,093 26,145,688 26,346,768 26,054,116
Fully diluted 26,461,609 26,145,688 26,393,774 26,056,433
===========================================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
CENTURA BANKS, INC. AND SUBSIDIARIES
Nine months ended September 30, 1997
Common Unrealized
Common Stock Stock Securities Total
---------------------------------- Acquired Gains, Retained Shareholders'
Shares Amount by ESOP Net Earnings Equity
-------------- ------------ ------------------------ ------------- -------------
(Dollars in thousands)
Balance, December 31, 1996 25,668,524 $ 187,563 $ (395) $ 1,568 $ 286,499 $ 475,235
Net income - - - - 59,554 59,554
Common stock issued under stock option
plans and for stock awards 224,833 3,989 - - - 3,989
Unrealized securities gains, net - - - 6,258 - 6,258
Other - (1,469) 108 - (253) (1,614)
Cash dividends declared - - - - (13,958) (13,958)
-------------- ------------ ---------- ----------- ------------- -------------
Balance, September 30, 1997 25,893,357 $ 190,083 $ (287) $ 7,826 $ 331,842 $ 529,464
-------------- ------------ ---------- ----------- ------------- -------------
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CENTURA BANKS, INC. AND SUBSIDIARIES
For the Nine Months Ended
September 30
1997 1996
(Dollars in thousands) ----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 59,554 $ 49,616
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 9,569 6,850
Depreciation and amortization 23,502 22,165
Decrease (increase) in deferred income taxes 6,521 (8,563)
Loan fees deferred, net 97 499
Bond premium amortization and discount accretion, net 1,730 2,339
Gain on sales of investment securities (35) (1,682)
Gain on sales of equipment under lease (1,372) (3,675)
Proceeds from sales of mortgage loans held for sale 263,455 329,545
Originations, net of principal repayments, of mortgage loans held for sale (267,634) (351,175)
Increase in accrued interest receivable (6,755) (4,084)
(Increase) decrease in accrued interest payable 1,453 (3,595)
Net increase in other assets and other liabilities (4,255) (5,290)
----------- ----------
Net cash provided by operating activities 85,830 32,950
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CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (238,036) (332,197)
Purchases of:
Securities available for sale (907,184) (439,275)
Securities held to maturity (45,583) (212,707)
Premises and equipment (12,774) (14,604)
Other assets (50,000) -
Proceeds from:
Sales of securities available for sale 455,620 338,465
Maturities and issuer calls of securities available for sale 320,679 125,267
Maturities and issuer calls of securities held to maturity 69,136 170,759
Sales of foreclosed real estate 2,691 2,830
Dispositions of premises and equipment 1,509 3,663
Disposition of equipment used in leasing activities 3,666 4,834
Net decrease in federal funds sold 13,639 35,659
Cash acquired, net of cash paid, in purchase acquisitions 106,871 73,828
----------- ----------
Net cash used by investing activities (279,766) (243,478)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 163,218 114,153
Net increase in short-term borrowings 46,722 114,811
Proceeds from issuance of long-term debt 123,210 149,222
Repayment of long-term debt (96,037) (134,389)
Cash dividends paid (20,373) (17,739)
Proceeds from issuance of common stock, net 3,025 2,830
Redemption of common stock - (29,507)
Other (1,469) -
----------- ----------
Net cash provided by financing activities 218,296 199,381
----------- ----------
Increase (decrease) in cash and cash equivalents 24,360 (11,147)
Cash and cash equivalents at January 1 294,478 282,659
----------- ----------
Cash and cash equivalents at September 30 $ 318,838 $ 271,512
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the nine
months for:
Interest $ 179,690 $ 166,729
Income taxes 17,215 21,724
Noncash transactions:
Net equity adjustment of merged entity - 818
Loans securitized into mortgage-backed securities - 122,982
Stock issued in purchase acquisitions and other stock issuances, net - 28,261
Unrealized securities gains (losses), net 9,830 (12,504)
Dividends declared, but not yet paid - 5,820
Other 1,325 249
Loans transferred to foreclosed property 4,650 2,591
=========== ==========
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Centura Banks, Inc. and Subsidiaries
Note 1: Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Centura Banks, Inc. ("Centura") and its wholly-owned subsidiaries Centura Bank
(the "Bank") and Centura Capital Trust I. The Bank also has various wholly-owned
subsidiaries. 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, 1997 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1997.
Note 2: Mergers and Acquisitions
Acquisition activity for 1997 and 1996 is summarized below. Data for the
completed transactions is as of the date of acquisition.
Institution Acquisition Offices Assets Loans Deposits Shares
Date Issued
(dollars in millions)
Completed Acquisitions
1997
Deposit assumption from Branch Banking and Trust 8/15/97 13 313 171 313 ----
Company and United Carolina Bank ("BB&T") (2)
Betts & Company ("Betts") (2) 11/3/97 ---- 1 ---- ---- 44,443
Deposit assumption from NationsBank, N.A. 11/13/97 5 88 52 88 ----
("NationsBank") (2)
1996
CLG, Inc. ("CLG") (1) 11/1/96 $ 126 $ 85 $ --- 1,661,970
FirstSouth Bank ("FirstSouth") (1) 10/25/96 4 170 132 150 1,075,559
First Community Bank ("First Community") (2) 8/16/96 4 121 83 99 776,441
Deposit assumption from Essex Savings Bank, FSB 7/26/96 ---- 71 ---- 71 ---
("Essex") (2)
First Commercial Holding Corporation ("FCHC") (1) 2/27/96 8 172 120 140 1,607,564
(1) Acquisition accounted for as a pooling-of-interests
(2) Acquisition accounted for as a purchase
On August 15, 1997, Centura assumed the deposits of thirteen branches of Branch
Banking and Trust Company and United Carolina Bank. Centura recorded as an other
asset approximately $35 million of goodwill. The financial centers added
approximately $313 million of deposits and approximately $171 million of loans.
Located primarily in the eastern and southeastern regions of North Carolina, the
financial stores complement markets already served by Centura and provide
strength to Centura's core market presence in those regions. The 13 offices are
located in 10 communities with two offices in Clinton, Wadesboro and Whiteville
and single facilities in Goldsboro, Rockingham, Chadbourn, Faison, Raeford,
Kenansville, and Williamston.
On November 3, 1997, Centura acquired Betts, an independent insurance agency
based in Rocky Mount, North Carolina. Betts offers all forms of property and
liability insurance, as well as medical malpractice and surety. Betts merged
into and will continue to offer its services through Centura Insurance Services,
Inc., a wholly-owned subsidiary of Centura Bank. The acquisition provides
Centura an opportunity to grow noninterest revenue through the insurance
activities and to strengthen the ability to increase market share.
On November 13, 1997, Centura assumed the deposits of five banking facilities
from NationsBank. The offices are located in the towns of Calabash, Dunn,
Harmony, Richlands, and Hertford, all in North Carolina. Centura added
approximately $52 million in loans and $88 million in deposits. Centura's
increased presence in these communities strengthen market share and the
increased customer base provides new opportunities for Centura to offer other
financial services such as insurance and securities activities.
Based in Raleigh, North Carolina, CLG specializes in leasing computer equipment
to companies throughout the United States through offices in Charlotte and
Wilmington, North Carolina, Columbus, Georgia, and Dallas, Texas. CLG operates
as a wholly-owned subsidiary of Centura Bank.
