FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2000 Commission File Number 0-11172
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
South Carolina 57-0738665
- ----------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1230 Main Street
Columbia, South Carolina 29201
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 733-3456
---------------
No Change
- --------------------------------------------------------------------------------
(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. YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 2000
----- ---------------------------------
Voting Common Stock, $5.00 Par Value 900,676 Shares
Non-Voting Common Stock, $5.00 Par Value 36,409 Shares
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED (DOLLARS IN THOUSANDS, EXCEPT PAR VALUE)
MARCH 31, December 31, March 31,
2000 1999 1999
----------- -------------- -----------
ASSETS
Cash and due from banks $ 118,473 $ 151,897 $ 107,001
Federal funds sold 36,500 37,400 87,100
Investment securities:
Held-to-maturity, at amortized cost 33,752 40,666 24,413
Available-for-sale, at fair value 674,491 522,326 600,821
----------- -------------- -----------
Total investment securities 708,243 562,992 625,234
----------- -------------- -----------
Gross loans 1,925,368 1,854,520 1,598,043
Less: Allowance for loan losses (34,265) (32,972) (28,760)
----------- -------------- -----------
Net loans 1,891,103 1,821,548 1,569,283
----------- -------------- -----------
Premises and equipment 86,087 84,395 80,384
Interest receivable 17,422 15,135 14,593
Intangible assets 25,823 19,256 16,202
Other assets 34,431 33,962 22,632
----------- -------------- -----------
TOTAL ASSETS $2,918,082 $ 2,726,585 $2,522,429
=========== ============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 427,074 $ 396,781 $ 361,176
Time and savings 1,887,519 1,825,252 1,678,972
----------- -------------- -----------
Total deposits 2,314,593 2,222,033 2,040,148
Securities sold under agreements to repurchase and federal
funds purchased 324,969 230,904 236,725
Long-term debt 50,963 50,963 50,000
Other liabilities 25,649 22,612 18,118
----------- -------------- -----------
TOTAL LIABILITIES 2,716,174 2,526,512 2,344,991
----------- -------------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock 3,248 3,282 3,282
Non-voting common stock - $5.00 par value, authorized
1,000,000; issued and outstanding March 31, 2000,
December 31, 1999 and March 31, 1999 - 36,409 182 182 182
Voting common stock - $5.00 par value, authorized 2,000,000;
issued and outstanding March 31, 2000 - 900,870
December 31, 1999 - 906,205; and March 31, 1999 - 882,766 4,504 4,531 4,414
Surplus 65,081 65,081 55,000
Undivided profits 128,317 123,328 107,381
Accumulated other comprehensive income, net of taxes 576 3,669 7,179
----------- -------------- -----------
TOTAL STOCKHOLDERS' EQUITY 201,908 200,073 177,438
----------- -------------- -----------
COMMITMENTS AND CONTINGENCIES -- -- --
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,918,082 $ 2,726,585 $2,522,429
=========== ============== ===========
PAGE 2
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
==============================================================================
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(DOLLARS IN THOUSANDS-EXCEPT PER SHARE DATA)
FOR THE
THREE MONTHS ENDED
MARCH 31,
------------------
2000 1999
-------- --------
INTEREST INCOME:
Loans, including fees $ 38,881 $ 32,626
Interest on investment securites:
Taxable 8,184 $ 7,757
390 342
Federal funds sold 910 1,159
-------- --------
Total interest income 48,365 41,884
-------- --------
INTEREST EXPENSE:
Deposits 17,014 14,520
Securities sold under agreements to repurchase
and federal funds purchased 4,127 2,877
Long-term debt 1,050 1,031
-------- --------
Total interest expense 22,191 18,428
-------- --------
Net interest income 26,174 23,456
Provision for loan losses 1,559 663
-------- --------
Net interest income after
provision for loan losses 24,615 22,793
-------- --------
NONINTEREST INCOME:
Service charges on deposit accounts 5,080 4,100
Commission and fees from fiduciary activities 610 395
Fees for other customer services 611 617
Mortgage servicing fees 549 549
Bankcard discount and fees 1,004 814
Insurance premiums earned 358 402
Gain on sale of investment securities 31 -
Other 183 632
-------- --------
Total noninterest income 8,426 7,509
-------- --------
NONINTEREST EXPENSE:
Salaries and employee benefits 11,291 10,386
Net occupancy expense 1,671 1,574
Furniture and equipment expense 1,616 1,465
Amortization of intangibles 1,378 1,411
Bankcard processing expense 1,061 933
Data processing expense 1,873 1,722
Professional services 494 487
Other 3,947 3,935
-------- --------
Total noninterest expense 23,331 21,913
-------- --------
Income before income tax expense 9,710 8,389
Income tax expense 3,350 2,924
-------- --------
NET INCOME $ 6,360 $ 5,465
