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 September 30, 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 October 31, 2000
----- -------------------------------
VOTING COMMON STOCK, $5.00 PAR VALUE 900,016 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 VALUES)
SEPTEMBER 30, December 31, September 30,
2000 1999 1999
--------------- -------------- ---------------
ASSETS
Cash and due from banks $ 118,043 $ 151,897 $ 100,448
Federal funds sold - 37,400 27,500
--------------- -------------- ---------------
Total cash and cash equivalents 118,043 189,297 127,948
--------------- -------------- ---------------
Investment securities:
Held-to-maturity, at amortized cost 35,292 40,666 44,941
Available-for-sale, at fair value 668,225 522,326 565,943
--------------- -------------- ---------------
Total investment securities 703,517 562,992 610,884
--------------- -------------- ---------------
Gross loans 2,005,306 1,854,520 1,798,532
Less: Allowance for loan losses (35,536) (32,972) (32,401)
--------------- -------------- ---------------
Net loans 1,969,770 1,821,548 1,766,131
--------------- -------------- ---------------
Premises and equipment 87,078 84,395 82,630
Interest receivable 20,953 15,135 16,689
Intangible assets 23,388 19,256 19,826
Other assets 32,253 33,962 26,736
--------------- -------------- ---------------
TOTAL ASSETS $ 2,955,002 $ 2,726,585 $ 2,650,844
=============== ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 423,371 $ 396,781 $ 384,424
Time and savings 1,885,855 1,825,252 1,749,089
--------------- -------------- ---------------
Total deposits 2,309,226 2,222,033 2,133,513
Securities sold under agreements
to repurchase and
federal funds purchased 345,648 230,904 254,350
Long-term debt 50,963 50,963 50,963
Other liabilities 26,950 22,612 15,533
--------------- -------------- ---------------
TOTAL LIABILITIES 2,732,787 2,526,512 2,454,359
--------------- -------------- ---------------
STOCKHOLDERS' EQUITY:
Preferred stock 3,231 3,282 3,282
Non-voting common stock -
$5.00 par value, authorized
1,000,000; issued and
outstanding September 30, 2000,
December 31, 1999 and
September 30, 1999 - 36,409 182 182 182
Voting common stock
$5.00 par value, authorized 2,000,000;
September 30, 2000 - 899,846;
issued and outstanding
December 31, 1999 - 906,205;
and September 30, 1999 - 908,248 4,499 4,531 4,541
Surplus 65,081 65,081 65,081
Undivided profits 142,149 123,328 117,462
Accumulated other comprehensive
income, net of taxes 7,073 3,669 5,937
--------------- -------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 222,215 200,073 196,485
--------------- -------------- ---------------
COMMITMENTS AND CONTINGENCIES -- -- --
--------------- -------------- ---------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,955,002 $ 2,726,585 $ 2,650,844
=============== ============== ===============
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 FOR THE
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
2000 1999 2000 1999
-------- --------- -------- --------
INTEREST INCOME:
Loans, including fees $ 43,268 $ 35,836 $124,157 $102,283
Interest on investment securites:
Taxable 8,951 7,611 26,816 23,415
Non-taxable 343 357 1,098 1,023
Federal funds sold 1,064 498 2,151 2,282
-------- --------- -------- --------
Total interest income 53,626 44,302 154,222 129,003
-------- --------- -------- --------
INTEREST EXPENSE:
Deposits 19,270 14,861 54,552 43,714
Securities sold under agreements to repurchase
and federal funds purchased 5,029 2,989 13,940 8,692
Long-term debt 1,025 1,038 3,149 3,100
-------- --------- -------- --------
Total interest expense 25,324 18,888 71,641 55,506
-------- --------- -------- --------
Net interest income 28,302 25,414 82,581 73,497
Provision for loan losses 1,477 1,630 5,030 4,110
-------- --------- -------- --------
Net interest income after
provision for loan losses 26,825 23,784 77,551 69,387
-------- --------- -------- --------
NONINTEREST INCOME:
Service charges on deposit accounts 5,496 5,011 16,080 13,735
Commissions and fees from fiduciary activities 613 496 1,873 1,279
Fees for other customer services 581 571 1,842 1,730
Mortgage servicing fees 554 542 1,662 1,633
Bankcard 1,291 1,109 3,484 2,939
Insurance premiums 577 461 1,585 1,357
Gain of sale of securities 6 - 32 8
Other 1,046 329 1,494 1,276
-------- --------- -------- --------
Total noninterest income 10,164 8,519 28,052 23,957
-------- --------- -------- --------
NONINTEREST EXPENSE:
Salaries and employee benefits 11,611 10,128 34,497 30,486
Net occupancy expense 1,621 1,811 4,909 4,892
Furniture and equipment expense 1,655 1,652 4,793 4,679
Amortization of intangibles 1,774 1,255 4,941 4,069
Bankcard processing expense 1,269 1,169 3,599 3,219
Data processing expense 2,072 1,846 5,964 5,224
Professional services 538 607 1,497 1,675
Other 5,034 3,707 13,418 11,306
-------- --------- -------- --------
Total noninterest expense 25,574 22,175 73,618 65,550
-------- --------- -------- --------