FirstSouth was headquartered in Burlington, North Carolina. This merger was
consummated through the issuance of 0.55 shares of Centura common stock for each
of the outstanding shares of FirstSouth.
First Community was headquartered in Gastonia, North Carolina. First Community
shareholders received 0.96 shares of Centura common stock for each share of
First Community outstanding stock. The purchase price for First Community
exceeded the fair value of net assets acquired by approximately $16 million
which amount was recorded as goodwill. Under a stock repurchase plan approved by
Centura's board of director's, Centura repurchased 100% of the shares issued
relative to the First Community transaction.
First Commercial with headquarters in Asheville, North Carolina was consummated
under an exchange ratio of 0.63 shares of Centura common stock for each of the
outstanding shares of FCHC.
Centura consummated the assumption of deposit liabilities and the acquisition of
certain deposit-related loans of the Wilmington, Raleigh, and Greensboro
locations of Essex. Centura Bank did not purchase the physical branch offices of
Essex, but consolidated the deposits into existing banking facilities.
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 and
finance company, operating over 30 offices in 10 states, specializing in
alternative equity lending for homeowners whose borrowing needs are generally
not met by traditional financial institutions. First Greensboro's other
investors retained the controlling interest of the company. Centura recorded
this investment as an other asset and recognizes 49 percent 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 is amortized over 20 years as a charge
against earnings of future periods.
For the mergers accounted for under the pooling-of-interests method, all
financial data previously reported prior to date of acquisition has been
restated as though the entities had been combined for all periods presented. CLG
was on a January 31 fiscal year and accordingly the results of operations of CLG
for the one-month period ended January 31, 1996 are included in the consolidated
statement of income for the nine months ended September 30, 1996. Total income,
noninterest expenses, and net income of CLG for the month of January 1996 were
$3,703,000, $2,336,000, and $818,000, respectively. For the acquisitions
accounted for under the purchase method of accounting, the financial position
and results of operations relative to each transaction are included in the
consolidated financial statements since date of consummation.
Note 3: Reclassifications
Certain items in the September 30, 1996 consolidated financial statements have
been reclassified to conform with the September 30, 1997 presentation. Such
reclassifications had no impact on net income or shareholders' equity.
Note 4: Long-term debt
At September 30, 1997, long-term debt consisted of the following:
Federal Home Loan Bank advances $181,989
Obligations under capital leases 477
Notes payable secured by lease rentals 55,098
Capital Securities, Series A 100,000
Other 411
Total long-term debt $337,975
In June 1997, Centura Capital Trust I ("CCTI"), a wholly-owned subsidiary of
Centura, issued $100 million of 8.845% Capital Securities, Series A ("Capital
Securities") maturing June 2027. CCTI also issued $3.1 million of common
securities to Centura. CCTI invested the proceeds of $103.1 million, generated
from the Capital Securities and common securities issuances, in 8.845% Junior
Subordinated Deferrable Interest Debentures ("the junior debentures") issued by
Centura, which upon consolidation are eliminated. The junior debentures,
scheduled to mature in June 2027, are the primary assets of CCTI. Centura has
guaranteed the obligations of CCTI under the Capital Securities. For risk-based
capital calculations, the Capital Securities are included as a component of Tier
I capital.
Additional details regarding the other components of long-term debt are more
fully described in the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
Note 5: Adoption of Statements of Financial Accounting Standards ("SFAS")
On January 1, 1997, Centura adopted SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," ("SFAS No.
125") 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. In
December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective Date of
Certain Provisions of FASB Statement No. 125, an amendment of FASB Statement No.
125". For repurchase agreements, dollar-rolls, securities lending and similar
transactions, SFAS No. 127 defers the effective date of SFAS No. 125 to
transfers occurring after December 31, 1997. Transfers that fall under the SFAS
No. 125 guidelines will be recorded as required by this statement.
In accordance with SFAS No. 125, Centura has combined previously recognized
mortgage servicing rights and mortgage excess servicing receivables as mortgage
servicing assets. Centura does not have mortgage excess servicing fees which
require interest-only strip classification. Otherwise, the adoption of SFAS No.
125 has had no material effect on Centura's consolidated financial statements.
Note 6: Off-Balance Sheet Derivative Financial Instruments
Off-balance sheet derivative financial instruments, such as interest rate swaps,
interest rate floor and cap arrangements, and interest rate futures and options
contracts, are available to Centura to assist in managing its exposure to
changes in interest rates. Centura has principally utilized interest rate swaps
and interest rate floor and cap arrangements. The fair values of these
off-balance sheet derivative financial instruments are based on dealer quotes
and third party financial models.
Interest rate swaps, floors and caps are accounted for on an accrual basis, and
the net interest differential, including premiums paid, if any, is recognized as
an adjustment to interest income or expense of the related designated asset or
liability. Changes in the fair values of the swaps, floors and caps are not
recorded in the consolidated statements of income because these agreements are
being treated as a synthetic alteration of the designated assets or liabilities.
Centura considers its interest rate swaps to be a synthetic alteration of an
asset or liability as long as (i) the swap is designated with a specific asset
or liability or finite pool of assets or liabilities; (ii) there is high
correlation, at inception and throughout the period of the synthetic alteration,
between changes in the interest income or expense generated by the swap and
changes in the interest income or expense generated by the designated asset or
liability; (iii) the notional amount of the swap is less than or equal to the
principal amount of the designated asset or liability or pools of assets or
liabilities; and (iv) the swap term is less than or equal to the remaining term
of the designated asset or liability or pools of assets or liabilities. If these
criteria are not met, then changes in the fair value of the floors, swaps, and
caps are no longer considered a synthetic alteration and changes in their fair
value are included in other income. The criteria for consideration of a floor or
cap as a synthetic alteration of an asset or liability are generally the same as
those for a swap arrangement.
If the swap, floor or cap arrangements are terminated before their maturity, the
net proceeds received or paid are deferred and amortized over the shorter of the
remaining contract life or the maturity of the designated asset or liability as
an adjustment to interest income or expense. If the designated asset or
liability is sold or matures, the swap agreement is marked to market and the
gain or loss is included with the gain or loss on the sale/maturity of the
designated asset or liability. Changes in the fair value of any undesignated
swaps, floors and caps would be included in other income in the consolidated
statement of income.
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, 1997
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. Headquartered in Rocky Mount, North Carolina,
Centura has two subsidiaries: Centura Bank ("the Bank") and Centura Capital
Trust I ("CCTI"). Through the Bank and its subsidiaries, Centura seeks to not
only become the primary provider of financial services for each of its customers
but to also deliver the services through convenient channels as evidenced by the
Centura Highway telephone banking center, supermarket locations, and home
banking through Quicken, QuickBooks, and Microsoft Money. Described in greater
detail in Note 4 of the notes to the consolidated financial statements for the
period ended September 30, 1997, CCTI is a Delaware business trust formed during
the quarter ended June 30, 1997, primarily for the issuance of $100 million of
Capital Securities, Series A ("Capital Securities").
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. The deposit assumption
transactions closed during the last half of 1997 allow Centura to leverage upon
its existing market presence, as well as expand into adjacent and complementary
markets. Centura continually evaluates acquisition opportunities and will
continue seeking to acquire healthy thrift and banking institutions as well as
non-traditional banking services allowed under current regulatory guidelines.