======== ========
- ----------------------------------------------------------------------
======================================================================
- ----------------------------------------------------------------------
NET INCOME PER COMMON SHARE -
BASIC AND DILUTED $ 6.73 $ 5.89
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING-BASIC AND DILUTED 938,902 919,835
PAGE 3
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME- UNAUDITED
(DOLLARS IN THOUSANDS)
Non- Accumulated Total
Voting Voting Other Stock-
Preferred Common Common Undivided Comprehensive holders'
Stock Stock Stock Surplus Profits Income/(Loss) Equity
----------- ------- -------- -------- ----------- --------------- ----------
Balance at December 31, 1998 $ 3,282 $ 182 $ 4,426 $ 55,000 $ 102,888 $ 8,397 $ 174,175
Comprehensive income:
Net income 5,465 5,465
Change in unrealized losses
on investment securities
available-for-sale, net of
benefit of $2,422 (1,218) (1,218)
----------
Total comprehensive income 4,247
----------
Reacquired voting common stock (12) (930) (942)
Preferred stock dividends (42) (42)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at March 31, 1999 3,282 182 4,414 55,000 107,381 7,179 177,438
Comprehensive income:
Net income 19,181 19,181
Change in unrealized losses
on investment securities
available-for-sale, net of
benefit of $120 (3,510) (3,510)
----------
Total comprehensive income 15,671
----------
Reacquired voting common stock (54) (3,105) (3,159)
Stock issued in acquisition 171 10,081 10,252
Preferred stock dividends (129) (129)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at December 31, 1999 3,282 182 4,531 65,081 123,328 3,669 200,073
Comprehensive income:
Net income 6,360 6,360
Change in unrealized losses
on investment securities
available-for-sale, net of
benefit of $1,218 (3,093) (3,093)
----------
Total comprehensive income 3,267
----------
Reacquired preferred stock (34) 6 (28)
Reacquired voting common stock (27) (1,335) (1,362)
Preferred stock dividends (42) (42)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at March 31, 2000 $ 3,248 $ 182 $ 4,504 $ 65,081 $ 128,317 $ 576 $ 201,908
=========== ======= ======== ======== =========== =============== ==========
PAGE 4
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (DOLLARS IN THOUSANDS)
For the three months ended
March 31,
---------------------
2000 1999
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,360 $ 5,465
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 1,559 663
Depreciation and amortization 3,370 3,090
(Accretion) amortization of investment securities (731) 137
Deferred income tax benefit (134) (6,874)
Gains on sales of premises and equipment 0 (150)
(Increase) decrease in interest receivable (2,287) 261
Increase in interest payable 1,913 598
Origination of mortgage loans held-for-sale (20,233) (40,738)
Proceeds from sales of mortgage loans held-for-sale 21,134 46,532
Gains on sales of mortage loans held-for-sale (64) (223)
Gains on call or sale of investment securities (31) 0
Decrease in other assets 1,376 8,949
Increase in other liabilities 1,114 116
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,346 17,826
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (38,504) (30,754)
Calls, maturities and prepayments of investment securities held-to-maturity 7,881 934
Purchases of investment securities held-to-maturity (205) (290)
Calls, maturities and prepayments of investment securities available-for-sale 63,308 79,802
Purchases of investment securities available-for-sale (220,231) (83,862)
Decrease (increase) in federal funds sold 900 (23,100)
Proceeds from sales of premises and equipment 0 2,512
Purchases of premises and equipment (2,158) (5,313)
(Increase) decrease in other real estate owned (39) 195
Increase in intangible assets (87) (444)
Purchase of institutions, net of cash acquired 24,478 0
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (164,657) (60,320)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 25,254 2,661
Increase in federal funds purchased and securities sold
under agreements to repurchase 94,065 32,023
Cash dividends paid (42) (42)
Cash paid to reacquire preferred stock (28) 0
Cash paid to reacquire common stock (1,362) (942)
---------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 117,887 33,700
NET DECREASE IN CASH AND DUE FROM BANKS (33,424) (8,794)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 151,897 115,795
---------- ---------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 118,473 $107,001
========== =========
PAGE 5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies of First Citizens
Bancorporation of South Carolina, Inc. ("Bancorporation") is set forth in Note 1
to the Consolidated Financial Statements in Bancorporation's Annual Report on
Form 10-K for 1999. The significant accounting policies used during the current
quarter are unchanged from those disclosed in the 1999 Annual Report.
