Exhibit 99
For Immediate Release
July 5, 2000
For more information: Steven J. Goldstein
Chief Financial Officer
Centura Banks, Inc.
(252) 454-8356
sgoldstein@centura.com
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CENTURA BANKS INC. LOWERS 2nd QUARTER, FULL-YEAR OUTLOOK
Interest Rate Environment, Slowing Economy Cited for Revision
ROCKY MOUNT, N.C., July 5, 2000 - Centura Banks Inc. (NYSE: CBC) today announced
that it is reducing its earnings outlook for the second quarter and full year
2000. The revised outlook is due primarily to the recent rise in interest rates
and the accompanying pressure on net interest margins.
For the second quarter, operating earnings are expected to be in the range of 71
to 74 cents per diluted share before merger-related and other significant
charges, compared with the analysts' consensus estimate of 99 cents per share as
reported by First Call. Operating earnings for the full year 2000 are expected
to range from $3.37 to $3.47 per diluted share, compared with the First Call
consensus of $4.05. These results include $5 million of additional loan loss
provisions recorded in order to align the credit risk management methodologies
of Triangle Bancorp, Inc. with those of Centura. Centura expects to report
second-quarter financial results on July 13.
As anticipated, the second quarter will include approximately $12 million in
charges related to the acquisition of Triangle and the previously announced
Hannaford store closings. After these items, Centura expects to report diluted
earnings per share in a range of 51 to 54 cents for the second quarter and $2.47
to $2.57 for the full year. The revised earnings outlook for 2000, excluding the
merger-related and the Hannaford charges, continues to project a return on
equity of approximately 15.6%, compared with 15.7% at year end 1999, and a
return on assets of 1.22%, compared with 1.23% a year ago. Centura is
reassessing its relationship with Hannaford and may close additional stores
during the year, which could result in additional charges of approximately $5-$7
million.
"The rise in interest rates and the accompanying pressure on our net interest
margin was partly exacerbated by our acquisition of Triangle," said Cecil W.
Sewell, chief executive officer. "Operationally, the integration has gone
smoothly, but we experienced additional margin pressures as we both absorbed
Triangle's portfolio and sacrificed some retail pricing to our overriding
priority of customer retention."
Addressing credit quality, Sewell said: "Although we have not seen any weakness
in our credit quality from the first quarter or any stress on our loan
portfolio, we anticipate an economy marked by higher interest rates and the
potential for further slowing. It also is our intent, based on current pricing
and interest rates, to sell our mortgage servicing in the third quarter and
reinvest the gain in restructuring the investment portfolio. These transactions
will enable us to eliminate the interest rate risk inherent in mortgage
servicing.
"Looking forward, we will be very focused on improving the net interest margin
by stimulating core deposits and retail funding, and on growing our wealth
management business," Sewell said. "We also plan to continue our diligent
expense control efforts without sacrificing long-term growth.
"Our integration of Triangle has progressed according to plan in terms of
reduced expenses and customer retention goals," Sewell continued. "To date we
have achieved in excess of a 98% retention rate for Triangle high-value
households and now have a much strengthened North Carolina franchise in high
growth MSA markets, particularly the Triangle area. Our focus on customer
retention represents the best long-term strategy for building lasting
relationships, reducing the need for wholesale funding, and strengthening our
net interest margin."
Factors Contributing To Revised Outlook
Contributing factors to the company's revised earnings outlook for the second
quarter and 2000 are primarily related to rising interest rates. The cumulative
effect of rising interest rates since October 1999 has put pressure on Centura's
net interest margin and the 50 basis-point increase in the second quarter
intensified that pressure.
o Net Interest income. A decline in net interest income is expected to
account for approximately 45% of the earnings revision or 9 to 11 cents for
the quarter and 25 to 30 cents per share for the full year. This is due
primarily to margin pressure created by rising interest rates, which
occurred at the same time Centura was engaged in an aggressive campaign to
retain Triangle Bancorp customers. The successful integration of Triangle
will enable Centura to focus on building core deposits and improving the
net interest margin for the remainder of the year.
o Fee-based businesses linked to interest rates. An industry-wide downturn in
the mortgage business, a result of rising interest rates, has affected
Centura's three mortgage-related businesses, which are expected to account
for approximately 20% of the earnings revision, or 12 to 14 cents per share
for the year. The second quarter impact is approximately 1 to 2 cents per
share. Centura's mortgage-related businesses are: Centura Bank, which
originates and services conforming mortgages; Capital Advisors, which
provides commercial mortgage placements; and Centura's 49% interest in
First Greensboro Home Equity, a sub-prime mortgage lender. The decline in
income from these business units is partially offset with increases in fee
income from NCS Mortgage Lending Company, a new business unit acquired late
in the first quarter of 2000.
o Operating expenses. Operating expenses are expected to account for
approximately 20% of the earnings revision or 13 to 16 cents for the full
year. The impact on the second quarter is approximately 7 to 8 cents per
share. We have achieved the projected cost savings from the Triangle
acquisition, however, expenses are above expectations due to continued
technology investments, the filling of previously approved vacant
positions, and operating expenses from NCS Mortgage Lending Company. NCS
expenses represent about one-third of the revision in operating expenses.
Despite this, operating expenses are expected to be relatively flat for the
year.
o Loan Loss Provision. As previously discussed, the additional loan loss
provision accounts for 15% or $5 million of the earnings revision.
About Centura
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With assets of more than $11 billion and deposits exceeding $7 billion, Centura
Banks Inc. provides a complete line of banking, investment, insurance, leasing
and asset management services to individuals and businesses in North Carolina,
South Carolina and Virginia. Centura's broad range of financial solutions is
provided through more than 250 full-service financial offices and Centura
Highway, the bank's multifaceted customer access system that includes telephone
banking, an extensive ATM network, PC banking, online bill payment and the
bank's suite of Internet products and services. Additional information may be
found on Centura's Web site at www.centura.com.
Safe Harbor
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Statements made in this press release, other than those containing historical
information, are forward-looking statements made pursuant to the safe-harbor
provisions of the Private Securities Litigation Act of 1995. These include
statements about Centura, including descriptions of plans or objectives of its
management for future operations, products or services, and forecasts of its
revenues, earnings or other measures of economic performance. Such statements
reflect current views, but are based on assumptions and are subject to risks,
uncertainties and other factors that may cause results to differ materially from
those set forth in such statements. 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)
customer and deposit attrition, 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 and the possible impairment of collectibility of loans;
(vi) the impact of changes in monetary and fiscal policies, laws, rules and
regulations; (vii) the impact of the Gramm-Leach-Bliley Act of 1999; (viii)
changes in business conditions and inflation; and (ix) other risks and factors
identified in Centura's filings with the Securities and Exchange Commission and
other regulatory bodies.