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 June 30, 1999
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)
(252) 454-4400
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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 28,467,528
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(Class of Stock) (Shares outstanding as of July 31, 1999)
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 -
June 30, 1999 and 1998, and December 31, 1998 4
Consolidated Statements of Income -
Three months and six months ended June 30, 1999 and 1998 5
Consolidated Statement of Shareholders' Equity -
Six months ended June 30, 1999 6
Consolidated Statements of Cash Flows -
Six months ended June 30, 1999 and 1998 7
Notes to Consolidated Financial Statements 8-11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-26
Item 3. Quantitative and Qualitative Disclosures about Market Risk 27
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 2. Changes in Securities and Use of Proceeds 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 (Unaudited)
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
(Unaudited)
June 30, December 31,
------------------------------------- -----------------
(In thousands, except share data) 1999 1998 1998
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ASSETS
Cash and due from banks $ 254,523 $ 293,879 $ 289,230
Due from banks, interest-bearing 18,264 15,241 21,963
Federal funds sold 14,067 10,561 17,646
Investment securities:
Available for sale (cost of $2,106,932, $1,865,868,
and $2,036,707, respectively) 2,082,798 1,881,718 2,057,270
Held to maturity (fair value of $57,686,
$151,046, and $106,432, respectively) 56,514 149,548 103,767
Loans 5,841,585 5,405,440 5,852,830
Less allowance for loan losses 75,519 71,262 72,310
- -----------------------------------------------------------------------------------------------------------------
Net loans 5,766,066 5,334,178 5,780,520
Bank premises and equipment 118,498 122,095 120,405
Other assets 446,023 396,255 404,759
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Total assets $ 8,756,753 $ 8,203,475 $ 8,795,560
=================================================================================================================
LIABILITIES
Deposits:
Demand, noninterest-bearing $ 982,066 $ 949,476 $ 979,346
Interest-bearing 4,405,335 4,524,171 4,569,243
Time deposits over $100 637,038 485,858 520,060
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Total deposits 6,024,439 5,959,505 6,068,649
Borrowed funds 1,173,312 945,285 1,299,337
Long-term debt 754,954 544,647 614,284
Other liabilities 116,405 119,240 137,085
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Total liabilities 8,069,110 7,568,677 8,119,355
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 28,465,362; 28,231,305;
and 28,318,226, respectively 212,566 202,419 205,237
Common stock acquired by ESOP (57) (179) (107)
Retained earnings 490,488 422,721 458,298
Accumulated other comprehensive (loss) income (15,354) 9,837 12,777
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Total shareholders' equity 687,643 634,798 676,205
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Total liabilities and shareholders' equity $ 8,756,753 $ 8,203,475 $ 8,795,560
=================================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
CENTURA BANKS, INC. AND SUBSIDIARIES
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
(In thousands, except share and per share data) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans, including fees $ 125,346 $ 123,671 $ 250,454 $ 240,972
Investment securities:
Taxable 31,623 31,452 63,039 62,126
Tax-exempt 434 549 907 1,134
Short-term investments 579 373 1,154 789
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Total interest income 157,982 156,045 315,554 305,021
INTEREST EXPENSE
Deposits 49,246 54,641 99,360 108,648
Borrowed funds 13,638 14,424 29,559 27,400
Long-term debt 10,993 7,693 19,743 14,208
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Total interest expense 73,877 76,758 148,662 150,256
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NET INTEREST INCOME 84,105 79,287 166,892 154,765
Provision for loan losses 6,411 3,635 12,677 7,028
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Net interest income after provision for loan losses 77,694 75,652 154,215 147,737
NONINTEREST INCOME
Service charges on deposit accounts 13,527 11,775 26,415 22,564
Credit card and related fees 1,762 1,328 3,531 2,758
Other service charges, commissions and fees 8,856 7,733 17,460 15,505
Fees for trust services 2,743 2,400 5,182 4,500
Mortgage income 5,774 6,014 12,810 10,141
Other noninterest income 6,101 5,448 11,114 11,242
Securities gains (losses), net (5) (73) 478 229
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Total noninterest income 38,758 34,625 76,990 66,939
NONINTEREST EXPENSE
Personnel 36,319 35,712 75,644 69,158
Occupancy 4,863 4,509 9,958 8,904
Equipment 5,392 5,608 10,567 11,136
Foreclosed real estate losses and related
operating expense 251 232 679 725
Merger-related expenses - - 6,858 -
Other operating 27,143 26,364 53,078 51,164
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Total noninterest expense 73,968 72,425 156,784 141,087
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Income before income taxes 42,484 37,852 74,421 73,589
Income taxes 13,695 12,770 25,055 25,019
- --------------------------------------------------- ----------------------------------------------------------
NET INCOME $ 28,789 $ 25,082 $ 49,366 $ 48,570
==============================================================================================================
NET INCOME PER COMMON SHARE
Basic $ 1.01 $ 0.89 $ 1.73 $ 1.74
Diluted 1.00 0.87 1.71 1.70
==============================================================================================================
AVERAGE COMMON SHARES OUTSTANDING
Basic 28,462,854 28,251,597 28,463,663 27,965,344
Diluted 28,872,807 28,816,180 28,918,942 28,545,349
==============================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
CENTURA BANKS, INC. AND SUBSIDIARIES
(Unaudited)
Six months ended June 30, 1999
Accumulated Other
Comprehensive
Common Income (loss)
Stock Minimum Total
Common Stock Acquired Retained Unrealized Pension Shareholders'
(In thousands, except share data) Shares Amount by ESOP Earnings Gains (losses) Liability Equity
- --------------------------------------------------------------------------------------------------------------------------------
December 31, 1998,as originally reported 26,618,931 $ 195,516 $ (107) $ 421,464 $ 12,975 $ (5) $ 629,843
Adjustments for pooling-of-interests 1,699,295 9,721 - 36,834 (193) - 46,362
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1998, restated 28,318,226 205,237 (107) 458,298 12,782 (5) 676,205
Comprehensive income:
Net income - - - 49,366 - - 49,366
Unrealized losses on securities, net of tax - - - - (28,131) - (28,131)
Comprehensive income - - - - - - 21,235
Common stock issued:
Stock option plans and stock awards 116,691 2,483 - - - - 2,483
Acquisitions 130,445 8,733 - (306) - - 8,427
Redemption of common stock (100,000) (5,643) - - - - (5,643)
Cash dividends declared, $0.61 per share - - - (16,875) - - (16,875)
Other - 1,756 50 5 - - 1,811
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1999 28,465,362 $ 212,566 $ (57) $ 490,488 $ (15,349) $ (5) $ 687,643
====================================================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CENTURA BANKS, INC. AND SUBSIDIARIES
(Unaudited) Six Months Ended
June 30,
(Dollars in thousands) 1999 1998
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 49,366 $ 48,570
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Provision for loan losses 12,677 7,028
Depreciation on assets under operating leases 7,233 5,682
Depreciation and amortization, excluding depreciation on assets under operating leases l19,404 18,150
Deferred income taxes (6,818) 6,051
Loan fees deferred, net 2,114 1
Bond premium amortization and discount accretion, net 406 395
Gains on sales of investment securities (478) (229)
Gain on sales of equipment under lease (1,923) (2,340)
Proceeds from sales of mortgage loans held for sale 544,831 432,826
Originations, net of principal repayments, of mortgage loans held for sale (467,041) (476,424)
Decrease (increase) in accrued interest receivable 3,191 (885)
(Increase) decrease in accrued interest payable (12) 5,245
Net increase in other assets and other liabilities (40,396) (53,971)
----------- ----------
Net cash provided (used) by operating activities 122,554 (9,901)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (38,820) (224,825)
Purchases of:
Securities available for sale (438,205) (519,483)
Premises and equipment (7,976) (6,248)
Proceeds from:
Sales of securities available for sale 124,874 130,003
Maturities and issuer calls of securities available for sale 245,064 278,896
Maturities and issuer calls of securities held to maturity 47,381 66,156
Sales of foreclosed real estate 2,943 3,982
Dispositions of premises and equipment 1,801 788
Dispositions of equipment used in leasing activities 3,862 8,333
Cash acquired, net of cash paid, in mergers and acquisitions (15,479) 15,447
----------- ----------
Net cash used by investing activities (74,555) (246,951)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits (83,792) 62,577
Net (decrease) increase in borrowed funds (126,025) 97,863
Proceeds from issuance of long-term debt 152,408 202,928
Repayment of long-term debt (11,688) (88,248)
Cash dividends paid (16,875) (15,314)
Proceeds from issuance of common stock, net 1,631 846
Redemption of common stock (5,643) (3,041)
Other - (181)
----------- ----------
Net cash (used) provided by financing activities (89,984) 257,430
----------- ----------
(Decrease) increase in cash and cash equivalents (41,985) 578
Cash and cash equivalents at January 1 328,839 319,103
----------- ----------
Cash and cash equivalents at June 30 $ 286,854 $ 319,681
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the three months for:
Interest $ 148,650 $ 144,830
Income taxes 11,436 13,832
Noncash transactions:
Stock issued in purchase acquisitions and other stock issuances, net 9,365 13,922
Change in unrealized securities gains (losses) (44,698) (390)
Loans transferred to foreclosed property 1,062 3,664
See accompanying notes to consolidated financial statements.