Income before income tax expense 11,415 10,128 31,985 27,794
Income tax expense 3,936 3,505 11,033 9,643
-------- --------- -------- --------
NET INCOME $ 7,479 $ 6,623 $ 20,952 $ 18,151
======== ========= ======== ========
=========================================================================================
NET INCOME PER COMMON SHARE -
BASIC AND DILUTED $ 7.94 $ 7.07 $ 22.22 $ 19.59
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING-BASIC AND DILUTED 936,238 919,810 937,341 919,810
Page 3
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
=================================================================================================================
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND ACCUMULATED OTHER 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 18,151 18,151
Change in unrealized losses
on investment securities
available-for-sale, net of
benefit of $1,272 (2,460) (2,460)
----------
Total comprehensive income 15,691
----------
Reacquired voting common stock (56) (3,451) (3,507)
Stock issued in acquisition 171 10,081 10,252
Preferred stock dividends (126) (126)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at September 30, 1999 3,282 182 4,541 65,081 117,462 5,937 196,485
Comprehensive income:
Net income 6,495 6,495
Change in unrealized losses
on investment securities
available-for-sale, net of
benefit of $1,200 (2,268) (2,268)
----------
Total comprehensive income 4,227
----------
Reacquired voting common stock (10) (584) (594)
Preferred stock dividends (45) (45)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at December 31, 1999 3,282 182 4,531 65,081 123,328 3,669 200,073
Comprehensive income:
Net income 20,952 20,952
Change in unrealized gains
on investment securities
available-for-sale, net of
benefit of $1,834 3,404 3,404
----------
Total comprehensive income 24,356
----------
Reacquired preferred stock (51) 7 (44)
Reacquired voting common stock (32) (1,561) (1,593)
Common stock dividends (450) (450)
Preferred stock dividends (127) (127)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at September 30, 2000 $ 3,231 $ 182 $ 4,499 $ 65,081 $ 142,149 $ 7,073 $ 222,215
=========== ======= ======== ======== =========== =============== ==========
Page 4
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA AND SUBSIDIARY
===================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (DOLLARS IN THOUSANDS)
For the
Nine Months Ended
September 30,
-----------------------
2000 1999
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,952 $ 18,151
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 5,030 4,110
Depreciation and amortization 10,789 9,719
(Accretion) amortization of investment securities (1,357) 566
Change in deferred taxes (3,251) (24,061)
Gain on sales of premises and equipment 0 (222)
Increase in accrued interest receivable (5,818) (909)
Increase/(decrease) in accrued interest payable 2,621 (600)
Origination of mortgage loans held-for-resale (83,042) (116,406)
Proceeds from sales of mortgage loans held-for-resale 81,300 122,530
Gain on sales of mortgage loans held-for-resale (776) (585)
Decrease in other assets 3,145 23,162
Increase/(decrease) in other liabilities 1,707 (1,898)
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 31,300 33,557
=========== ==========
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (116,442) (170,007)
Calls, maturities and prepayments
of investment securities, available-for-sale 202,333 254,650
Purchases of investment securities, available-for-sale (342,995) (225,865)
Calls, maturities and prepayments
of investment securities, held-to-maturity 6,967 3,505
Purchases of investment securities, held-to-maturity (205) (1,060)
Proceeds from sales of premises and equipment 120 3,609
Purchases of premises and equipment (7,120) (11,103)
(Increase)/decrease in other real estate owned (11) 193
Increase in intangible assets (1,058) (3,974)
Purchase of institutions, net of cash acquired 26,461 (3,380)
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (231,950) (153,432)
=========== ==========
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 16,865 10,798
Increase in federal funds
purchased and securities sold
under agreements to repurchase 114,745 49,648
Issuance of bank notes - 963
Common stock issued - 10,252
Cash dividends paid (577) (126)
Cash paid to reacquire preferred stock (44) (3,507)
Cash paid to reacquire common stock (1,593) 0
----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 129,396 68,028
=========== ==========
NET DECREASE IN CASH AND CASH EQUIVALENTS (71,254) (51,847)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 189,297 179,795
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 118,043 $ 127,948
=========== ==========
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 1999 Annual Report
on Form 10-K. 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)
There were no material acquisitions during the quarter ending September 30,
2000.