Basis of presentation
The preceding consolidated financial statements and the notes thereto are
unaudited; however, in the opinion of management, all adjustments comprising
normal recurring accruals necessary for a fair presentation of the consolidated
financial statements have been recorded. Certain amounts in prior periods have
been reclassified to conform to the 2000 presentation.
Acquisitions (Dollars in thousands)
On March 10, 2000, three branch locations were acquired from another South
Carolina financial institution. First Citizens Bank and Trust of South
Carolina, Inc. ("Bank") acquired deposits of $67,983, loans of $32,632, and
goodwill of $7,864 in connection with this acquisition. No goodwill
amortization was recorded for the period ended March 31, 2000 related to this
acquisition.
On August 20, 1999, Bancorporation acquired The Exchange Bank of South Carolina,
a banking corporation located in Kingstree, South Carolina. The total cost of
the acquisition, recorded as a purchase, was $15,750.
The breakdown of the purchase price is as follows:
Cash $ 4,535
5 year Bancorporation notes @ 7.50% 90
10 year Bancorporation notes @ 7.75% 873
Bancorporation stock - 34,174 shares 10,252
--------
Total consideration $ 15,750
========
Goodwill amortization related to this acquisition for the quarter ended March
31, 2000, was $53.
Subsequent events
On April 26, 2000, Bancorporation's Board of Directors declared a $.25 dividend
on common stock to shareholders of record on May 5, 2000, payable on May 15,
2000.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Summary (Dollars in thousands)
Net income for the quarter ended March 31, 2000 totaled $6,360, or $6.73 per
common share. Net income for the quarter ended March 31, 1999 totaled $5,465,
or $5.89 per common share.
The primary factors affecting the increase in net income were a $1,822 or 7.99%
increase in net interest income after provision for loan losses, and a $917 or
12.21% increase in noninterest income. These favorable changes were partially
offset by a $1,418 or 6.47% increase in noninterest expense, and a $426 or
14.57% increase in income tax expense.
Return on average stockholders' equity and average assets are key measures of
earnings performance. Return on average stockholders' equity for the period
ended March 31, 2000 and March 31, 1999 were 12.50% and 12.35%, respectively.
The increase was primarily the result of improvement in return on average
assets. Return on average assets for the period ended March 31, 2000 and March
31, 1999 were .90% and .87%, respectively. The increase was primarily the
result of an 18 basis point improvement in the noninterest margin to average
assets. This favorable change was partially offset by a 13 basis point decline
in the net interest margin after provision to average assets. Net interest
income is discussed further in the following section.
PAGE 6
Table 1 provides summary information on selected average balances and ratios.
Table 1: Selected Summary Information (dollars in thousands)
As of and for the
three months ended
March 31,
------------------------
Selected average balances: 2000 1999
----------- -----------
Total assets $2,817,140 $2,518,229
Interest-earning assets 2,575,796 2,304,390
Investment securities 641,689 626,107
Loans 1,868,559 1,579,202
Deposits 2,236,351 2,016,090
Noninterest-bearing deposits 399,327 352,031
Interest-bearing deposits 1,837,024 1,664,059
Interest-bearing liabilities 2,191,200 1,972,900
Stockholders' equity 203,534 176,979
Selected ratios:
Return on average assets .90% .87%
Return on average stockholders equity 12.50% 12.35%
Return on average common stockholders' 7.11% 6.90%
equity
Net yield on average interest-earning assets 4.15% 4.19%
(tax equivalent)
Average loans to average deposits 83.55% 78.33%
Nonperforming assets to total loans .17% .18%
Allowance for loan losses to total loans 1.78% 1.80%
Allowance for loan losses to nonperforming 10.90x 10.22x
assets
Average stockholders' equity to average total 7.22% 7.03%
assets
Total risk-based capital ratio 13.20% 14.38%
Tier I risk-based capital ratio 11.96% 13.12%
Tier I leverage ratio 8.16% 8.26%
Net interest income (Dollars in thousands)
Net interest income represents the principal source of earnings for
Bancorporation. Table 2 compares average balance sheet items and analyzes net
interest income on a tax equivalent basis for the quarters ended March 31, 2000
and 1999.