CENTURA BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited 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. The interim financial statements
have been prepared in conformity with generally accepted accounting principles
for interim financial statements. 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). All prior period
financial information has been restated to include historical information for
companies acquired in transactions accounted for as poolings-of-interests.
The information contained in the consolidated financial statements and
accompanying footnotes in Centura's annual report on Form 10-K should be
referenced when reading these unaudited interim financial statements. Operating
results for the three and six month periods ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
Note 2: Mergers and Acquisitions
Acquisition activity through June 30, 1999 is summarized below. Data
for the completed transactions is as of the date of acquisition.
Acquisition Shares
Date Offices Assets Loans Deposits Issued
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(dollars in millions)
Capital Advisors ** 01/07/99 -- $ 0.6 $ -- $ -- 107,789
Scotland Bancorp, Inc. ** 02/05/99 2 56.8 41.0 39.6 --
First Coastal Bankshares, Inc. * 03/26/99 18 526.5 433.1 380.0 1,706,875
- ------------------------------------------
* Merger accounted for as a pooling-of-interests
** Acquisition accounted for as a purchase
On January 7, 1999, Centura acquired Capital Advisors of North
Carolina, LLC, Capital Advisors of South Carolina, Inc., Capital Advisors of
Mississippi, Inc., Selken, Inc., and Capital Advisors, Inc., collectively
referred to as Capital Advisors. With this transaction, Capital Advisors became
a wholly-owned subsidiary of Centura Bank. Capital Advisors, with offices in
North Carolina, South Carolina, Georgia, and Mississippi, is engaged in the
business of commercial real estate financing and consulting primarily through
brokering and servicing commercial mortgage loans. The acquisition was accounted
for using the purchase method of accounting, and approximately $14.3 million of
goodwill was recorded in other assets on the consolidated balance sheet.
On February 5, 1999, Centura completed the acquisition of Scotland
Bancorp, Inc. ("Scotland") based in Laurinburg, North Carolina. The acquisition
was accounted for as a purchase. Goodwill of approximately $6.6 million was
recorded in other assets on the consolidated balance sheet.
On March 26, 1999, Centura merged with First Coastal Bankshares, Inc.
("First Coastal"), headquartered in Virginia Beach, Virginia. Each share of
First Coastal common stock was exchanged for 0.34 shares of Centura common
stock. The combination was accounted for as a pooling-of-interests, and
accordingly, historical financial information for all periods presented has been
restated to include First Coastal's historical financial information. This
combination increased Centura's presence in the Hampton Roads region of Virginia
by 18 financial stores. In connection with the merger, Centura recorded
non-recurring pre-tax merger-related charges of $8.4 million. Included in these
merger-related expenses were severance and termination-related accruals, costs
of the transaction, and the write-off of certain assets deemed to have no
ongoing benefit to Centura. The severance costs include payments to be made in
connection with the involuntary termination of employees who were specifically
identified and notified of their termination and severance benefits in December,
1998. The remaining accrued severance balance is expected to be paid during
1999. An additional $1.5 million in provision for loan losses was also recorded
to align the allowance for loan loss factors between the two entities. The
following table summarizes these merger-related charges as well as the remaining
liability at June 30, 1999:
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Remaining
Utilized in Balance
Merger-Related Charges Pre-tax 1999 June 30, 1999
- --------------------------------------- ------------- -------------- -----------
(In thousands)
Severance costs $ 770 $ 565 $ 205
Write-off of unrealizable assets 1,259 1,059 200
Contract terminations 2,071 644 1,427
Professional costs 1,683 1,581 102
Other merger-related expenses 1,075 927 148
- --------------------------------------- ------------- -------------- -----------
Merger-related expenses 6,858 4,776 2,082
Provision for loan losses 1,500 1,500 -
================================================================================
Total merger-related charges $ 8,358 $ 6,276 $ 2,082
================================================================================
The following table summarizes the historical results of operations for
Centura and First Coastal prior to the date of merger and the consolidated
results of operations after giving effect to the merger:
- --------------------------------------------------------------------------------
Historical
-------------------------------
Centura First Coastal Combined
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(In thousands, except share data)
Year ended December 31, 1998
Net interest income $ 284,174 $ 18,273 $ 302,447
Noninterest income 134,700 5,821 140,521
Noninterest expense 271,689 18,708 290,397
Net income 96,871 3,443 100,314
Net income per common share:
Basic $ 3.67 $ 0.69 $ 3.57
Diluted 3.60 0.68 3.50
Year ended December 31, 1997
Net interest income $ 254,487 $ 18,737 $ 273,224
Noninterest income 109,974 3,901 113,875
Noninterest expense 238,983 15,981 254,964
Net income 83,058 4,103 87,161
Net income per common share:
Basic $ 3.22 $ 0.82 $ 3.17
Diluted 3.15 0.81 3.11
The financial position and results of operations of acquisitions
accounted for under the purchase method of accounting are included in the
consolidated financial statements since the date of consummation.
Note 3: Net Income Per Share
Basic earnings per common share is calculated by dividing net income by
the weighted-average number of common shares outstanding during each period.
Diluted earnings per common share is based on the weighted-average number of
common shares outstanding during each period plus the maximum dilutive effect of
common stock issuable upon exercise of stock options which totaled 455,279
shares and 580,005 shares for the six months ended June 30, 1999 and 1998,
respectively.
Note 4: Reclassifications
Certain items reported in prior periods have been reclassified to
conform with current period presentation. Such reclassifications had no impact
on net income or shareholders' equity.
Note 5: Commitments and Contingencies
Centura Bank is a co-defendant in two actions consolidated for
discovery in the Superior Court of Forsyth County, North Carolina. The
plaintiffs in these actions allege that Centura Bank breached its duties and
committed other violations of law while acting as depository of substantial sums
of money allegedly converted by the personal and financial advisors of the
owners of such money and in connection with the creation of charitable trusts
established with a portion of the funds. The cases consolidated into the subject
case (Philip A.R. Staton, Ingeborg Staton, Mercedes Staton, et als. v. G. Thomas
Brame, Jerri Russell (formerly Jerri Brame), Centura Bank, et als.) were
originally brought in 1996. No claim for a specific amount of monetary damages
was made in the cases until 1999. Plaintiffs are seeking compensatory and treble
damages in amounts that are material to Centura and its subsidiaries taken as a
whole. Centura believes that Centura Bank has meritorious defenses to all claims
asserted in these cases and Centura Bank is defending the cases vigorously. In a
separate and related case instituted in 1996 (Piedmont Institute of Pain
Management; T. Stuart Meloy, M.D.; Nancy J. Faller, D.O. v. Poyner & Spruill,
L.L.P. and Centura Bank), consolidated for discovery with the Staton cases in
the Superior Court of Forsyth County, North Carolina, Centura Bank is alleged to
have provided the plaintiffs with false information regarding the establishment
and funding of a medical clinic by failing to exercise reasonable care or
competence in obtaining such information, and to have committed other violations
of law. Plaintiffs allege that they were damaged as a result of Centura Bank's
actions and seek specific performance or recovery of money damages in an amount
that is material to Centura and its subsidiaries taken as a whole. Centura and
Centura Bank believe Centura Bank has meritorious defenses to all claims
asserted in this case and Centura Bank is defending the case vigorously.