SUMMARY
On September 30, 1996, legislation was enacted requiring a one-time SAIF
assessment on SAIF-insured deposits ("SAIF assessment"), and accordingly,
Centura recorded as other operating expense $7.3 million, $4.2 million, net of
tax. As indicated throughout this analysis, results of operations described for
1996 may exclude this SAIF assessment. Net income increased $5.7 million or 10.6
percent over the prior nine-month period, adjusted for the SAIF assessment, and
earnings per fully diluted share were $2.26 and $2.07 for the periods ended
September 30, 1997 and 1996, respectively. Including the effect of the SAIF
assessment, Centura's net earnings increased $9.9 million or 20.0 percent from
the same period in 1996 while earnings per fully diluted share increased $0.35.
Specific highlights for the nine months of 1997 are as follows:
Assets at September 30, 1997 totaled $6.9 billion compared to $6.2 billion
at September 30, 1996.
The annualized return on average assets was 1.23 percent for September
year-to-date, increasing 1 basis point from the 1.22 percent return for the
same period in 1996 excluding the impact of the SAIF assessment. Net income
represented a 15.83 percent annualized return on equity for the nine months
ended September 30, 1997. The annualized return on equity for the
comparable period in 1996 without the SAIF assessment was 16.08 percent.
Excluding the loans and deposits assumed in the BB&T transaction, average
loans grew approximately 6.0 percent on an annualized basis while average
deposits increased 6.8 percent between the two periods.
Taxable equivalent net interest income increased $14.3 million to $202.6
million for the nine months of 1997 compared to $188.4 million for the same
period in 1996. The growth of $522.3 million in average earning assets
accounted for $16.0 million of this net increase while the rate environment
had a negative impact of $1.8 million. Net interest margin declined 5 basis
points between the periods.
Noninterest income, before securities transactions, increased $11.2 million
to $83.1 million or 15.6 percent over the $71.9 million recorded for the
same period of 1996. Excluding the SAIF assessment, noninterest expense for
the nine months ended September 30, 1997, increased over the comparable
period in 1996 by 8.7 percent to $179.2 million. The efficiency ratio of
62.71 percent represents a 23 basis point improvement over the 62.94
percent recorded for the nine months ended September 30, 1996, excluding
the impact of the SAIF assessment.
Nonperforming assets of $28.6 million at September 30, 1997 increased $8.2
million from September 30, 1996, but represented only 0.42 percent and 0.33
percent of total assets, respectively.
The allowance for loan losses was $62.3 million, representing 1.38 percent
of total loans at September 30, 1997, compared to $60.3 million and 1.43
percent at September 30, 1996. Gross charge-off activity generated $10.5
million of charge-offs, up from the $5.4 million recorded for the first
nine months of 1996 while recoveries declined $467,000. The provision for
loan losses was $9.6 million for the nine months ending September 30, 1997
versus $6.9 million for the same period of 1996.
INTEREST-EARNING ASSETS
Average interest-earning assets for the nine months ended September 30, 1997
climbed to $5.9 billion, an increase of $522.3 million or 9.7 percent over the
average of $5.4 billion for the same period in 1996. Growth in the loan and
securities portfolios contributed $265.6 million and $261.2 million,
respectively, while short-term investments declined $4.5 million. At September
30, 1997, earning assets were $6.2 billion, representing a $519.1 million or 9.1
percent increase over the level at September 30, 1996. For additional
information on average interest-earning assets, refer to Table 3, "Net Interest
Income Analysis", and Table 8, "Net Interest Income and Volume/Rate Analysis".
Loans
Loans averaged $4.2 billion for the first nine months of 1997, increasing $265.6
million or 6.7 percent over the average loan volume of $4.0 billion for the
comparable prior year period. Excluding the loans acquired in the BB&T deposit
assumption transaction, average loan growth was approximately 6.0 percent.
Commercial loans, the largest segment of the loan portfolio, increased $193.6
million, on average, between the two nine-month periods. The continued
integration of CLG, Inc., acquired in the fourth quarter of 1996, and a strong
demand for leases in the markets served contributed to the $132.8 million
increase in average leases over the prior year period. Centura securitized $243
million of residential mortgages during 1996 which accounted for part of the
$116.9 million decline in average residential mortgages for the nine months
ended September 30, 1997 as compared to the nine months ended September 30,
1996. Between the two nine-month periods, average retail loans were higher by
$56.1 million. Moderate to slow loan growth in early 1997 impacted the ratio of
average loans to average earnings assets which declined to 71.2 percent from
73.1 percent experienced in the first nine months of 1996.
Loans at September 30, 1997, were $4.5 billion, an increase of $304.8 million,
or 7.2 percent, compared to $4.2 billion at September 30, 1996, and up $401.6
million over loans at December 31, 1996. Excluding the BB&T loans acquired in
the deposit assumption transaction, growth between the periods was 3.2 percent.
Table 1 summarizes total loans outstanding and the mix of loans being held. Each
loan category demonstrated growth between the periods excluding residential
mortgages (due, in part, to the timing of the securitizations in 1996). Compared
to December 31, 1996, residential mortgages increased $90.4 million. The
commercial portfolio represented 50.9 percent and 50.1 percent at September 30,
1997 and 1996, respectively. Of these commercial loans, over 90 percent are
secured.
Credit is extended by the Bank almost exclusively to customers in its market
areas of North Carolina and Virginia. 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.
Loans generated $298.5 million of taxable equivalent interest income for
year-to-date September 30, 1997 compared to $280.2 million for the same period
last year. Given that the average loan yield rose only 2 basis points to 9.37
percent, the increase in the average loan volume accounted for substantially all
of the $18.3 million improvement in loan related interest income. Approximately
75 percent of the commercial loan portfolio is variable rate, affected by
changes in the prime rate or other various indices.
Investment Securities
Investment securities, the second largest component of earning assets were
higher by $214.9 million or 14.5 percent at September 30, 1997 as compared to
the same period last year. On average, the investment portfolio grew $261.2
million to $1.7 billion for the first nine months of 1997. Average investments
represented 28.3 percent of average earnings assets as compared to 26.2 percent
for the prior year period. The slower average loan growth relative to deposit
growth and the investment of the proceeds of the $100 million Capital Securities
issuance in June 1997 (described in greater detail in Note 4 of the notes to the
consolidated financial statements) into investment vehicles have contributed to
the shift in the earning-asset mix.
To preserve liquidity, Centura's investment portfolio consists primarily of
securities for which an active market exists. Accordingly, at September 30,
1997, approximately 89 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 classification of securities as held to maturity ("HTM") or as available for
sale ("AFS") is determined at the date of purchase. The HTM investments declined
$123.4 million for the nine months to $232.4 million and represented 13.7
percent and 24.1 percent of total investments for September 30, 1997 and 1996,
respectively. Centura intends and has the ability to hold such HTM securities
until maturity. At September 30, 1997, the fair value of the HTM portfolio was
$233.9 million, representing $1.5 million more than amortized cost.
Investment securities available for sale (the "AFS portfolio"), representing the
remainder of the investment portfolio, totaled $1.5 billion at September 30,
1997 up $338.3 million from September 30, 1996. AFS investments are used as a
part of Centura's asset/liability management strategy and may be sold in
response to changes in interest rates, changes in prepayment risk, the need to
increase regulatory capital and other factors. The recorded fair value of the
AFS portfolio exceeded the amortized cost by $12.5 million which difference has
been recorded, net of tax, as a $7.8 million increase to shareholders' equity.