PAGE 7
Table 2: Comparative Average Balance Sheets and Taxable Equivalent Rate/Volume Variance (Dollars in thousands)
As of and for the three months ended March 31,
Yield/Average Change Due to(2)
Average Balance Interest Inc/Exp(1) Rate ---------------- Net
---------------------- ---------------- ---------- Yield Increase
2000 1999 2000 1999 2000 1999 /Rate Volume (Decrease)
---------- ---------- ------- ------- ---- ---- ------- -------- -----------
Interest-earning assets:
Loans (3) $1,868,559 $1,579,202 $39,061 $32,773 8.41 8.42 $ 204 $ 6,084 $ 6,288
Investment securities:
Taxable 612,553 601,830 8,184 7,757 5.37 5.23 283 144 427
Non-taxable 29,136 24,277 600 526 8.24 8.67 (26) 100 74
Federal funds sold 65,548 99,081 910 1,159 5.58 4.74 219 (468) (249)
---------- ---------- ------- ------- ------- -------- -----------
Total interest-earning assets 2,575,796 2,304,390 48,755 42,215 7.61 7.43 680 5,860 6,540
---------- ---------- ------- ------- ------- -------- -----------
Noninterest-earning assets:
Cash and due from banks 116,823 107,423
Premises and equipment 85,135 80,269
Other, less allowance for loan losses 39,386 26,147
---------- ----------
Total noninterest-earning assets 241,344 213,839
---------- ----------
Total assets $2,817,140 $2,518,229
---------- ----------
Interest-bearing liabilities:
Deposits 1,837,024 $1,664,059 $17,014 $14,521 3.73 3.54 $ 880 $ 1,613 $ 2,493
Federal funds purchased and
securities sold under
agreements to repurchase 303,213 258,841 4,127 2,877 5.47 4.51 643 607 1,250
Long-term debt 50,963 50,000 1,050 1,031 8.24 8.25 (1) 20 19
---------- ---------- ------- ------- ------- -------- -----------
Total interest-bearing liabilities 2,191,200 1,972,900 22,191 18,429 4.07 3.79 1,522 2,240 3,762
---------- ---------- ------- ------- ------- -------- -----------
Noninterest-bearing liabilities:
Demand deposits 399,327 352,031
Other liabilities 23,079 16,319
Total noninterest-bearing liabilities 422,406 368,350
Stockholders' equity 203,534 176,979
Total liabilities and stockholders' equity $2,817,140 $2,518,229
========== ==========
Interest rate spread 3.54 3.64
==== ====
Net interest margin $26,564 $23,786 4.15 4.19 ($842) $ 3,620 $ 2,778
======= ======= ==== ==== ======= ======== ===========
<FN>
(1) Non-taxable interest income has been adjusted to a taxable equivalent rate, using the federal income tax rate of 35%.
(2) Yield/rate-volume changes have been allocated to each category based on the percentage of each to the total change.
(3) Nonaccrual loans are included in the average loan balances. Income on such loans generally is recognized on a cash basis.
PAGE 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)
- --------------------------------------------------------------------------------
Net interest income on a tax equivalent basis increased $2,778 or 11.68% for the
three months ended March 31, 2000, over the comparable period in 1999. Net
interest margin to average assets declined 4 basis points from 3.83% at March
31, 1999 to 3.79% at March 31, 2000. The decline was due to a decrease in the
ratio of earnings assets to average assets from 91.51% at March 31, 1999 to
91.43% at March 31, 2000, and a decrease in net interest margin to average
earning assets from 4.19% at March 31, 1999 to 4.15% at March 31, 2000.