Management does not believe that Centura or Centura Bank have liability with
respect to these cases and is unable to estimate a range of loss.
Note 6: Segment Information
Centura has two reportable segments: retail banking and treasury.
Centura's reportable segments represent business units that are managed
separately. Each segment requires specific industry knowledge and products and
services offered have varying customer bases.
The retail banking segment includes commercial loans, retail loans,
retail lines of credit, credit cards, transaction deposits, time deposits,
master notes and repurchase agreements, and mortgage servicing and origination.
The retail bank offers its products to individuals, small businesses, and
commercial customers. Treasury is responsible for the Bank's asset/liability
management including managing the Bank's investment portfolio.
The `other' segment includes the asset management division, leasing
activities, Centura Securities, Inc., Centura Insurance Services, Inc., and
First Greensboro Home Equity ("FGHE"). Centura's asset management division
provides trust and fiduciary services as well as retirement plan design and
administration. Leasing activities include Centura's technology leasing
subsidiary CLG, Inc. as well as the Centura Bank Leasing Division which together
offer a broad range of lease products including automobile, equipment, and
recreational vehicle leases. Centura Securities, Inc. offers a competitive line
of brokerage services. Centura Insurance Services, Inc. offers various insurance
products to commercial and consumer customers. FGHE is a mortgage and finance
company specializing in alternative equity lending for homeowners whose
borrowing needs are generally not met by traditional financial institutions.
Centura has a 49 percent ownership interest in FGHE.
Financial information by segment for the three months ended June 30,
1999 and 1998 is as follows:
1999
(In thousands) Retail Treasury Other Total Adjustments Consolidated
- -----------------------------------------------------------------------------------------------------------
Interest income $ 101,900 $ 40,537 $ 9,959 $ 152,396 $ 5,586(1) $ 157,982
Interest expense 51,056 19,373 1,156 71,585 2,292(2) 73,877
Funds transfer pricing allocation 17,860 (13,598) (4,262) -- -- --
Net interest income 68,704 7,566 4,541 80,811 3,294 84,105
Provision for loan losses 3,936 -- 866 4,802 1,609(3) 6,411
Net interest income after
provision for loan losses 64,768 7,566 3,675 76,009 1,685 77,694
Noninterest income 31,776 952 12,400 45,128 (6,370)(4) 38,758
Noninterest expense 61,082 3,544 9,152 73,778 190(5) 73,968
Income before income taxes 35,462 4,974 6,923 47,359 (4,875) 42,484
Income tax expense/(benefit) 10,208 810 (163) 10,855 2,840(3) 13,695
Net income $ 25,254 $ 4,164 $ 7,086 $ 36,504 $ 7,715) $ 28,789
Period end assets $4,905,694 $2,669,293 $519,410 $8,094,397 $662,356(6) $8,756,753
1998
(In thousands) Retail Treasury Other Total Adjustments Consolidated
- -----------------------------------------------------------------------------------------------------------
Interest income $ 97,676 $ 45,312 $ 10,560 $ 153,548 $ 2,497(1) $ 156,045
Interest expense 55,721 18,760 1,474 75,955 803(2) 76,758
Funds transfer pricing allocation 20,871 (18,753) (5,158) -- -- --
Net interest income 62,826 7,799 3,928 74,553 1,694 79,287
Provision for loan losses 2,803 23 743 3,569 (66)(3) 3,635
Net interest income after
provision for loan losses 60,023 7,776 3,185 70,984 1,628 75,652
Noninterest income 26,366 1,478 11,528 39,372 (4,747)(4) 34,625
Noninterest expense 56,158 4,293 9,043 69,494 2,931(5) 72,425
Income before income taxes 30,231 4,961 5,670 40,862 (6,050) 37,852
Income tax expense/(benefit) 11,693 (1,500) 1,264 11,457 1,313(3) 12,770
Net income $18,538 $ 6,461 $ 4,406 $ 29,405 $ (7,363) $ 25,082
Period end assets $4,248,191 $2,627,787 $517,685 $7,393,663 $809,812(6) $8,203,475
- ----------------------------
(1) Reconciling item relates to unallocated income and to loan fees and taxable
equivalent adjustments that are excluded and included, respectively, in
interest income for management reporting purposes.
(2) Reconciling item relates to unallocated expenses and to interest expense on
certain borrowings that are excluded from interest expense for management
reporting purposes.
(3) Reconciling item adjusts balances from cash basis to accrual method of
accounting.
(4) Reconciling item relates to loan fees that are included in noninterest
income for management reporting purposes.
(5) Reconciling item relates to
unallocated expenses and offsetting entries from above adjustments.
(6) Reconciling item relates to assets not allocated to segments including
premises and equipment, cash and due from banks, and other assets.
CENTURA BANKS, INC.
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations For the Six Months Ended June 30, 1999
This document contains forward-looking statements about Centura Banks,
Inc. ("Centura"). These statements can be identified by the use of words such as
"expect," "may," "could," "intend," "estimate," or "anticipate." These
forward-looking statements reflect current views, but are based on assumptions
and are subject to risks, uncertainties and other factors. Those factors
include, but are not limited to, the following: (i) expected cost savings from
completed mergers may not be fully realized or costs or difficulties related to
the integration of the businesses of Centura and merged institutions may be
greater than expected, (ii) deposit attrition, customer loss, or revenue loss
following completed mergers may be greater than expected, (iii) competitive
pressure in the banking industry may increase significantly, (iv) changes in the
interest rate environment may reduce margins, (v) general economic conditions,
either nationally or regionally, may be less favorable than expected, resulting
in, among other things, credit quality deterioration, (vi) changes may occur in
the regulatory environment, (vii) changes may occur in business conditions and
inflation, (viii) changes may occur in the securities markets, and (ix)
disruptions of the operations of Centura or any of its subsidiaries, or any
other governmental or private entity may occur as a result of the "Year 2000"
("Y2K") problem.
The following discussion and analysis is presented to assist in the
understanding and evaluation of the financial condition and results of
operations of Centura. Centura is a bank holding company operating in North
Carolina, South Carolina and Virginia. Through Centura 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 leading online money
management packages.
Centura's common stock is traded on the New York Stock Exchange under
the symbol CBC.
EARNINGS SUMMARY
Net income for the six months ended June 30, 1999 totaled $49.4 million
as compared to $48.6 million earned during the same period of 1998. Year-to-date
diluted earnings per share were $1.71 and $1.70 at June 30, 1999 and 1998,
respectively. Included in year-to-date earnings are $8.4 million of
restructuring charges related to the merger with First Coastal Bankshares, Inc.
These merger-related expenses adversely impacted earnings per diluted share by
$0.19. Key factors responsible for Centura's results of operations are discussed
throughout Management's Discussion and Analysis.
INTEREST-EARNING ASSETS
Interest-earning assets, consisting primarily of loans and investment
securities, averaged $8.0 billion for the six months ended June 30, 1999, an
increase of $724.6 million or 9.9 percent over the interest-earning assets of
$7.3 billion averaged for the six months ended June 30, 1998. Growth in the
commercial loan portfolio accounted for the majority of the increase as
discussed below.
Period-end interest-earning assets at June 30, 1999 were $8.0 billion,
representing a $550.7 million or 7.4 percent increase over the level at June 30,
1998. For additional information on average interest-earning assets, refer to
the discussion below, Table 3, "Net Interest Income Analysis, Taxable Equivalent
Basis," and Table 8, "Net Interest Income and Volume/Rate Analysis, Taxable
Equivalent Basis."
Loans
Loans, the largest component of interest-earning assets, were $5.8
billion at June 30, 1999, an increase of $436.1 million, or 8.1 percent over the
$5.4 billion reported at June 30, 1998. Table 1 provides a summary of the loan
portfolio and mix as of June 30, 1999, June 30, 1998 and December 31, 1998.
Loans averaged $5.9 billion for the six months ended June 30, 1999,
increasing 11.6 percent over the average loan balance of $5.3 billion for the
comparable prior year period. Average loan growth was driven primarily by volume
generated in the commercial loan portfolio. On average, commercial loans
increased $600.1 million between the two six-month periods. Consumer loans
(equity lines, installment loans, and other credit line loans) were higher, on
average, by $93.7 million or 7.8 percent over the prior year period, a result of
two equity loan campaigns and an unsecured loan campaign. The leasing portfolio,
on average, declined $53.4 million as a result of decreased emphasis on the
product and normal amortization. The residential mortgage portfolio was reduced
during the first six months of 1999 by $31.9 million in response to balance
sheet repositioning in anticipation of higher interest rates.