At September 30, 1996, the fair value of the AFS portfolio was $11.6 million
less than its amortized cost resulting in a $7.1 million decrease to equity.
Centura's liquidity position remains strong, alternative funding sources are
available, 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 $35,000 were generated during the first nine months of
1997 from sales and issuer call activity, compared to net realized gains of $1.7
million during the comparable 1996 period.
Investment securities contributed $84.0 million in taxable equivalent interest
income for the nine-month period ending September 30, 1997, an increase of $14.6
million over the $69.5 million earned in the comparable period of 1996. A 19
basis point improvement in the investment yield to 6.69 percent accounted for
$2.2 million of the increase between the two periods while the average volume
increase provided an additional $12.4 million of taxable equivalent interest
income.
FUNDING SOURCES
Total funding sources averaged $5.9 billion for the nine month period ended
September 30, 1997, a $535.3 million or 10.0 percent increase from the average
volume of $5.3 billion in the comparable 1996 period. Funding sources include
total deposits, short-term borrowings and long-term debt. For additional
information on funding sources refer to Table 3, "Net Interest Income Analysis",
and Table 8, "Net Interest Income and Volume/Rate Analysis".
Deposits
For the first nine months of 1997, average deposits increased $352.1 million to
$4.8 billion, or 7.9 percent over the comparable 1996 period. Average deposit
growth, without the deposits assumed from BB&T, was approximately 6.8 percent.
While the growth did not significantly alter the deposit mix, the average
deposit mix trend between the two nine month periods, as shown in Table 2,
indicates a shift from time accounts to money markets. Product restructuring for
money market demand accounts including more variable pricing spurred growth in
this type of deposit by over 75 percent. Money market demand accounts averaged
$759.6 for the nine months ended September 30, 1997 compared to $431.7 million
for the same period last year. The average volume of time deposits declined
$51.5 million partially due to funds shifting into the new money market
products. Of the deposits assumed from BB&T, approximately $173.7 million were
time accounts; however, the timing of the transaction resulted in the
acquisition providing minimal impact to the nine month averages. Average
noninterest bearing demand accounts were 14.5 percent of total deposits for the
period ended September 30, 1997, up slightly from 14.3 percent for the prior
year period.
The deposit base at September 30, 1997 of $5.2 billion was up $481.5 million
from the $4.7 billion level held at September 30, 1996 and up from the $4.7
billion held at December 31, 1996. Excluding the assumed BB&T deposits,
period-end deposit growth was approximately 3.6 percent over the level at
September 30, 1996.
Interest expense on deposits increased $9.7 million to $134.7 million for the
nine months ending September 30, 1997 versus $125.0 million for the comparable
period of 1996. The average rate paid for total deposits increased 1 basis
point, principally a function of the deposit mix previously described. The cost
of the money market funds increased 92 basis points over the prior year
nine-month period. As detailed further in Table 8, $2.0 million of the increase
in interest expense was due to changes in rates while volume provided an
additional $7.7 million.
Other Funding Sources
External funding sources as a percent of average total interest-bearing
liabilities increased to 21.0 percent for the nine months ended September 30,
1997, up slightly from the 19.3 percent for the prior year. The use of both
short-term and long-term debt has been in line with asset/liability strategies.
Consequently, short-term borrowed funds averaged $756.6 million, compared to the
$581.2 million average volume for the period ending September 30, 1996. Interest
expense on short-term borrowings increased by a net $7.4 million, primarily due
to higher volume. The average rate paid for these funds increased 5 basis points
to 5.20 percent. The average amount of long-term debt, consisting predominantly
of FHLB advances and Capital Securities, increased $7.8 million to $333.1
million for the first nine months of 1997 compared to $325.2 million for the
comparable prior year nine months. With the issuance of the higher cost Capital
Securities funding, rates paid for long-term funding increased to 6.57 percent,
30 basis points over the prior year period.
NET INTEREST INCOME AND NET INTEREST MARGIN
As detailed in Table 3, taxable equivalent net interest income for the nine
months of 1997 increased by $14.3 million, or 7.6 percent, to $202.6 million,
from $188.4 million in the comparable period of 1996. Table 8 provides a
volume/rate analysis. Changes in the rate environment impacted taxable
equivalent net interest income unfavorably by $1.7 million while average volume
provided $16.0 million of improvement.
The net interest margin declined 5 basis points between the periods to 4.52
percent. In addition, the interest rate spread decreased 3 basis points.
Initiatives to enhance Centura's noninterest income sources, through such
products as operating leases and insurance activities, have impacted Centura's
margin. Funded through interest-bearing liabilities, these initiatives add to
noninterest income while the margin absorbs the interest expense of financing.
ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses was $9.6 million for the nine months ending
September 30, 1997, up $2.7 million compared to $6.9 million for the same period
last year. Net charge-offs totaled $8.4 million for the first nine months of
1997 while net charge-off activity for the same period in 1996 resulted in $2.8
million of net charge-offs. For the year ended December 31, 1996 net charge-offs
were $7.2 million. Segmented based on regulatory definitions, net losses between
the two nine-month periods were generally higher for all loan categories with
the most significant increases in commercial loans, loans secured by real
estate, and leases. Net charge-offs as a percent of average loans and leases, on
an annualized basis were 0.27 percent, 0.10 percent and 0.18 percent for
September 30, 1997 and 1996 and December 31, 1996, respectively. Overall net
charge-off performance for 1996 and 1997 has moved in a manner more consistent
with the industry.
The allowance for loan losses was $62.3 million at September 30, 1997,
representing 1.38 percent of loans outstanding, compared to $60.3 million, or
1.43 percent of loans outstanding at September 30, 1996, and compared to $58.7
million or 1.43 percent of loans outstanding at December 31, 1996. Based on the
growth of the loan portfolio and on levels of current problem assets and
potential problem loans, management believes the allowance for loan losses to be
adequate. 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 $28.6
million at September 30, 1997 or 0.42 percent of total assets at the end of the
period. Nonperforming assets were $20.4 million at September 30, 1996, or 0.33
percent of total assets. At December 31, 1996, nonperforming assets were $22.9
million or 0.36 percent of total assets. Real estate nonperforming loans
increased by $4.0 million to $16.1 million and were 0.57 percent and 0.44
percent, respectively, of outstanding real estate loans for the periods ending
September 30, 1997 and 1996. The remaining increases in nonperforming assets
were principally in the leasing and in the commercial portfolios. Nonperforming
leases increased from September 30, 1996 by $1.2 million while commercial
nonperforming loans increased $1.9 million. Foreclosed properties were up $1.9
million from the $3.3 million recorded September 30, 1996.
Accruing loans past due ninety or more days were $10.9 million, $7.9 million and
$8.9 million at September 30, 1997, September 30, 1996 and December 31, 1996,
respectively, which represented 0.24 percent, 0.19 percent and 0.22 percent of
outstanding loans, respectively. At September 30, 1997, the allowance for loan
losses was 2.66 times nonperforming loans, down from 3.53 times at September 30,
1996 and 3.06 times at December 31, 1996.