On March 10, 2000, three branch locations were acquired from another South
Carolina financial institution. First Citizens Bank and Trust Company of South
Carolina (the "Bank") acquired deposits of $67,983, loans of $32,632, and
goodwill of $7,933 in connection with this acquisition. Goodwill amortization
related to this acquisition for the quarter and nine months ended September 30,
2000 was $405 and $809, respectively.
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 and nine
months ended September 30, 2000, was $57 and $166, respectively.
On September 8, 2000, the Bank entered into a purchase and assumption agreement
to acquire seven branches from an unrelated financial institution with estimated
total deposits and loans of $217,000 and $41,000, respectively. The acquisition
is expected to be completed during the fourth quarter of 2000 pending regulatory
approvals.
SUBSEQUENT EVENTS
On October 25, 2000, Bancorporation's Board of Directors declared a $ .25
dividend on common stock to shareholders of record on November 3, 2000, payable
on November 15, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
FORWARD-LOOKING STATEMENT
These consolidated financial statements may contain forward-looking statements.
All forward-looking statements involve risks and uncertainty and any number of
factors could cause actual results to differ materially from anticipated results
or other expectations expressed in forward-looking statements. Management
cautions readers not to place undue reliance on forward-looking statements,
which are subject to influence by certain risk factors and unanticipated future
events.
RESULTS OF OPERATIONS
SUMMARY (DOLLARS IN THOUSANDS)
Net income for the quarter and nine months ended September 30, 2000 totaled
$7,479, or $7.94 per common share and $20,952, or $22.22 per common share,
respectively. Net income for the quarter and nine months ended September 30,
1999 totaled $6,623, or $7.07 per common share and $18,151, or $19.59 per common
share, respectively.
The primary factors affecting the increase in net income for the quarter ended
September 30, 2000 were a $3,041 or 12.79% increase in net interest income after
provision for loan losses, and a $1,645 or 19.31% increase in noninterest
income. These favorable changes were partially offset by a $3,399 or 15.33%
increase in noninterest expense, and a $431 or 12.30% increase in income tax
expense.
Page 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
The primary factors affecting the increase in net income for the nine months
ended September 30, 2000 were a $8,165 or 11.77% increase in net interest income
after provision for loan losses, and a $4,095 or 17.09% increase in noninterest
income. These favorable changes were partially offset by a $8,070 or 12.31%
increase in noninterest expense, and a $1,389 or 14.40% 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 quarter
ended September 30, 2000 and September 30, 1999 was 13.86% and 13.85%,
respectively. The increase was primarily the result of an increase in return on
assets from 1.01% to 1.02% for the quarter ended September 30, 1999 and
September 30, 2000, respectively. The increase in return on assets was due to a
1 basis point increase in net interest income after provision for loan losses to
average assets. Noninterest income to average assets increased by 8 basis
points, but was offset by an increase of 8 basis points in noninterest expense
to average assets.
Return on average stockholders' equity for the nine months ended September 30,
2000 and September 30, 1999 was 13.40% and 13.20%, respectively. The increase
was primarily the result of an increase in return on assets from .94% to .96%
for the nine months ended September 30, 1999 and September 30, 2000,
respectively. The increase in return on assets was partially offset by a
decline in the equity multiplier (average assets to average stockholders'
equity) from 14.04X to 13.96X at September 30, 1999 and September 30, 2000,
respectively. The increase in return on assets was primarily due to a decrease
in noninterest expense to average assets of 2 basis points. Noninterest income
to average assets increased by 4 basis points, but was offset by a 4 basis point
decline in net interest income after provision for loan losses to average
assets.
Net interest income is discussed in the following section.