The average loan yield declined 65 basis points between June 30, 1998
and 1999. Falling interest rates, tighter credit spreads and growth in the
lower-yielding average mortgage pipeline contributed to this decline.
Investment Securities
At June 30, 1999, investment securities totaled $2.1 billion, an
increase of $108.0 million over 1998. On average, the investment portfolio grew
$98.6 million to $2.1 billion for the six-month period ending June 30, 1999 as
compared with the same prior year period.
The available for sale ("AFS") investment portfolio is 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 manage
regulatory capital and other factors. This portfolio is carried at fair value
with unrealized gains or losses recorded, net of tax, in accumulated other
comprehensive income. At June 30, 1999, AFS investments were $2.1 billion, up
$201.1 million compared with $1.9 billion at June 30, 1998. During the second
quarter of 1999, the AFS portfolio was unfavorably impacted by rising interest
rates resulting in unrealized losses totaling $24.1 million.
The held to maturity ("HTM") investment portfolio declined $93.0
million between comparable periods to total $56.5 million at June 30, 1999, a
result of scheduled maturities within the portfolio. It is management's intent
to hold the remaining securities in the portfolio to maturity.
FUNDING SOURCES
Funding sources include total deposits, short-term borrowings and
long-term debt. Funding sources averaged $7.9 billion for the six month period
ended June 30, 1999, a $699.3 million or 9.7 percent increase from the average
balance of $7.2 billion at June 30, 1998.
Deposits
Total deposits, whose major categories include money market accounts,
savings accounts, individual retirement accounts, time deposits and transaction
accounts totaled $6.0 billion at June 30, 1999, up $64.9 million over 1998.
Table 2 details average balances for the deposit portfolio and the mix
of deposits for the six months ended June 30, 1999, June 30, 1998 and December
31, 1998. Overall, average deposits increased $209.1 million between the two
six-month periods. Average money market accounts showed the strongest growth,
increasing $271.4 million or 25.4 percent. The growth in the money market
balance is a result of attractive pricing as well as customers preferring the
liquidity and flexibility provided by the product. CD's less than $100,000 fell
$184.9 million, principally a result of customers moving their balances to the
money market product. Average non-interest bearing deposits increased $90.4
million, primarily the result of growth in commercial accounts.
Centura's cost of funds for interest-bearing deposits declined 45 basis
points between June 30, 1998 and 1999. Declining interest rates and an emphasis
on more competitive and efficient product pricing improved the cost of funds.
Other Funding Sources
Aside from the traditional funding sources described above, management
may utilize alternative nondeposit funding sources. Slower deposit growth in
recent periods has influenced management to increase the utilization of these
alternative sources. Such sources included the $125.0 million issuance of 6.5
percent subordinated bank notes in the first quarter of 1999. Management also
utilizes short-term borrowed funds, consisting predominantly of Federal funds
purchased, securities sold under repurchase agreements and master notes. On
average, short-term borrowed funds increased $282.8 million to total $1.2
billion at June 30, 1999. Period-end short-term borrowings totaled $1.2 billion
and $945.3 million at June 30, 1999 and 1998, respectively. The increase was
driven by additional borrowings of $228.4 million and $64.4 million in federal
funds purchased and master notes, respectively. Short-term FHLB advances
declined $68.0 million. The cost of funds for short-term debt declined 93 basis
points to 4.72 percent when compared with the prior year. The change in mix of
short-term debt from higher to lower cost debt in combination with falling
interest rates during the past year contributed to this decline.
Long-term debt consists predominantly of FHLB advances, Capital
Securities, subordinated bank notes and notes secured by lease rentals and
totaled $755.0 million at June 30, 1999 as compared to $544.6 million at June
30, 1998. The majority of the increase resulted from the issuance of the $125
million in subordinated bank notes described above and an increase of $100.0
million in borrowings from the Federal Home Loan Bank of Atlanta. The average
amount of long-term debt increased $207.4 million to $684.0 million for the
six-month period ended June 30, 1999 compared to $476.6 million for the
comparable prior year period.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income for the six months ended June 30, 1999 and 1998 was
$166.9 million and $154.8 million, respectively. On a taxable equivalent basis,
net interest income increased $12.1 million to $170.5 million from $158.4
million the prior year. The increase was primarily due to the combination of
interest rate changes and a $724.6 million increase in average interest-earning
asset volume that outpaced the $608.9 million increase in average
interest-bearing liabilities. As indicated on Table 8, "Net Interest Income and
Volume/Rate Analysis-Taxable Equivalent Basis", volume contributed $30.3 million
to interest income whereas interest rates reduced interest income by $19.8
million. Interest expense declined $16.4 million as a result of the rate
environment and increased $14.8 million due to volume.
The net interest margin, taxable equivalent, continues to be impacted
by tighter credit spreads, increased competition and changes in the product mix
to lower yielding earning assets. The margin declined 10 basis points between
the two six-month periods to 4.24 percent. Attributing to the margin decline is
a greater decrease in the yield earned on interest-earning assets of 52 basis
points compared to a 45 basis point decline in the cost of funds.
ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES (AFLL)
Total nonperforming assets ("NPA's"), including nonperforming loans
("NPL's") and foreclosed properties, were $60.0 million at June 30, 1999
compared with $40.5 million at June 30, 1998, representing 0.68 percent and 0.49
percent of total assets, respectively. The increase between the two periods was
a result of management's decision to place on nonperforming status $23.0 million
of loans outstanding to Pluma, Inc. ("Pluma"), an Eden, North Carolina based
manufacturer and distributor of fleece and jersey sportswear. The addition of
Pluma to NPL's also unfavorably impacted the ratio of NPL's to total loans(1),
which increased from 0.65 percent to 0.97 percent, the ratio of NPA's to loans
and foreclosed property(1), which increased from 0.76 percent to 1.04 percent
and the ratio of the AFLL to NPL's which decreased from 2.08 to 1.35 times
coverage. Had Pluma remained a performing loan, the ratio of NPA's to total
assets and the AFLL to NPL's would have been 0.42 percent and 2.28 times,
respectively.
Year-to-date net charge-offs were $10.0 million and $6.4 million at
June 30, 1999 and 1998, respectively. Net charge-offs for the six months ended
June 30, 1999 were 0.35 percent of average loans(2) versus 0.25 percent for the
same period of 1998. Net charge-offs for commercial and industrial loans,
representing the largest portion of net charge-offs, increased $1.6 million
between the two six-month periods. Leasing charge-offs increased $941,000, a
result of higher levels of problem assets in the leasing portfolio. The credit
card portfolio and loans secured by real estate accounted for the remainder of
the increase, increasing $414,000 and $317,000 each, respectively.
For the six months ended June 30, 1999 and 1998, the provision for loan
losses was $12.7 million and $7.0 million, respectively. Of the $12.7 million
charged in 1999, $1.5 million was incurred as a result of the merger with First
Coastal in order to align the allowance for loan loss factors between the two
merged entities. The remaining increase in the provision for loan losses was in
response to growth in the loan portfolio, the higher level of charge-offs, and
provisions made for the Pluma credit. Management continues to closely monitor
the Pluma credit, and based on information that becomes available, additional
provision for loan loss may be necessary.
The allowance for loan losses ended the period at $75.5 million at June
30, 1999, representing 1.31 percent of loans outstanding(1), compared to $71.3
million, or 1.34 percent of loans outstanding(1) at June 30, 1998. For
additional information with respect to the activity in the allowance for loan
losses, see Table 4 "Analysis of Allowance for Loan Losses."