At September 30,1997, the recorded investment in loans that are considered
impaired under SFAS No. 114 was $14.8 million compared to $10.8 million at
December 31, 1996. Of the impaired loans at September 30, 1997, $13.1 million
were on a nonaccrual basis. Included in the impaired loans at September 30, 1997
were $8.7 million of impaired loans for which the related AFLL determined in
accordance with SFAS No. 114 was $3.8 million. Impaired loans of $6.1 million
had no related allowance determined in accordance with this statement. For the
period ended September 30, 1997, the average recorded investment in impaired
loans was $13.8 million.
During 1997, Centura management has reviewed and continues to review existing
credit polices and has reinforced the commitment to credit quality. On an
absolute basis, nonperforming assets have increased corresponding to increased
loan and lease growth. Management evaluates the loan portfolio by sector and
credit quality analysis. Management believes that an estimated $10 to $15
million of additional nonperforming and past due loans and leases may exist
which are currently "performing" in accordance with their contractual terms. The
impact of ever-changing economic conditions and changes in interest rates and/or
inflation on the operations of Centura's customers is evaluated in the
assessment of overall portfolio credit quality.
NONINTEREST INCOME AND EXPENSE
Noninterest income ("NII") increased $9.6 million, or 13.0 percent, to $83.1
million for the nine months ended September 30, 1997. Excluding net securities
gains, NII was up $11.2 million or 15.6 percent. Service charges on deposits
increased $4.2 million between the two nine-month periods. The increase was
driven principally by non-sufficient funds ("NSF") charges which were impacted
by deposit growth and by rate increases in September 1996 and May 1997. The
continued emphasis on expanding financial services resulted in a $1.2 million
increase in brokerage commissions and a $757,000 improvement in insurance
commissions over the comparable period last year. Other deposit fees increased
$1.7 million between the two periods primarily due to an increase in ATM fees
assessed to non-Centura customers using Centura ATMs and to an increase in debit
card activity. Mortgage income (composed of servicing revenues, origination
fees, servicing release premiums, and net gains or losses on the sales of
mortgage loans) for the nine-month period of 1997 declined to $8.3 million from
$8.9 million for the comparable period in 1996. Credit card revenue and trust
fees were higher by $1.1 million and $789,000, respectively, while operating
lease fees were down $940,000, principally due to a decline in volume. Centura's
49 percent investment in First Greensboro, which occurred in October 1996,
generated $1.5 million in other NII during 1997. Sales activity of investment
securities realized a net gain of $35,000, compared to $1.7 million in net gains
realized during the first nine-months of 1996.
Excluding the SAIF assessment in 1996, noninterest expense ("NIE") increased 8.7
percent, or $14.3 million over the prior year nine months to $179.2 million.
Personnel expenses, the largest component of noninterest expense, contributed
$2.9 million to this increase. Salaries and fringe benefits were down $1.0
million primarily due to a decline in full-time equivalents between the periods,
influenced by efforts to improve efficiency and reallocate resources for both
the sales force and the support staff. Given the timing of the BB&T transaction,
fourth quarter 1997 should feel the impact of the additional branch personnel.
Incentives increased $3.9 million principally due to favorable results relative
to performance criteria.
Occupancy and equipment expense increased $2.8 million over year-to-date 1996,
principally in rent and depreciation associated with the timing of opening
retail in-store locations, with 1 operating at September 30, 1996 and 23
operating at September 30, 1997. The reduction in the rates of federal deposit
insurance premiums that began in late 1996 was responsible for a $2.0 million
decline in other operating NIE, excluding the SAIF assessment. Professional fees
increased $8.0 million for the first nine months of 1997, due in part, to the
outsourcing of Centura's proof operations in mid-1996 and to the cost of
services for computer support and maintenance. Expenses for consulting services
have also contributed to the increase in professional fees as Centura strives to
identify and implement operating efficiencies and cost savings. With enhanced
customer profile data made available in 1997, efforts to increase targeted
marketing activities led to the $1.4 million increase in marketing expenses over
the prior year nine-months.
The efficiency ratio for the period ended September 30, 1997 was 62.71 percent,
as compared to the 62.94 percent, excluding the SAIF assessment, recorded for
the same period in 1996. During 1997, Centura has streamlined the branch network
and has begun to emphasize customer profitability and market data to assist and
re-focus front-line representatives to customer retention and portfolio
maintenance as well as new business generation. Resources continue to be
utilized to generate nontraditional income sources as evidenced by growth in
securities commission, insurance commissions and trust fees. These efforts
should favorably impact the efficiency ratio in future periods.
INCOME TAX EXPENSE
The amount of income tax expense for the nine months ended September 30, 1997
was $31.6 million compared to $29.0 million in the prior period. The current
effective tax rate is 34.66 percent, down from the 36.85 percent at September
30, 1996.
EQUITY AND CAPITAL RESOURCES
Shareholders' equity increased to $529.5 million at September 30, 1997, compared
to $468.4 million at September 30, 1996. The change in equity between the two
periods was influenced by earnings, payment of dividends and the timing of the
stock repurchases relative to the 1996 acquisitions. There have been no shares
repurchased for the nine months ended September 30, 1997. Shareholder's equity
at September 30, 1997 reflects a $1.5 million price settlement related to a
stock buyback transaction that occurred in the fourth quarter of 1996.
Shareholder's equity also included unrealized gains, net of tax, on securities
available for sale of $7.8 million at September 30, 1997 compared to a $7.1
million unrealized loss, net of tax, for the comparable period last year. The
ratio of shareholders' equity to period-end assets was 7.68 percent, up from
7.52 percent at period end September 30, 1996.
Centura's common stock is traded on the New York Stock Exchange under the symbol
CBC. At September 30, 1997, Centura had 25,893,357 shares outstanding. Cash
dividends for the nine months of 1997 were $20.4 million, or $0.79 per share,
compared to $17.7 million, or $0.75 per share, for the comparable period last
year. Cash dividends of $6.4 million for the first quarter 1997 were declared
and accrued during the fourth quarter of 1996.
Centura maintains higher regulatory 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, 1997, Centura and Centura Bank had the
requisite capital levels to qualify as well-capitalized. At September 30, 1997,
Centura's Tier 1 capital was $520.7 million and total capital was $549.0
million. Centura's capital ratios are outlined in Table 6 entitled "Capital
Ratios." The September 30, 1997 ratios reflect the issuance of the Capital
Securities (described in detail in the following section) which qualify as Tier
I capital under the risk-based capital guidelines.
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 and the ability to borrow from
the Federal Home Loan Bank. Centura also has an unsecured line of credit of $60
million. There was $40 million outstanding under this line of credit at
September 30, 1997; there was $52 million outstanding at September 30, 1996.
Long-term debt includes $100 million of fixed-rate, thirty-year Capital
Securities issued in June 1997 by Centura Capital Trust I ("CCTI"), a
consolidated subsidiary. CCTI issued $3.1 million of common securities to the
Holding Company of Centura. CCTI invested the proceeds of $103.1 million,
generated from the Capital Securities and common securities issuances, in
fixed-rate Junior Subordinated Deferrable Interest Debentures ("the junior
debentures") issued by Centura. The junior debentures, scheduled to mature in
June 2027, are the primary assets of CCTI. Centura has guaranteed the
obligations of CCTI under the Capital Securities. For risk-based capital
calculations, the Capital Securities are included as a component of Tier I
capital.
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, and is discussed more thoroughly under "Asset Quality and
Allowance for Loan Losses".