Table 1 provides summary information on selected average balances and ratios.
TABLE 1: SELECTED SUMMARY INFORMATION (DOLLARS IN THOUSANDS)
AS OF AND FOR THE AS OF AND FOR THE
QUARTER ENDED NINE MONTHS ENDED
------------------------ ------------------------
AVERAGE BALANCES: 2000 1999 2000 1999
----------- ----------- ----------- -----------
Total assets $2,945,526 $2,620,166 $2,897,810 $2,563,281
Interest-earning assets 2,703,103 2,402,370 2,654,756 2,348,425
Investment securities 674,777 662,347 676,953 649,492
Loans 1,987,378 1,731,556 1,938,405 1,646,859
Deposits 2,318,277 2,111,238 2,290,516 2,061,492
Noninterest-bearing deposits 425,725 385,074 416,461 367,922
Interest-bearing deposits 1,892,552 1,726,164 1,874,055 1,693,570
Interest-bearing liabilities 2,277,695 2,029,190 2,248,669 1,997,848
Stockholders' equity 215,813 191,354 208,405 183,357
RATIOS:
Return on average assets 1.02% 1.01% .96% .94%
Return on average stockholders' equity 13.86% 13.85% 13.40% 13.20%
Return on average common stockholders' equity 14.07% 14.09% 13.62% 13.44%
Net yield on average interest-earning assets (tax equivalent) 4.24% 4.29% 4.20% 4.23%
Average loans to average deposits 85.73% 82.02% 84.63% 79.89%
Nonperforming assets to total loans .24% .19% .25% .19%
Allowance for loan losses to total loans 1.77% 1.80% 1.77% 1.80%
Allowance for loan losses to nonperforming assets N/A N/A 7.30X 10.11X
Average stockholders' equity to average total assets 7.33% 7.30% 7.19% 7.15%
Total risk-based capital ratio N/A N/A 13.80% 14.07%
Tier I risk-based capital ratio N/A N/A 12.21% 12.69%
Tier I leverage ratio N/A N/A 8.36% 8.58%
NET INTEREST INCOME (DOLLARS IN THOUSANDS)
Net interest income represents the principal source of earnings for
Bancorporation. Tables 2 and 3 compare average balance sheet items and analyzes
net interest income on a tax equivalent basis for the quarters and nine months
ended September 30, 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 QUARTER ENDED SEPTEMBER 30,
---------------------------------------------
Change Due to(2)
Yield/ ----------------
Average Balance Interest Inc/Exp(1) Rate Yield Net
------------------------ ----------------- ------------- Increase
2000 1999 2000 1999 2000 1999 /Rate Volume (Decrease)
----------- ----------- -------- ------- ------- ----- ------- ------- --------
INTEREST-EARNING ASSETS:
Loans (3) $1,987,378 $1,731,556 $43,438 $35,984 8.70% 8.24% $1,890 $5,564 $7,454
Investment securities:
Taxable 649,636 636,405 9,336 7,942 5.72 4.95 1,205 189 1,394
Non-taxable 25,141 25,942 528 549 8.40 8.47 (4) (17) (21)
Federal funds sold 40,948 8,467 676 124 6.57 5.81 18 534 552
----------- ----------- -------- ------- ------- ------- -------
Total interest-earning
assets 2,703,103 2,402,370 53,978 44,599 7.94 7.37 3,109 6,270 9,379
----------- ----------- -------- ------- ------- ------- -------
NONINTEREST-EARNING
ASSETS:
Cash and due from banks 113,320 107,952
Premises and equipment 86,806 82,179
Other, less allowance for
loan losses 42,297 27,665
----------- -----------
Total noninterest-earning
assets 242,423 217,796
----------- -----------
TOTAL ASSETS $2,945,526 $2,620,166
----------- -----------
INTEREST-BEARING LIABILITIES:
Deposits $1,892,552 $1,726,164 $19,269 $14,861 4.05 3.42 $2,723 $1,685 $4,408
Federal funds purchased and
securities sold under
agreements to repurchase 334,180 252,586 5,029 2,944 5.99 4.62 863 1,222 2,085
Long-term debt 50,963 50,440 1,025 1,037 8.05 8.22 (23) 11 (12)
----------- ----------- -------- ------- ------- ------- -------
Total interest-bearing
liabilities 2,277,695 2,029,190 25,323 18,842 4.42 3.69 3,563 2,918 6,481
----------- ----------- -------- ------- ------- ------- -------
NONINTEREST-BEARING
LIABILITIES:
Demand deposits 425,725 385,074
Other liabilities 26,293 14,548
----------- -----------
Total noninterest-bearing
liabilities 452,018 399,622
----------- -----------
Stockholders' equity 215,813 191,354
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,945,526 $2,620,166
=========== ===========
Interest rate spread 3.52% 3.68%
======= =====
Net interest margin: $28,655 $25,757 ($454) $3,352 $2,898
======== ======= ======= ======= =======
to average assets 3.89% 3.93%
======= =====
to average interest-earning
assets 4.24% 4.29%
======= =====
<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. Interest income on nonaccrual loans is generally
recognized on a cash basis.