Management believes the AFLL is adequate based upon its current
judgment, evaluation, and analysis of the loan portfolio. Centura continuously
monitors overall credit quality and manages its credit processes, including
loans in past due and nonaccrual status. The AFLL represents management's
estimate of an amount adequate to provide for probable losses inherent in the
loan portfolio. However, there are additional risks of future losses which
cannot be quantified precisely or attributed to particular loans or classes of
loans. Because those risks include general economic trends as well as conditions
affecting individual borrowers, management's judgment of the AFLL is necessarily
approximate and imprecise. The AFLL is also subject to regulatory examinations
and determinations as to adequacy, which may take into account such factors as
the methodology used to calculate the AFLL and the size of the AFLL in
comparison to peer banks identified by the regulatory agencies. No assurances
can be given that the ongoing evaluation of the loan portfolio in light of
economic conditions and other factors then prevailing will not require
significant future additions to the AFLL, thus adversely affecting the operating
results of Centura.
In addition to nonperforming assets and past due loans shown in Table
5, management has identified approximately $25.0 million in loans that are
currently performing in accordance with contractual terms that management
believes may become nonperforming during the remaining term of the loan.
- --------
1 Excludes mortgage loans held for sale of $81.0 million and $100.2 million at
June 30, 1999 and 1998, respectively.
2 Excludes mortgage loans held for sale, on average, of $116.6 million and
$85.8 million for the six months ended June 30, 1999 and 1998, respectively.
NONINTEREST INCOME AND EXPENSE
While Centura generates most of its revenue from net interest income,
noninterest income continues to comprise a greater percentage of revenue.
Noninterest income as a percentage of total revenues (defined as the sum of net
interest income, TE plus noninterest income) was 31.1 percent and 29.7 percent
for the six months ended June 30, 1999 and 1998, respectively. Noninterest
income grew $10.1 million to total $77.0 million for the six months ended June
30, 1999. Service charges on deposit accounts, the largest component of
noninterest income, grew 17.1 percent or $3.9 million over 1998. The increase
was principally the result of changes to the fee structure for various products,
implemented in order for Centura to become more competitive with other financial
institutions. Nonsufficient funds fees ("NSF"), another component of service
charges on deposits, increased $1.0 million between periods, primarily the
result of an increase in NSF fees. Insurance and brokerage commissions increased
$431,000 and $766,000 respectively, a result of higher volume supported by
favorable market conditions. Other service charges and fees were up $758,000
over 1998, a result of increased letter of credit activity and additional
customers utilizing the Pocket Check debit card. Mortgage income increased $2.7
million. This increase was primarily driven by the restructuring of the balance
sheet.
Excluding merger-related expenses, noninterest expenses totaled $149.9
million for the six months ended June 30, 1999, an $8.8 million or 6.3 percent
increase over the comparable 1998 period. Personnel and occupancy expenses
contributed $6.5 million and $1.1 million to the increase, respectively. Normal
salary growth and the addition of FTE's and financial stores brought on through
acquisitions were the primary factors in the increase. Acquisitions also
resulted in an additional $737,000 of amortization expense for the six months
ended June 30, 1999 over 1998. Fees for outsourced services, which is mainly
volume driven, increased $1.4 million. Telephone expenses were up $754,000 in
1999. Favorably, marketing expenses dropped $987,000 as a result of decreased
emphasis on marketing campaigns. Equipment rental expense between periods
declined $569,000.
Year-to-date, Centura has incurred additional expense related to Year
2000 remediation efforts. Direct and indirect expenses incurred for the first
six months of 1999, which are included throughout the various components of
noninterest expense, totaled $2.9 million. Refer to the "Year 2000" section for
additional information concerning Y2K.
INCOME TAX EXPENSE
Income tax expense recorded for the six months ended June 30, 1999 was
$25.1 million compared to $25.0 million in the prior period. The current
effective tax rate is 33.67 percent, down from the 34.00 percent at June 30,
1998.
EQUITY AND CAPITAL RESOURCES
Shareholders' equity as of June 30, 1999 was $687.6 million compared to
$634.8 million at June 30, 1998. The change in equity between the two
periods was influenced by the retention of earnings, the issuance of common
stock in connection with the acquisition of Capital Advisors, and the exercise
of stock options. Offsetting increases to shareholders' equity between the two
periods was the payment of $16.9 million in dividends and the repurchase of
common stock. During the second quarter of 1999, Centura repurchased 100,000
shares of common stock at an aggregate cost of $5.6 million. Unrealized losses
on available for sale securities, net of tax, were $15.3 million compared to
unrealized gains of $9.8 million the year before. This decline was attributable
to rising interest rates. The ratio of shareholders' equity to period-end assets
was 7.85 percent and 7.74 percent at June 30, 1999 and 1998, respectively.
Centura's capital ratios are greater than minimums required by
regulatory guidelines. It is Centura's intent to maintain an optimal capital and
leverage mix within the regulatory framework while providing a basis for future
growth. At June 30, 1999, Centura had the required capital levels to qualify as
well capitalized. At June 30, 1999, Tier I capital was $679.9 million and total
capital was $850.7 million. For risk-based capital calculations, Centura's
Capital Securities are included as a component of Tier I capital. Centura's
capital ratios are outlined in Table 6.
LIQUIDITY
Centura's liquidity management objective is to meet maturing debt
obligations, fund loan commitments and deposit withdrawals, and manage
operations on a cost-effective basis. Management believes that sufficient
resources are available to meet Centura's liquidity objective through its debt
maturity structure, holdings of liquid assets, and access to the capital markets
through a variety of funding vehicles.
Centura's traditional funding sources include established federal funds
lines with major banks, advances from the Federal Home Loan Bank, proceeds from
matured investments, principal repayments on loans, and core deposit growth.
Centura also has an unsecured bank note facility for institutional investors. In
addition, Centura accepts Eurodeposits, has a master note commercial paper
facility, and offers brokered certificates of deposits.
Management is not aware of any events or uncertainties 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 pending
regulatory developments or proposals, which, if implemented, would have a
material effect on Centura.
ASSET/LIABILITY AND INTEREST RATE RISK MANAGEMENT
Market risk is the risk of loss from adverse changes in market prices
and rates. Centura's market risk primarily stems from interest rate risk, the
potential economic loss due to future changes in interest rates, which is
inherent in lending and deposit gathering activities. Centura's objective is to
manage the mix of interest-sensitive assets and liabilities to minimize interest
rate risk and stabilize the net interest margin and the market value of equity
while optimizing profit potential.
Centura's Asset/Liability Management Committee seeks to maintain a
general balance between interest-sensitive assets and liabilities to insulate
net interest income and shareholders' equity from significant adverse changes in
market interest rates. Mismatches in interest rate repricings of assets and
liabilities arise from the interaction of customer business needs and Centura's
discretionary asset and liability management activities. Exposure to changes in
the level and direction of interest rates is managed by adjusting the
asset/liability mix through the use of various interest rate risk management
products, including 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 option contracts ("swaps", "floors", "caps", "futures" and "options,"
respectively), are an integral part of Centura's interest rate risk management
activities. Centura has principally utilized interest rate swaps. Swaps are used
to manage interest rate risk, reduce funding costs, and allow Centura to utilize
diversified funding sources. 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 a third party at an agreed upon price under
the specific terms of each agreement. Table 7, "Off-Balance Sheet Derivative
Financial Instruments", summarizes Centura's off-balance sheet derivative
financial positions at June 30, 1999. On-balance sheet and off-balance sheet
financial instruments are managed on an integrated basis as part of Centura's
overall asset/liability management function. The value of any single component
of the on-balance sheet or off-balance sheet position should not be viewed
independently.
SECOND QUARTER RESULTS
Net income increased by $3.7 million or 14.8 percent to total $28.8
million for the second quarter of 1999 as compared to the second quarter of
1998. Earnings per diluted share of $1.00 represented a $0.12 increase over
1998's second quarter. These results produced a return on average assets of 1.32
percent and a return on average equity of 16.58 percent, compared with second
quarter 1998 ratios of 1.23 percent and 15.98 percent, respectively.
Comparing current and prior year second quarters, the net interest
margin fell 9 basis points to 4.26 percent. The decline in the margin was
influenced by greater growth in the average interest-earning asset balance
relative to the increase in net interest income, taxable equivalent, which was
influenced by the declining rate environment. Average interest-earning assets
grew $588.8 million between the periods. As seen in Table 8, volume growth
contributed $12.5 million to interest income, taxable equivalent, whereas
changes in interest rates reduced interest income by $10.5 million. Interest
expense declined $2.9 million for the three months ended June 30, 1999 as
compared to 1998. A decline in the cost of funds of 49 basis points contributed
an $8.9 million decrease in interest expense while volume increases added $6.0
million.