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 indicate that Centura's net interest income would benefit from a
rising rate environment; however these 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. The results
of gap analyses are appropriate only for a point in time and should not be
projected into the future because each of the factors listed above 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 affected by a
change in interest rates. Management of Centura believes that Centura is
currently positioned to react appropriately to changes in interest rates under
these guidelines.
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, 1997.
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 1997 was $21.7 million or 14.5 percent over
the prior year quarter, excluding the SAIF assessment. Earnings per share of
$0.82 represented a 9 cent increase over the $0.73 for the third quarter of
1996, excluding the SAIF assessment. Earnings for the third quarter of 1996
including the SAIF assessment were $14.7 million or $0.57 per share.
As shown in Tables 3 and 8, the net interest margin of 4.46 percent declined 15
basis points between the quarters as the interest rate spread declined 13 basis
points to 3.87 percent. Interest income, taxable equivalent, for the quarter
ending September 30, 1997 was $134.0 million, up $13.6 million or 11.3 percent
over the third quarter of 1996. Growth in average earning assets was responsible
for $12.1 million of the increase while the rate environment contributed $1.5
million. Average earning assets increased $633.6 million to $6.2 billion for the
third quarter 1997, with average loans increasing $274.6 million and average
investments rising $363.1 million. The average yield on earning assets rose 3
basis points to 8.59 percent from 8.56 percent for the third quarter of 1996.
Total interest expense of $64.4 million for the three months ending September
30, 1997, increased $9.2 million or 16.6 percent over the prior year quarter.
The rates paid for these funds also increased to 4.72 percent from 4.56 percent
experienced in the third quarter 1996. The $577.3 million average growth in
interest-bearing funding sources, evenly split between interest-bearing deposits
and other borrowings, was responsible for $6.8 million of the interest expense
increase while the rate environment accounted for $2.4 million. Average deposits
for the quarter ending September 30, 1997 and 1996 were $5.0 billion and $4.6
billion, respectively. Noninterest-bearing deposits were approximately 15
percent of average deposits for each of the quarters.
Net charge-offs for the third quarter of 1997 were $2.8 million, up $1.5 million
from the prior year quarter and represented 0.26 percent of average loans. Net
charge-offs of $1.3 million represented 0.13 percent of average loans for the
third quarter 1996. Gross charge-offs increased 67.5 percent while recoveries
declined $28.5 percent. Provision for loan losses increased $1.1 million to $3.5
million.
Noninterest income ("NII") increased 19.1 percent or $4.8 million to $29.9
million. As expected, the majority of the increase occurred in service charge on
deposit accounts, insurance and brokerage commissions, and other service charges
and fees. Service charges of deposit accounts increased 24.7 percent or $2.1
million due to fee increases and growth in deposits. Credit card activities and
insurance and brokerage commissions increased $472,000 and $603,000,
respectively over the third quarter of 1996. Operating lease income declined 7.1
percent or $213,000 compared to the third quarter of 1996, primarily due to a
decline in assets under lease while income from FGHE contributed to the $1.3
million increase in other NII. Securities sales generated $161,000 of net gains
compared to $403,000 during the third quarter 1996.
The efficiency ratio improved by 86 basis points between the quarters to 61.47
percent, excluding the impact of the SAIF assessment. Noninterest expenses
("NIE") for the quarter ending September 30, 1997 were $61.2 million, up 8.6
percent from the $56.3 million recorded for the quarter ending September 30,
1996, excluding the SAIF assessment. Professional fees increased to $6.9 million
for the third quarter of 1997, up $3.3 million from the comparable quarter of
1996. Timing of expenditures for consulting services and costs of outsourcing
certain bank functions accounted for the majority of the increase. Marketing
expenses for the third quarter of 1997 were $360,000 more than the $1.7 million
recorded for the prior year quarter. Equipment expense and occupancy expense
increased $624,000 and $358,000, respectively.
CURRENT ACCOUNTING ISSUES
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share" ("SFAS No.
128") which provides standards for computing and presenting earnings per share
("EPS") for entities with publicly held common stock or potential common stock.
It requires the dual presentation of basic EPS (defined as income available to
common stockholders divided by the weighted-average number of common shares
outstanding for the period) and diluted EPS on the face of the income statement.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock and is similar to current fully-diluted EPS calculations. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods and requires restatement for all prior-periods
of EPS data presented. Had Centura adopted SFAS No. 128 for the nine-month
periods ended September 30, 1997 and 1996, the following per share computations
would have been presented in the consolidated financial statements.
Nine Months ended September 30,
1997 1996
Basic income per share $2.31 $1.95
Diluted income per share $2.26 $1.91
In February 1997, the FASB issued SFAS No. 129 "Disclosure of Information About
Capital Structure" which eliminates the exemption of nonpublic entities from
certain disclosure requirements of APB Opinion No. 15 "Earnings Per Share". This
statement should have no effect on Centura's consolidated financial statements.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
("SFAS No. 130") which establishes standards for reporting and display of
comprehensive income and its components in a full set of financial statements.
Comprehensive income is defined as the change in equity during a period for
non-owner transactions and is divided into net income and other comprehensive
income. Other comprehensive income includes revenues, expenses, gains, and
losses that are excluded from earnings under current accounting standards. This
statement does not change or modify the reporting or display in the income
statement. SFAS No. 130 is effective for interim and annual periods beginning
after December 15, 1997 although early adoption is permitted. Comparative
financial statements provided for earlier periods are required to be reclassed
to reflect the application of this statement.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). The statement requires
management to report selected financial and descriptive information about
reportable operating segments. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Generally, disclosures are required for segments internally identified to
evaluate performance and resource allocation. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997. In the
initial year of application, comparative information for earlier periods is to
be restated, if it is practical to do so. SFAS No. 131 does not have to be
applied to interim financial statements in the initial year of application, but,
comparative information must be provided for interim periods in the second year
of application.