Page 8
TABLE 3: COMPARATIVE AVERAGE BALANCE SHEETS AND TAXABLE EQUIVALENT RATE/VOLUME VARIANCE (DOLLARS IN THOUSANDS)
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------
Yield/ 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) $1,938,405 $1,646,859 $124,671 $102,715 8.59% 8.34% $3,173 $18,783 $ 21,956
Investment securities:
Taxable 649,739 625,067 27,202 23,768 5.59 5.08 2,400 1,034 3,434
Non-taxable 27,214 24,425 1,689 1,574 8.28 8.59 (58) 173 115
Federal funds sold 39,398 52,074 1,763 1,908 5.98 4.90 424 (569) (145)
----------- ----------- --------- -------- ------- -------- -----------
Total interest-earning
assets 2,654,756 2,348,425 155,325 129,965 7.82 7.40 5,939 19,421 25,360
----------- ----------- --------- -------- ------- -------- -----------
NONINTEREST-EARNING
ASSETS:
Cash and due from banks 114,830 107,188
Premises and equipment 86,153 81,240
Other, less allowance
for loan losses 42,071 26,428
----------- -----------
Total noninterest-
earning assets 243,054 214,856
----------- -----------
TOTAL ASSETS $2,897,810 $2,563,281
----------- -----------
INTEREST-BEARING
LIABILITIES:
Deposits $1,874,055 $1,693,570 $ 54,552 $ 43,715 3.89 3.45 $5,571 $ 5,266 $ 10,837
Federal funds purchased and
Securities sold under
agreements to repurchase 323,651 254,130 13,940 8,670 5.75 4.56 2,272 2,998 5,270
Long-term debt 50,963 50,148 3,149 3,100 8.24 8.24 (1) 50 49
----------- ----------- --------- -------- ------- -------- -----------
Total interest-bearing
liabilities 2,248,669 1,997,848 71,641 55,485 4.26 3.71 7,842 8,314 16,156
----------- ----------- --------- -------- ------- -------- -----------
NONINTEREST-BEARING
LIABILITIES:
Demand deposits 416,461 367,922
Other liabilities 24,274 14,154
----------- -----------
Total noninterest-bearing
liabilities 440,735 382,076
----------- -----------
Stockholders' equity 208,406 183,357
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,897,810 $2,563,281
=========== ===========
Interest rate spread 3.56% 3.69%
====== ======
Net interest margin: $83,684 $ 74,480 ($1,903) $11,107 $ 9,204
======= ======== ======== ======= =======
to average assets 3.85% 3.87%
====== =====
to average interest-earning
assets 4.20% 4.23%
====== =====
<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. Interest income on nonaccrual loans is generally
recognized on a cash basis.
Page 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
NET INTEREST INCOME (CONTINUED)
Current Quarter compared to Prior Year Quarter
- ----------------------------------------------
Net interest income on a tax equivalent basis increased $2,898 or 11.25% for the
quarter ended September 30, 2000, over the comparable period in 1999. Net
interest margin to average assets decreased from 3.93% at September 30, 1999 to
3.89% at September 30, 2000. This is attributable to a 5 basis point decrease
in the net interest margin to average interest-earning assets (4.24% compared to
4.29% for the same comparable periods), offset partially by improvement in the
ratio of earning assets to average total assets from 91.69% at September 30,
1999 to 91.77% at September 30, 2000.