Net interest margin to average earning assets declined by 4 basis points due to
a 10 basis point decline in the net interest spread. The decline in net
interest spread was offset by a favorable change in the contribution to net
interest margin from the net interest position. The net interest position as a
percent of earning assets increased from 14.39% at March 31, 1999 to 14.93% at
March 31, 2000.
The decline in the net interest rate spread from 3.64% at March 31, 1999 to
3.54% at March 31, 1999 was due to the increase in the cost of interest-bearing
liabilities exceeding the increase in interest earned on earning assets. The
cost of interest-bearing liabilities increased from 3.79% at March 31, 1999 to
4.07% at March 31, 2000, or an increase of 28 basis points, while the yield on
earning assets increased from 7.43% to 7.61%, or an increase of 18 basis points.
The increase in the cost of interest-bearing liabilities was due to an increase
in the rate paid on deposits (primarily CDs) and repurchase agreements. The
increase in the yield on interest-earning assets was primarily due to an
increase in the yields on investment securities and federal funds sold.
Noninterest income and expense (Dollars in thousands)
Noninterest income increased by $917 or 12.21% for the three months ended March
31, 2000, over the comparable period in 1999 due to increases in service charges
on deposits commissions and fees from fiduciary activities and bankcard fees.
Service charges on deposits increased by $980 or 23.90% over the comparable
period primarily due to overall deposit growth. Additionally, commissions and
fees from fiduciary and bankcard activities increased by $405 or 33.50%. These
favorable changes were partially offset by a $500 or 51.65% decline in other
income. Other income declined due to a decline in non-recurring gain on sale of
fixed assets and premiums earned on the sale of mortgage loans.
Noninterest expense increased by $1,418 or 6.47% for the three months ended
March 31, 2000 over the comparable period in 1999 due to increases in salaries
and employee benefits, depreciation expense, data processing expense and
bankcard processing expense. Salaries and employee benefits increased $905 or
8.71% over the comparable period primarily due to an increase in the number of
employees, the addition of Exchange Bank employees and merit increases.
Depreciation expense (included in net occupancy and furniture and fixtures
expense) increased by $316 or 18.80% over the comparable period due to the
addition of depreciation on Exchange Bank assets, and an increase in the level
of assets placed in service since March 31, 1999. Data processing expense
increased $151 or 8.77% over the comparable period due to the on-going growth
realized by Bancorporation. Bankcard processing expense increased by $128 or
13.72% over the comparable period due to increased bankcard activity.
Overall, the noninterest margin (noninterest income less noninterest expense) to
average assets improved from a negative 2.29% for the three months ended March
31, 1999 to a negative 2.11% for the three months ended March 31, 2000. This
was due to a 17 basis point decrease in non-interest expense to average assets
and a 1 basis point increase in noninterest income to average assets. This
factor had the most measurable impact on the improvement in return on assets for
the comparable periods.
Income taxes (Dollars in thousands)
Total income tax expense increased by $426 or 14.57% for the three months ended
March 31, 2000 over the comparable period in 1999 due to the increase in net
income. The effective tax rate was 34.5% and 34.8% at March 31, 2000 and March
31, 1999, respectively.
PAGE 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
Investment securities (Dollars in thousands)
As of March 31, 2000, the investment portfolio totaled $708,243, compared to
$625,234 at March 31, 1999. The investment portfolio increased as funds were
shifted from federal funds sold to the bond portfolio. Approximately $22,000 of
investment securities were purchased in the Exchange Bank acquisition. During
1999, excess cash was invested in federal funds sold to provide for Year 2000
liquidity. Bancorporation continues to invest primarily in short-term U.S.
government obligations to minimize credit, interest rate and liquidity risk.
During the first quarter, Bancorporation purchased $40,000 of Federal Home Loan
Bank ("FHLB") bonds. The FHLB is a Aaa-rated government sponsored agency. The
investment portfolio consisted of 90.84% and 91.27% U.S. government and
government agency securities as of March 31, 2000 and March 31, 1999,
respectively. The remainder of the investment portfolio consists of municipal
bonds and equity securities.