In July 1996, the Emerging Issues Task Force provided guidance concerning the
costs for modifications to computer software to accommodate the year 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 the new century. Management currently estimates that the costs of
this additional programming ranges from $6-$8 million. Through September 30,
1997, Centura has expensed approximately $461,000 for the year 2000 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, 1997 September 30, 1996 December 31, 1996
------------------ ------------------- -----------------
(Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total
- --------------------------------------------------------------------------------------------------------------------------------
Commercial, financial and agricultural $ 844,485 18.7% $ 771,281 18.3% $ 743,477 18.1%
Commercial mortgage 882,383 19.6 819,415 19.5 806,721 19.6
Real estate construction 566,739 12.6 518,017 12.3 524,246 12.8
----------------------------------------------------------------------------------
Commercial loan portfolio 2,293,607 50.9 2,108,713 50.1 2,074,444 50.5
Consumer 305,500 6.8 269,181 6.4 274,733 6.7
Residential mortgage 1,381,429 30.6 1,403,214 33.4 1,291,036 31.4
Leases 489,144 10.8 383,575 9.1 420,240 10.2
Other 41,394 0.9 41,614 1.0 49,001 1.2
- --------------------------------------------------------------------------------------------------------------------------------
Total loans $ 4,511,074 100.0% $ 4,206,297 100.0% $ 4,109,454 100.0%
================================================================================================================================
Residential mortgage servicing
portfolio for others $ 2,819,000 $ 2,108,000 $ 2,245,000
================================================================================================================================
TABLE 2
- --------------------------------------------------------------------------------
AVERAGE DEPOSIT MIX FOR THE NINE MONTHS ENDED
September 30, 1997 September 30, 1996
------------------ ------------------
(Dollars in thousands) Balance % of Total Balance % of Total
- -------------------------------------------------------------------------------------------------------
Demand, noninterest bearing $ 695,119 14.5% $ 632,851 14.2%
Interest checking 636,886 13.3 601,381 13.6
Money market 759,608 16.0 431,708 9.7
Savings 287,152 6.0 309,259 7.0
- -------------------------------------------------------------------------------------------------------
Time deposits:
Certificates of deposit less than $100K 1,742,151 36.3 1,740,644 39.3
Certificates of deposit greater than $100K 364,208 7.6 420,093 9.5
IRA 299,337 6.3 296,431 6.7
- -------------------------------------------------------------------------------------------------------
Total time deposits 2,405,696 50.2 2,457,168 55.5
- -------------------------------------------------------------------------------------------------------
Total average deposits $ 4,784,461 100.0% $ 4,432,367 100.0%
=======================================================================================================
TABLE 3
- --------------------------------------------------------------------------------
NET INTEREST INCOME ANALYSIS - TAXABLE EQUIVALENT BASIS
Centura Banks, Inc. and Subsidiaries
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Loans $ 4,223,754 $ 298,465 9.37% $ 3,958,127 $ 280,204 9.35%
Taxable securities 1,633,860 81,184 6.63 1,374,903 66,240 6.42
Tax-exempt securities 42,833 2,855 8.89 48,654 3,225 8.84
Short-term investments 31,143 1,271 5.38 35,717 1,367 5.03
------------ ---------- ----------- ---------
Interest-earning assets, gross 5,931,590 383,775 8.59 5,417,401 351,036 8.58
Net unrealized gain (loss) on available
for sale securities 2,350 (5,741)
Other assets, net 527,200 463,583
----------- -----------
Total assets $ 6,461,140 $ 5,875,243
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking $ 636,886 $ 8,154 1.71% $ 601,381 $ 8,321 1.85%
Money market 759,608 23,807 4.19 431,708 10,553 3.27
Savings 287,152 4,135 1.93 309,259 4,815 2.08
Time 2,405,696 98,623 5.48 2,457,168 101,298 5.51
----------- ----------- ----------- ---------
Total interest-bearing deposits 4,089,342 134,719 4.40 3,799,516 124,987 4.39
Borrowed funds 756,583 29,824 5.20 581,223 22,403 5.15
Long-term debt 333,064 16,600 6.57 325,236 15,275 6.27
----------- ----------- ----------- ---------
Interest-bearing liabilities 5,178,989 181,143 4.66 4,705,975 162,665 4.62
Demand, noninterest-bearing 695,119 632,851
Other liabilities 83,983 88,962
Shareholders' equity 503,049 447,455
----------- -----------
Total liabilities and
shareholder's equity $ 6,461,140 $ 5,875,243
=========== ===========
Interest rate spread 3.93% 3.96%
Net yield on interest-
earning assets $ 5,931,590 $ 202,632 4.52% $ 5,417,401 $ 188,371 4.57%
=========== =========== =========== ==========
Taxable equivalent adjustment $ 5,822 $ 4,371
=========== ==========
TABLE 3, continued
- ------------------------------ ------------------------------------------------
NET INTEREST INCOME ANALYSIS - TAXABLE EQUIVALENT BASIS
Centura Banks, Inc. and Subsidiaries
Three months ended Three months ended
September 30 1997 September 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Loans $ 4,372,404 $ 104,037 9.38% $ 4,097,846 $ 96,733 9.30%
Taxable securities 1,722,535 28,568 6.63 1,376,452 22,125 6.43
Tax-exempt securities 40,618 908 8.94 43,742 972 8.89
Short-term investments 34,177 457 5.23 38,286 562 5.74
----------- ---------- ----------- ----------
Interest-earning assets, gross 6,169,734 133,970 8.59 5,556,326 120,392 8.56
Net unrealized gain (loss) on available
for sale securities 7,941 (12,239)
Other assets, net 560,958 480,240
----------- -----------
Total assets $ 6,738,633 $ 6,024,327
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking $ 647,316 $ 2,718 1.67% $ 602,318 $ 2,654 1.75%
Money market 837,849 9,023 4.27 549,406 5,094 3.69
Savings 285,745 1,299 1.80 304,006 1,542 2.02
Time 2,454,163 33,864 5.47 2,472,379 33,844 5.45
----------- ---------- ----------- ----------
Total interest-bearing deposits 4,225,073 46,904 4.40 3,928,109 43,134 4.37
Borrowed funds 809,460 11,150 5.39 561,180 7,078 5.02
Long-term debt 356,546 6,331 6.95 324,490 4,989 6.12
----------- ---------- ----------- ----------
Interest-bearing liabilities 5,391,079 64,385 4.72 4,813,779 55,201 4.56
Demand, noninterest-bearing 741,991 664,435
Other liabilities 86,388 89,041
Shareholders' equity 519,175 457,072
----------- -----------
Total liabilities and
shareholder's equity $ 6,738,633 $ 6,024,327
=========== ===========
Interest rate spread 3.87% 4.00%
Net yield on interest-
earning assets $ 6,169,734 $ 69,585 4.46% $ 5,556,326 $ 65,191 4.61%
=========== =========== =========== ==========
Taxable equivalent adjustment $ 2,126 $ 1,397
=========== ==========
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) 1997 1996 1996
- ---------------------------------------------------------------------------------------------------------------
Allowance for loan losses at beginning of period $ 58,715 $ 55,070 $ 55,070
Allowance for acquired financial institutions 2,410 1,240 1,240
Provision for loan losses 9,569 6,850 9,596
Loans charged off (10,527) (5,413) (10,408)
Recoveries on loans previously charged off 2,115 2,582 3,217
- ---------------------------------------------------------------------------------------------------------------
Net charge-offs (8,412) (2,831) (7,191)
- ---------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of period $ 62,282 $ 60,329 $ 58,715
===============================================================================================================
Loans at period-end $ 4,511,074 $ 4,206,297 $ 4,109,454
Average loans 4,223,754 3,958,127 4,014,391
Nonperforming loans 23,390 17,098 19,210
Allowance for loan losses to loans at period-end 1.38% 1.43% 1.43%
Net charge-offs to average loans 0.27 0.10 0.18
Allowance for loan losses to nonperforming loans 2.66x 3.53x 3.06x
===============================================================================================================
TABLE 5
- --------------------------------------------------------------------------------
NONPERFORMING ASSETS AND PAST DUE LOANS
September 30, December 31,
------------------------------------- ------------------
(Dollars in thousands) 1997 1996 1996
- ---------------------------------------------------------------------------------------------
Nonaccrual loans $ 23,390 $ 16,489 $ 18,713
Restructured loans --- 609 497
------------------------------------- ----------------
Nonperforming loans 23,390 17,098 19,210
Foreclosed property 5,243 3,300 3,663
- ---------------------------------------------------------------------------------------------
Total nonperforming assets $ 28,633 $ 20,398 $ 22,873
=============================================================================================
Nonperforming assets to:
Loans and foreclosed property 0.63% 0.48% 0.56%
Total assets 0.42 0.33 0.36
=============================================================================================
Accruing loans past due ninety days $ 10,887 $ 7,937 $ 8,916
=============================================================================================
TABLE 6
- --------------------------------------------------------------------------------
CAPITAL RATIOS
Tier I Capital Total Capital Tier I Leverage
September 30, 1997 11.11% 11.71% 7.85%
December 31, 1996 9.48 10.02 6.56
September 30, 1996 9.43 10.68 6.78
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, 1997 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/receives floating $ 125,000 5.74% 6.56% 0.7 $ (754)
Corporation pays variable/receives fixed 270,000 6.66% 5.67% 6.9 2,503
Corporation pays variable/receives variable 200,000 5.77% 5.26% 1.2 (582)
-------------- ---------
Total interest rate swaps $ 595,000 $ 1,167
============== =========
Interest rate cap and floor agreements at September 30, 1997 are summarized
below:
Weighted Average
Remaining
Notional Average Current Index Contractual Carrying Estimated
Amount Rate * Rate Term (Years) Value Fair Value
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Rate Floors $ 230,000 5.78% 5.77% 2.6 $ 985 $ 1,435
============== ========== ==========
Interest Rate Caps $ 38,000 7.27% 5.77% 5.8 $ 1,016 $ 605
============== ========== ==========
* 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, 1997 Centura had put options for 2 ten-year Treasury futures
contracts and call options for 4 ten-year Treasury 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,
1997, the options had a carrying value of $26,500 and an estimated fair value of
$27,200.