Net charge-offs for the second quarter of 1999 were $4.9 million, or
0.34 percent of average loans1. Gross charge-offs and recoveries for the second
quarter of 1999 were $5.6 million and $694,000, respectively, as compared to
$4.6 million and $1.1 million, respectively, for the second quarter of 1998. The
provision for loan loss increased $2.8 million, resulting in total provision
expense of $6.4 million for the second quarter of 1999.
Noninterest income for the three months ended June 30, 1999 was $38.8
million, an increase of $4.1 million or 11.9 percent over the three months ended
June 30, 1998. This increase was mainly due to increases in service charges on
deposit accounts and insurance and brokerage commissions of $1.8 million and
$794,000, respectively. Service charges on deposit accounts increased as a
result of higher volume as well as an increase in the fee for NSF transactions.
Insurance and brokerage commissions were up as a result of increases in volume
supported by favorable market conditions. The remainder of the increase was
spread among various business lines.
Noninterest expense charges were up $1.5 million or 2.1 percent to
total $74.0 million for the quarter ended June 30, 1999. Contributing to the
increase in noninterest expense were additional personnel expenses of $607,000,
primarily a result of increases in fringe benefit costs. During the second
quarter, Centura determined that incentive-based compensation targets would not
be achieved, and as such, $852,000 of bonus expense recorded in the first
quarter of 1999 was reversed. Fees for outsourced services, a volume driven
expense, added $767,000. Professional fees, which include expenses related to
Y2K compliance efforts, were up $450,000. Intangible asset amortization was up
$390,000 over the prior year second quarter, a result of acquisitions.
Reductions in noninterest expense were realized in the marketing area and in
losses other than loans, which had combined savings of $804,000.
The effective tax rate decreased from 33.7 percent for the three months
ended June 30, 1998 to 32.2 percent for the three months ended June 30, 1999,
primarily due to certain tax planning matters.
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1 Excludes mortgage loans held for sale, on average, of $108.0 million and
$104.1 million for the three months ended June 30, 1999 and 1998,
respectively.
CURRENT ACCOUNTING ISSUES
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). The statement addresses accounting and reporting requirements for
derivative instruments and for hedging activities. SFAS 133 requires that all
derivatives be recognized as either assets or liabilities in the consolidated
balance sheet and that those instruments be measured at fair value. If certain
conditions are met, a derivative may be designated as a hedge of exposure to
changes in fair value of an asset or liability, exposure to variable cashflows
of a forecasted transaction or exposure of foreign currency denominated
forecasted transactions. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivatives and its resulting
designation. In June 1999, the FASB issued SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities- Deferral of the Effective Date of
FASB 133." This Statement defers the effective date of SFAS 133 for one year.
SFAS 133, as amended, is now effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Management has not quantified the impact of
adopting SFAS 133 nor has the timing of the adoption been determined.
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
the proposed statements on the consolidated financial statements of Centura and
monitors the status of changes to exposure drafts and to proposed effective
dates.
YEAR 2000
The Year 2000 issue confronting Centura and its suppliers, customers,
customers' suppliers, and competitors centers on the inability of computer
systems to recognize the Year 2000. Many existing computer programs and systems
were originally programmed with six digit dates that provided only two digits to
identify the calendar year, without considering the upcoming change in the
century.
Centura formulated the initial Year 2000 awareness program in 1996. A
steering committee with representation from all the major areas of the bank and
executive management was established to determine internal operational
requirements to make its systems Year 2000 compliant. A formal Year 2000 Project
Plan was drafted and approved by the board of directors in 1998. In this effort,
Centura has followed the five management phases recommended by the Federal
Financial Institutions Examination Council: (1) awareness, (2) assessment, (3)
renovation, (4) validation, and (5) implementation. As of the end of June,
Centura has completed all five phases of its readiness plan on schedule
according to the Y2K plan that was established and the milestones decreed by the
federal guidelines. The project has been organized along functional lines to
ensure that information technology (mainframe and distributed applications),
vendors and other third parties, and the customer base will receive adequate
resource attention.
For its internal systems, Centura completed the assessment phase with a
complete inventory of all hardware and software that could potentially be
impacted. A risk scoping analysis determined the schedule for remediation and
testing to ensure that mission critical systems would have ample time for
extensive validation. Through code enhancements, hardware and software upgrades,
and systems replacement, where needed, Centura has completed renovation or
replacement of all of its systems. The final phase, validation of all internal
systems and external interfaces through integrated testing, is complete. Centura
will continue to conduct additional tests of all systems and interfaces
throughout the remainder of the year.
Centura's assessment phase included the identification of external
vendors, significant customers and borrowers, market partners, and fund
providers whose operations and state of Year 2000 readiness may have a potential
impact on Centura. Relationships with third parties in which electronic data is
exchanged exposes Centura to some risk of loss in the event the other party
makes a mistake or is unable to perform. In the Year 2000 context, Centura
continues to work to identify where such exposure may exist and has developed
contingency plans in order to minimize risk of loss due to third parties' Year
2000 vulnerabilities.
Centura is exposed to credit risk due to the failure of its borrowers
to properly remediate their own systems as well as address their own customers'
or suppliers' Year 2000 state of readiness. Centura continues its due diligence
process of identifying all borrowers representing a material Year 2000 related
risk, evaluating their Year 2000 preparedness, assessing the aggregate Year 2000
borrower risk to Centura, and developing appropriate risk controls to manage and
mitigate the Year 2000 customer risk. As part of this process, borrowers are
assigned a risk rating based on their Year 2000 compliance readiness that is
being used to assess the need for additional specific loan loss reserves.
Management has documented and tested contingency plans for mission
critical systems and business processes. The Year 2000 contingency plans
were designed to address any failure to remediate Centura's internal systems and
to address failures of systems outside Centura. Centura, of course, cannot
control the Y2K compliance of its suppliers or customers; accordingly, it is
possible that the failure of those third parties could have an adverse impact on
Centura's operations and financial results. For example, in the event of a power
failure caused by Y2K non-compliance, Centura's operations could be adversely
affected. Centura's contingency plans have incorporated these "worse case"
scenarios of an outside failure. The plans incorporated the use of third party
service providers, alternate vendors, and other contingency service providers.
An Event Management Plan has also been documented to outline the monitoring
process of system validation during the event period.
Monitoring and managing the Year 2000 project continues to result in
additional nonrecurring expenditures. Direct costs include potential charges by
third party software vendors for product enhancements, costs involved in testing
software products for Year 2000 compliance, and any resulting costs for
developing and implementing contingency plans for critical software products
which were not enhanced. In addition to the direct costs, indirect costs have
also been incurred. These indirect costs consist principally of the time devoted
by existing employees in monitoring software vendor progress, testing enhanced
software products, and implementing any necessary contingency plans. The Year
2000 project cost estimates include the estimated costs and time associated with
the assessment and monitoring of a third party's Year 2000 risk, and are based
on presently available information. However, there can be no guarantee that the
systems of other companies on which Centura's systems rely will be timely
converted, or that failure to convert by another company, or a conversion that
is incompatible with Centura's systems, would not have a material adverse effect
on Centura in future periods. The Emerging Issues Task Force provided guidance
concerning the accounting for the costs related to Year 2000 modification. The
costs of the modifications continue to be treated as regular maintenance and
repair and are charged to expense as incurred.
The remaining direct and indirect costs are not expected to have a
material effect on Centura's results of operations. However, the distribution
of Year 2000 expenses between direct and indirect may change due to the
allocation of internal resources. Including direct and indirect expenditures,
management currently estimates that the total costs to become Year 2000
compliant will range between $8.0 and $10.0 million. In total, Centura has
expensed approximately $9.0 million in indirect and direct costs related to Year
2000 compliance efforts, of which $2.9 million was incurred during 1999.