Net interest margin to average interest-earning assets decreased from 4.29% at
September 30, 1999 to 4.24% at September 30, 2000. This was attributable to a
decline in the net interest spread from 3.68% at September 30, 1999 to 3.52% at
September 30, 2000, partially offset by improvement in the net interest position
from 15.53% at September 30, 1999 to 15.74% at September 30, 2000. The decline
in the net interest spread was due to the increase in the cost of
interest-bearing liabilities exceeding the increase in interest earned on
interest-earning assets. The cost of interest-bearing liabilities increased
from 3.69% at September 30, 1999 to 4.42% at September 30, 2000, or 73 basis
points, while the yield on interest-earning assets increased from 7.37% to
7.94%, or 57 basis points. The increase in the cost of interest-bearing
liabilities was due to an increase in the rates paid on deposits (primarily CDs)
and repurchase agreements. The increase in the yield on interest-earning assets
was due to an increase in the yields on loans, investment securities and federal
funds sold.
Current year-to-date period compared to Prior year-to-date period
- ------------------------------------------------------------------------
Net interest income on a tax equivalent basis increased $9,204 or 12.36% for the
nine months ended September 30, 2000, over the comparable period in 1999. Net
interest margin to average assets was relatively consistent for the nine months
ended September 30, 2000 and September 30, 1999 at 3.85% and 3.87%,
respectively. This is attributable to net interest margin to interest-earning
assets (4.20% compared to 4.23% for the same comparable periods) and the mix of
interest-earning assets to average assets remaining relatively stable.
Net interest margin to average interest-earning assets was relatively stable
despite a decline in the net interest spread from 3.69% at September 30, 1999 to
3.56% at September 30, 2000. This was attributable to improvement in the net
interest position from 14.93% at September 30, 1999 to 15.30% at September 30,
2000. The decline in the net interest spread was due to the increase in the
cost of interest-bearing liabilities exceeding the increase in interest earned
on interest-earning assets. The cost of interest-bearing liabilities increased
from 3.71% at September 30, 1999 to 4.26% at September 30, 2000, or 55 basis
points, while the yield on interest-earning assets increased from 7.40% at
September 30, 1999 to 7.82% at September 30, 2000, or 42 basis points. The
increase in the cost of interest-bearing liabilities was due to an increase in
the rates paid on deposits (primarily CDs) and repurchase agreements. The
increase in the yield on interest-earning assets was due to an increase in the
yield on loans, investment securities and federal funds sold.
NONINTEREST INCOME AND EXPENSE (DOLLARS IN THOUSANDS)
Current Quarter compared to Prior Year Quarter
- ----------------------------------------------------
Noninterest income increased by $1,645 or 19.31% for the quarter ended September
30, 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 $485 or 9.68% over the comparable
period primarily due to overall deposit growth. Additionally, commissions and
fees from fiduciary and bankcard activities increased by $117 or 23.59% and
$182 or 16.41%, respectively.
Noninterest expense increased by $3,399 or 15.33% for the quarter ended
September 30, 2000 over the comparable period in 1999 due to increases in
salaries and employee benefits, amortization of intangibles, data processing
expense and bankcard processing expense. Salaries and employee benefits
increased $1,483 or 14.64% over the comparable period primarily due to an
increase in the number of employees, the addition of Exchange Bank employees and
merit increases. Amortization of intangibles increased by $519 or 41.35% over
the comparable period due to the goodwill related to the acquisition of Exchange
Bank and other branches. Data processing expense increased $226 or 12.24% over
the comparable period due to the on-going growth realized by Bancorporation.
Bankcard processing expense increased by $100 or 8.55% over the comparable
period due to increased bankcard activity. These changes were partially offset
by a $69 or 11.37% decline in professional services. Professional services
expense was higher in 1999 due to services performed by third parties related to
Year 2000 issues.
Page 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
NONINTEREST INCOME AND EXPENSE (CONTINUED)
Current year-to-date period compared to Prior year-to-date period
- -----------------------------------------------------------------
Noninterest income increased by $4,095 or 17.09% for the nine months ended
September 30, 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 $2,345 or 17.07% over
the comparable period primarily due to overall deposit growth. Additionally,
commissions and fees from fiduciary and bankcard activities increased by $594 or
46.44% and $545 or 18.54%, respectively.