Loans and allowance for loan losses (Dollars in thousands)
As of March 31, 2000, loans totaled $1,925,368, compared to $1,598,043 at March
31, 1999. Of this increase, $95,557 was related to acquisitions and the
remainder was the a result of normal loan growth. The composition of the loan
portfolio has not shifted significantly since March 31, 1999. Loan growth was
primarily funded through core deposits and short-term borrowed funds.
It is the policy of Bancorporation to maintain an allowance for loan losses
which is adequate to absorb probable losses inherent in the loan portfolio.
Management believes that the provision taken during the three months ended March
31, 2000 was appropriate to provide an allowance for loan losses which considers
the past experience of charge-offs, the level of past due and nonaccrual loans,
the size and mix of the loan portfolio, credit classifications and general
economic conditions in Bancorporation's market areas.
An analysis of activity in the allowance for loan losses as of March 31, 2000
and 1999 is presented below. The allowance for loan losses is managed and
maintained through charges to the provision for loan losses. Loan charge-offs
and recoveries are charged or credited directly to the allowance for loan
losses. During the first quarter of 2000, Bancorporation recorded provision
expense of approximately $586 related to loans purchased in three branch
acquisitions based on management's estimate of losses inherent in those loans.
As of and for the
three months ended
March 31,
-----------------------
Allowance for loan losses: 2000 1999
---------- -----------
Balance at beginning of period $ 32,972 $ 28,306
Provision for loan losses 1,559 663
---------- -----------
Charge-offs (700) (585)
Recoveries 434 376
---------- -----------
Net charge-offs (266) (209)
---------- -----------
Balance at end of period $ 34,265 $ 28,760
---------- -----------
Nonperforming assets $ 3,143 $ 2,814
Annualized net charge-offs to:
Average loans .06% .05%
Loans at end of period .06% .06%
Allowance for loan losses 3.11% 2.91%
Funding sources (Dollars in thousands)
Bancorporation's primary source of funds is its deposit base. Total deposits
increased $274,445 or 13.45% from March 31, 1999 to March 31, 2000. Deposits
totaling $158,118 were obtained through acquisitions during the period. Average
deposits were $2,236,351 and $2,016,090 at March 31, 2000 and March 31, 1999,
respectively.
PAGE 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)
- --------------------------------------------------------------------------------
Short-term borrowings in the form of repurchase agreements are another source of
funds. Short-term borrowings increased $88,244 or 37.28% from March 31, 1999 to
March 31, 2000. Average short-term borrowings were $303,213 and $258,841 at
March 31, 2000 and March 31, 1999, respectively.
Capital resources
Regulatory agencies define capital as Tier I, consisting of stockholders' equity
less ineligible intangible assets, and Total Capital, consisting of Tier I
capital plus the allowable portion of the allowance for loan losses and certain
long-term debt.
Regulatory guidelines require a minimum ratio of total capital to risk-adjusted
assets of 8 percent, with at least 50 percent consisting of tangible common
stockholders' equity and a minimum Tier I leverage ratio of 3 percent. Banks
which meet or exceed a Tier I ratio of 6 percent, a total capital ratio of 10
percent, and a Tier I leverage ratio of 5 percent are considered
well-capitalized by regulatory standards. The following table details
Bancorporation's capital ratios at March 31, 2000 and 1999.
Capital ratios March 31,
-----------------------------
2000 1999
---------- ----------
Tier I leverage ratio 8.16% 8.26%
Total risk-based capital ratio 13.20% 14.37%
Tier I 11.96% 13.12%
Tier II 1.24% 1.25%
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk exposures that affect the
quantitative and qualitative disclosures presented as part of Bancorporation's
Annual Report on Form 10-K for the year ended December 31, 1999.
PAGE 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Bancorporation and its subsidiaries, are not parties to, nor is any of their
property the subject of, any material or other pending legal proceeding, other
than ordinary routine proceedings incidental to their business.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement Re Computation of Earnings Per Share
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended March 31,
2000
PAGE 12
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.
FIRST CITIZENS BANCORPORATION
OF SOUTH CAROLINA, INC.
(Registrant)
Dated: May 11, 2000 By: /s/ Jay C. Case
----------------- -----------------------------------------
Jay C. Case, Executive Vice President
(Chief Financial Officer)
PAGE 13