TABLE 1
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LOAN PORTFOLIO
June 30, 1999 June 30, 1998 December 31, 1998
---------------------------------------------------------------------------------
(Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total
- -------------------------------------------------------------------------------------------------------------------------
Commercial, financial and agricultural $1,125,183 19.3 % $1,002,067 18.5 % $1,126,721 19.3 %
Commercial mortgage 1,266,242 21.7 1,041,257 19.3 1,142,962 19.5
Real estate construction 748,809 12.8 666,563 12.3 750,156 12.8
---------------------------------------------------------------------------------
Commercial loan portfolio 3,140,234 53.8 2,709,887 50.1 3,019,839 51.6
Consumer 440,914 7.5 389,755 7.2 437,815 7.5
Residential mortgage 1,764,062 30.2 1,773,993 32.8 1,873,944 32.0
Leases 382,275 6.5 455,884 8.4 434,556 7.4
Other 114,099 2.0 75,921 1.5 86,676 1.5
- -------------------------------------------------------------------------------------------------------------------------
Total loans $5,841,584 100.0 % $5,405,440 100.0 % $5,852,830 100.0 %
=========================================================================================================================
Residential mortgage servicing
portfolio for others $3,086,000 $2,565,000 $2,877,000
=========================================================================================================================
TABLE 2
- --------------------------------------------------------------------------------
AVERAGE DEPOSIT MIX FOR THE SIX MONTHS ENDED
June 30, 1999 June 30, 1998
----------------------------------------------------------
(Dollars in thousands) Balance % of Total Balance % of Total
- --------------------------------------------------------------------------------------------
Demand, noninterest bearing $ 916,224 15.2 % $ 825,868 14.2 %
Interest checking 775,799 12.9 748,150 12.9
Money market 1,338,455 22.3 1,067,097 18.4
Savings 293,723 4.9 335,784 5.8
- --------------------------------------------------------------------------------------------
Time deposits:
Certificates of deposit < $100,00 1,776,239 29.6 1,961,130 33.8
Certificates of deposit > $100,000 554,358 9.2 495,708 8.6
IRA 355,837 5.9 367,834 6.3
- --------------------------------------------------------------------------------------------
Total time deposits 2,686,434 44.7 2,824,672 48.7
- --------------------------------------------------------------------------------------------
Total average deposits $6,010,635 100.0 % $5,801,571 100.0 %
============================================================================================
TABLE 3
- -------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME ANALYSIS - TAXABLE EQUIVALENT BASIS
Six months ended Six months ended
June 30, 1999 June 30, 1998
-----------------------------------------------------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Loans $ 5,861,025 $ 250,994 8.55 % $ 5,252,490 $ 241,297 9.20 %
Taxable securities 2,064,131 65,621 6.36 1,953,617 64,818 6.64
Tax-exempt securities 30,882 1,377 8.92 38,834 1,734 8.93
Short-term investments 43,558 1,154 5.27 30,664 789 5.12
------------- ----------- ----------- -----------
Interest-earning assets, gross 7,999,596 319,146 7.97 7,275,605 308,638 8.49
Net unrealized gains on available
for sale securities 9,662 13,665
Other assets, net 762,929 685,026
------------- -----------
Total assets $ 8,772,187 $ 7,974,296
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking $ 775,799 $ 3,907 1.02 % $ 748,150 $ 5,548 1.50 %
Money market 1,338,455 25,705 3.87 1,067,097 23,231 4.39
Savings 293,723 2,239 1.54 335,784 3,392 2.04
Time 2,686,434 67,509 5.07 2,824,672 76,477 5.46
------------- ----------- ----------- -----------
Total interest-bearing deposits5,094,411 99,360 3.93 4,975,703 108,648 4.40
Borrowed funds 1,246,743 29,559 4.72 963,975 27,400 5.65
Long-term debt 684,041 19,743 5.74 476,592 14,208 5.93
------------- ----------- ----------- -----------
Interest-bearing liabilities 7,025,195 148,662 4.25 6,416,270 150,256 4.70
Demand, noninterest-bearing 916,224 825,868
Other liabilities 136,286 115,630
Shareholders' equity 694,482 616,528
------------- -----------
Total liabilities and
shareholder's equity $ 8,772,187 $ 7,974,296
============= ===========
Interest rate spread 3.72 % 3.79 %
Net yield on interest-
earning assets $ 7,999,596 $ 170,484 4.24 % $ 7,275,605 $ 158,382 4.34 %
============= =========== =========== ===========
Taxable equivalent adjustment $ 3,592 $ 3,617
=========== ===========
TABLE 3- Continued
- -------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME ANALYSIS - TAXABLE EQUIVALENT BASIS
Three months ended Three months ended
June 30, 1999 June 30, 1998
-----------------------------------------------------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Loans $ 5,872,026 $ 125,658 8.51 % $ 5,372,738 $ 123,866 9.20 %
Taxable securities 2,068,347 32,948 6.37 1,982,459 32,784 6.62
Tax-exempt securities 30,674 663 8.65 37,394 839 8.97
Short-term investments 43,320 579 5.29 27,089 373 5.45
-------------- --------- ------------ -----------
Interest-earning assets, gross 8,014,367 159,848 7.94 7,419,680 157,862 8.49
Net unrealized gains on available
for sale securities 2,559 12,523
Other assets, net 757,165 716,388
-------------- ------------
Total assets $ 8,774,091 $ 8,148,591
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking $ 769,302 $ 1,845 0.96 % $ 752,521 $ 2,658 1.42 %
Money market 1,372,417 13,260 3.88 1,106,018 12,109 4.39
Savings 283,328 1,042 1.48 337,264 1,709 2.03
Time 2,660,966 33,099 4.99 2,810,599 38,165 5.44
-------------- --------- ------------ -----------
Total interest-bearing deposits 5,086,013 49,246 3.88 5,006,402 54,641 4.38
Borrowed funds 1,184,328 13,638 4.56 1,018,099 14,424 5.60
Long-term debt 744,816 10,993 5.84 519,508 7,693 5.86
-------------- --------- ------------ -----------
Interest-bearing liabilities 7,015,157 73,877 4.20 6,544,009 76,758 4.69
Demand, noninterest-bearing 928,753 853,748
Other liabilities 133,815 121,295
Shareholders' equity 696,366 629,539
-------------- ------------
Total liabilities and
shareholder's equity $ 8,774,091 $ 8,148,591
============== ============
Interest rate spread 3.74 % 3.80 %
Net yield on interest-
earning assets $ 8,014,367 $ 85,971 4.26 % $ 7,419,680 $ 81,104 4.35 %
============== ========= ============ ===========
Taxable equivalent adjustment $ 1,866 $ 1,817
========= ===========
TABLE 4
- ------------------------------------------------------------------------------------------------------------
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES (AFLL)
At and for the six months At and for the year ended
ended June 30, ended December 31,
--------------------------------------------------------
(Dollars in thousands) 1999 1998 1998
- ------------------------------------------------------------------------------------------------------------
Allowance for loan losses at beginning of period $ 72,310 $ 68,576 $ 68,576
Transfer of AFLL for loans sold (100) - -
Allowance for acquired loans 605 2,068 2,068
Provision for loan losses 12,677 7,028 15,644
Loans charged off (11,491) (8,430) (17,358)
Recoveries on loans previously charged off 1,518 2,020 3,380
- ------------------------------------------------------------------------------------------------------------
Net charge-offs (9,973) (6,410) (13,978)
- ------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of period $ 75,519 $ 71,262 $ 72,310
============================================================================================================
Loans at period-end $ 5,841,585 $ 5,405,440 $ 5,852,830
Average loans 5,861,025 5,252,490 5,391,867
Nonperforming loans 56,085 34,295 32,293
Allowance for loan losses to total loans 1 1.31 % 1.34 % 1.27 %
Net charge-offs to average loans 2 0.35 0.25 0.26
Allowance for loan losses to nonperforming loans 1.35 x 2.08 x 2.24 x
============================================================================================================
1 Excludes mortgage loans held for sale of $81.0 million, $100.2 million, and $158.8 million at June 30 1999, June 30, 1998 and
December 31, 1998, respectively.
2 Excludes mortgage loans held for sale, on average, of $116.6 million, $85.8 million and $96.3 million for the six months ended
June 30, 1999, June 30, 1998 and December 31, 1998, respectively.