TABLE 8
- --------------------------------------------------------------------------------
NET INTEREST INCOME AND VOLUME/RATE ANALYSIS - TAXABLE EQUIVALENT BASIS
Nine months ended
September 30, 1997 and 1996
- -----------------------------------------------------------------------------
Income/ Variance
Expense Attributable to
(Dollars in thousands) Variance Volume Rate
- -----------------------------------------------------------------------------
INTEREST INCOME
Loans $ 18,261 $ 18,771 ($510)
Taxable securities 14,944 12,811 2,133
Tax-exempt securities (370) (388) 18
Short-term investments (96) (183) 87
--------- --------- ----------
Total interest income 32,739 31,011 1,728
INTEREST EXPENSE Interest-bearing deposits:
Interest checking (167) 475 (642)
Money market 13,254 9,664 3,590
Savings (680) (332) (348)
Time (2,675) (2,113) (562)
--------- --------- -----------
Total interest-bearing deposits 9,732 7,694 2,038
Borrowed funds 7,421 6,902 519
Long-term debt 1,325 374 951
--------- --------- -----------
Total interest expense 18,478 14,970 3,508
--------- --------- -----------
Net interest income $ 14,261 $ 16,041 ($1,780)
========== ========== ========
The change in interest due to both rate and volume has been allocated
proportionately to volume variance and rate variance based on the relationship
of the absolute dollar change in each.
TABLE 8, continued
- --------------------------------------------------------------------------------
NET INTEREST INCOME AND VOLUME/RATE ANALYSIS - TAXABLE EQUIVALENT BASIS
Three months ended
September 30, 1997 and 1996
- --------------------------------------------------------------------------------
Income/ Variance
Expense Attributable to
(Dollars in thousands) Variance Volume Rate
- --------------------------------------------------------------------------------
INTEREST INCOME
Loans $ 7,304 $ 6,527 $ 777
Taxable securities 6,443 5,720 723
Tax-exempt securities (64) (70) 6
Short-term investments (105) (57) (48)
--------- --------- --------
Total interest income 13,578 12,120 1,458
INTEREST EXPENSE Interest-bearing deposits:
Interest checking 64 193 (129)
Money market 3,929 3,005 924
Savings (243) (89) (154)
Time 20 (250) 270
--------- --------- --------
Total interest-bearing deposits 3,770 2,859 911
Borrowed funds 4,072 3,370 702
Long-term debt 1,342 523 819
--------- --------
Total interest expense 9,184 6,752 2,432
--------- --------- --------
Net interest income $ 4,394 $ 5,368 ($974)
========= ========= ======
The change in interest due to both rate and volume has been allocated
proportionately to volume variance and rate variance based on the relationship
of the absolute dollar change in each.
CENTURA BANKS, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The following represents the legal matter first reported in Form 10-Q for the
quarterly period ended June 30, 1994.
On May 13, 1994, seven individuals claiming to have been depositors of
First Savings Bank of Forest City, SSB ("First Savings") filed suit in Wake
County, North Carolina, Superior Court against the Registrant, Centura
Bank, the North Carolina Savings Institutions Division ("NCSID"), and six
individuals who were directors of First Savings at the time of the
acquisition of that institution by the Registrant and Centura Bank through
a merger/conversion transaction in October 1993 (the "Acquisition").
Plaintiffs' complaint alleges, among other things, that the individual
defendants violated their fiduciary duties as directors of First Savings in
connection with the Acquisition by allegedly receiving excessive benefits
as part of that transaction; that the Registrant and Centura Bank acted in
concert with the individual defendants in that regard, as a result of which
it is alleged that "the assets of First Savings were wrongfully
transferred"; and that the NCSID acted in violation of law in approving the
Acquisition. Plaintiffs sought (i) certification of the suit as a class
action; (ii) a judgment ordering the individual defendants, the Registrant,
and Centura Bank to pay to plaintiffs and members of the class the
difference between the fair market value of First Savings as of the date of
the Acquisition and the value of benefits paid to depositors in the
Acquisition; (iii) punitive damages in an unspecified amount; and (iv) in
the event damages are not awarded, entry of an order declaring the
Acquisition to be "illegal, void and reversed." Management of the
Registrant believes that the suit is without merit and intends to defend
vigorously.
On March 2, 1995, claims against NCSID were severed from claims against the
six individuals who were directors of First Savings, the Registrant and
Centura Bank, and accordingly, such claims are now the subject of two
separate proceedings.
On October 31, 1995, the Wake County Superior Court reversed the decision
of the NCSID Administrator denying plaintiffs' request for a hearing on the
issue of whether the NCSID should have approved the Acquisition and
remanded the action to the NCSID for such a hearing. The Registrant and
NCSID appealed this decision, which appeal was dismissed by the North
Carolina Court of Appeals. A hearing has not yet been scheduled by the
NCSID.
The civil damage action was certified as a class action on March 4, 1996,
and on March 26, 1996, was assigned to the Special Superior Court for
Complex Business Litigation. Registrant, and the former First Savings
directors moved for summary judgment, which motion was heard by the court
on January 8, 1997.
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 7, 1997 was filed under Item 5, Other
Events, indicating the Registrant's announcement on July 7, 1997 of
earnings for the three and six months ended June 30, 1997.
2)A report on Form 8-K dated July 15, 1997 was filed under Item 2,
Acquisition or Disposition of Assets, indicating the Registrant had
reached an agreement to purchase 5 banking offices, with approximately
$92 million of deposits and $55 million of loans, from NationsBank,
N.A.
3)A report on Form 8-K dated August 18, 1997 was filed under Item 2,
Acquisition or Disposition of Assets, indicating the Registrant had
completed its assumption of loans and deposits of 13 banking centers
from Branch Banking and Trust Company and United Carolina Bank.
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 14, 1997 By: /s/Steven J. Goldstein
----------------------
Steven J. Goldstein
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
COPIES OF EXHIBITS ARE AVAILABLE UPON WRITTEN REQUEST TO STEVEN GOLDSTEIN, CHIEF
FINANCIAL OFFICER OF CENTURA BANKS, INC.