TABLE 5
- --------------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS AND PAST DUE LOANS
June 30, December 31,
----------------------------------------------------
(Dollars in thousands) 1999 1998 1998
- --------------------------------------------------------------------------------------------------------
Nonperforming loans $ 56,085 $ 34,295 $ 32,293
Foreclosed property 3,867 6,174 5,812
- --------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 59,952 $ 40,469 $ 38,105
========================================================================================================
Nonperforming assets to:
Loans and foreclosed property 1 1.04 % 0.76 % 0.67 %
Total assets 0.68 0.49 0.43
========================================================================================================
Accruing loans past due ninety days or greater $ 5,742 $ 9,627 $ 9,095
========================================================================================================
1 Excludes mortgage loans held for sale of $81.0 million, $100.2 million, and $158.8 million at June 30,
1999, June 30, 1998 and December 31, 1998, respectively.
TABLE 6
- -------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS
Tier I Capital Total Capital Tier I Leverage
June 30, 1999 10.34 % 12.93 % 7.86 %
December 31, 1998 10.18 10.79 7.79
June 30, 1998 10.53 11.17 7.68
Minimum requirement 4.00 8.00 3.00-5.00
TABLE 7
- -------------------------------------------------------------------------------------------------------------------
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swap agreements at June 30, 1999 are summarized below:
Weighted Avg.
Weighted Average Rate Remaining Estimated
Notional During the Quarter Contractual Fair Value
(Dollars in thousands) Amount Received Paid Term (Years) Gain (Loss)
- -------------------------------------------------------------------------------------------------------------------
INTEREST RATE SWAPS
Corporation pays fixed/receives floatng $ 502,416 5.08% 5.86% 2.8 $ 3,747
Corporation pays variable/receives fixed 441,000 5.97% 4.93% 5.3 (3,666)
Corporation pays variable/receives variable 100,000 5.13% 5.51% 0.4 6
---------------------------------------------------------------------------
Total interest rate swaps $ 1,043,416 $ 87
===========================================================================
Interest rate cap and floor agreements at June 30, 1999 are summarized below:
Weighted Average
Remaining Estimated
Notional Average Current Index ContractualCarrying Fair Value
(Dollars in thousands) Amount Rate * Rate Term (Years) Value Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------
INTEREST RATE FLOORS
LIBOR $ 180,000 5.73% 5.37% 1.4 $ 500 $ 947
CMS 125,000 5.20% 6.83% 4.3 - 329
-------------------------------------------------------------------------------
$ 305,000 $ 500 $ 1,276
===============================================================================
INTEREST RATE CAPS
LIBOR $ 22,000 7.00% 5.37% 4.3 $ 423 $ 314
CMS 125,000 6.94% 6.83% 4.3 - (2,632)
-------------------------------------------------------------------------------
$ 147,000 $ 423 $ (2,318)
===============================================================================
* Average rate represents the average of the strike rates above or below which Centura will receive payments on the outstanding
cap or
TABLE 8
- ------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AND VOLUME/RATE ANALYSIS
TAXABLE EQUIVALENT BASIS
Six months ended Three months ended
June 30, 1999 and 1998 June 30, 1999 and 1998
----------------------------------------------------------------------------
Income/ Variance Income/ Variance
Expense Attributable to Expense Attributable to
(Dollars in thousands) Variance Volume Rate Variance Volume Rate
- ------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans $ 9,697 $ 26,760 ($17,063) $ 1,792 $ 11,045 ($9,253)
Taxable securities 803 3,579 (2,776) 164 1,392 (1,228)
Tax-exempt securities (357) (355) (2) (176) (146) (30)
Short-term investments 365 341 24 206 217 (11)
---------- ---------- ---------- ----------- ----------- ----------
Total interest income 10,508 30,325 (19,817) 1,986 12,508 (10,522)
INTEREST EXPENSE
Interest-bearing deposits:
Interest checking (1,641) 198 (1,839) (813) 58 (871)
Money market 2,474 5,432 (2,958) 1,151 2,686 (1,535)
Savings (1,153) (390) (763) (667) (246) (421)
Time (8,968) (3,634) (5,334) (5,066) (1,966) (3,100)
---------- ---------- ---------- ----------- ----------- ----------
Total interest-bearing deposits (9,288) 1,606 (10,894) (5,395) 532 (5,927)
Borrowed funds 2,159 7,186 (5,027) (786) 2,150 (2,936)
Long-term debt 5,535 6,001 (466) 3,300 3,325 (25)
---------- ---------- ---------- ----------- ----------- ----------
Total interest expense (1,594) 14,793 (16,387) (2,881) 6,007 (8,888)
---------- ---------- ---------- ----------- ----------- ----------
Net interest income, TE $12,102 $15,532 ($3,430) $ 4,867 $ 6,501 ($1,634)
========== ========== ========== =========== =========== ==========
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There has been no material change in Centura's market risk since December
31, 1998 as described in Item 7A of Centura's Annual Report on Form 10-K for the
year ended December 31, 1998. Mergers accounted for as pooling-of-interests did
not materially impact Centura's market risk.
CENTURA BANKS, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Centura Bank is a co-defendant in two actions consolidated for
discovery in the Superior Court of Forsyth County, North Carolina. The
plaintiffs in these actions allege that Centura Bank breached its duties and
committed other violations of law while acting as depository of substantial sums
of money allegedly converted by the personal and financial advisors of the
owners of such money and in connection with the creation of charitable trusts
established with a portion of the funds. The cases consolidated into the subject
case (Philip A.R. Staton, Ingeborg Staton, Mercedes Staton, et als. v. G. Thomas
Brame, Jerri Russell (formerly Jerri Brame), Centura Bank, et als.) were
originally brought in 1996. No claim for a specific amount of monetary damages
was made in the cases until 1999. Plaintiffs are seeking compensatory and treble
damages in amounts that are material to Centura and its subsidiaries taken as a
whole. Centura believes that Centura Bank has meritorious defenses to all claims
asserted in these cases and Centura Bank is defending the cases vigorously. In a
separate and related case instituted in 1996 (Piedmont Institute of Pain
Management; T. Stuart Meloy, M.D.; Nancy J. Faller, D.O. v. Poyner & Spruill,
L.L.P. and Centura Bank), consolidated for discovery with the Staton cases in
the Superior Court of Forsyth County, North Carolina, Centura Bank is alleged to
have provided the plaintiffs with false information regarding the establishment
and funding of a medical clinic by failing to exercise reasonable care or
competence in obtaining such information, and to have committed other violations
of law. Plaintiffs allege that they were damaged as a result of Centura Bank's
actions and seek specific performance or recovery of money damages in an amount
that is material to Centura and its subsidiaries taken as a whole. Centura and
Centura Bank believe Centura Bank has meritorious defenses to all claims
asserted in this case and Centura Bank is defending the case vigorously.
Management does not believe that Centura or Centura Bank have liability with
respect to these cases and is unable to estimate a range of loss.
Various other legal proceedings against Centura and its subsidiaries have
arisen from time to time in the normal course of business. Management believes
liabilities arising from these proceedings, if any, will have no material
adverse effect on the financial position or results of operations of Centura or
its subsidiaries.
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
At the Registrant's Annual Meeting of Shareholders held April 21, 1999,
all of the nominees for Director listed under the caption "Election of
Directors" in the Registrant's Proxy Statement dated March 16, 1999 were duly
elected Directors of the Registrant. Eighty-one percent of the outstanding
shares were voted. Of the 21,629,878 shares voted, each director received at
least 21,438,830 shares or 99.1 percent in favor.
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)
27.1 Financial Data Schedule - included in the electronically filed document
as required.
27.2 Financial Data Schedule- (Restated for pooling-of-interests with First
Coastal Bankshares, Inc.) included in the electronically filed document
as required.
- --------------------------------------------------------------------------------------------------------------
(1) Included as the identified exhibit in Centura Banks, Inc. Form S-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 April 5, 1999 was filed under Item 5,
Other Events, indicating Centura's announcement on April 5, 1999 that
its Board of Directors authorized a share repurchase program of up to
100,000 shares of Centura Common Stock.
(2) A report on Form 8-K dated April 7, 1999 was filed under Item 5,
Other Events, indicating Centura's announcement on April 7, 1999 of
earnings for the three months ended March 31, 1999.
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: August 13, 1999 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)
27.1 Financial Data Schedule **
27.2 Financial Data Schedule- Restated **
- --------------------------------------------------------------------------------
* Incorporated by reference from the following documents as noted:
(1) Included as the identified exhibit in Centura Banks, Inc. Form S-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.