Noninterest expense increased by $8,070 or 12.31% for the nine months ended
September 30, 2000 over the comparable period in 1999 due to increases in
salaries and employee benefits, amortization of intangibles, data processing
expense and bankcard processing expense. Salaries and employee benefits
increased $4,011 or 13.16% over the comparable period primarily due to an
increase in the number of employees, the addition of Exchange Bank employees and
merit increases. Amortization of intangibles increased by $872 or 21.43% over
the comparable period due to the goodwill related to the acquisition of Exchange
Bank and other branches recorded since September 30, 1999. Data processing
expense increased $740 or 14.17% over the comparable period due to the on-going
growth realized by Bancorporation. Bankcard processing expense increased by
$380 or 11.80% 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 2.16% for the nine months ended
September 30, 1999 to a negative 2.10% for the nine months ended September 30,
2000. This was due to a 2 basis point decrease in non-interest expense to
average assets and a 4 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 $431 or 12.30% for the quarter ended
September 30, 2000 over the comparable period in 1999 due to the increase in net
income. Total income tax expense increased by $1,389 or 14.40% for the nine
months ended September 30, 2000 over the comparable period in 1999 due to the
increase in net income. The effective tax rate was 34.5% and 34.6% at September
30, 2000 and September 30, 1999, respectively.
FINANCIAL CONDITION
INVESTMENT SECURITIES (DOLLARS IN THOUSANDS)
As of September 30, 2000, the investment portfolio totaled $703,517, compared to
$610,884 at September 30, 1999. As bonds matured during the latter part of 1999,
they were invested in federal funds sold to provide liquidity for potential
issues related to Y2K. Since December 31, 1999, Bancorporation invested the
excess federal funds sold in investment securities. Bancorporation continues to
invest primarily in short-term U.S. government obligations to minimize credit,
interest rate and liquidity risk. During the nine months ended September 30,
2000, Bancorporation purchased $85,000 of Federal Home Loan Bank ("FHLB") bonds.
The FHLB is a Aaa-rated government sponsored agency. The investment portfolio
consisted of 92.52% and 90.61% U.S. government and government agency securities
as of September 30, 2000 and September 30, 1999, respectively. The remainder of
the investment portfolio consists of municipal bonds and equity securities.
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (DOLLARS IN THOUSANDS)
As of September 30, 2000, loans totaled $2,005,306 compared to $1,798,532 at
September 30, 1999, an increase of $206,774, or 11.50%, which is the result of
normal loan growth and acquisitions. Between September 30, 1999 and September
30, 2000, approximately $35,443 of loans were acquired from other financial
institutions. The composition of the loan portfolio has not shifted
significantly since September 30, 1999. Loan growth was primarily funded
through core deposits and short-term borrowed funds.
Page 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (CONTINUED)
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 nine months ended
September 30, 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 September 30,
2000 and 1999 is presented below. The allowance for loan losses is 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.
AS OF AND FOR THE AS OF AND FOR THE
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
ALLOWANCE FOR LOAN LOSSES: 2000 1999 2000 1999
-------- -------- -------- ---------
Balance at beginning of period $ 35,437 $ 30,037 $32,972 $ 28,306
Addition related to acquisitions -- 1,113 586 1,113
Provision for loan losses 1,477 1,630 4,444 4,110
-------- -------- -------- ---------
Charge-offs (1,705) (704) (3,545) (2,213)
Recoveries 327 325 1,079 1,085
-------- -------- -------- ---------
Net charge-offs (1,378) (379) (2,466) (1,128)
-------- -------- -------- ---------
Balance at end of period $ 35,536 $ 32,401 $35,536 $32,401
-------- -------- -------- ---------
Nonperforming assets $ 4,869 $ 3,205 $ 4,869 $ 3,205
Annualized net charge-offs to:
Average loans .28% .09% .17% .09%
Loans at end of period .27% .08% .16% .08%
Allowance for loan losses 15.51% 4.68% 9.25% 4.64%
FUNDING SOURCES (DOLLARS IN THOUSANDS)
Bancorporation's primary source of funds is its deposit base. Total deposits
increased $175,713 or by 8.24% from September 30, 1999 to September 30, 2000.
Between September 30, 1999 and September 30, 2000, approximately $75,912 of
deposits were acquired from other financial institutions. Average deposits were
$2,290,516 and $2,061,492 at September 30, 2000 and September 30, 1999,
respectively.
Short-term borrowings in the form of repurchase agreements are another source of
funds. Short-term borrowings increased $91,298 or by 35.89% from September 30,
1999 to September 30, 2000. Average short-term borrowings were $323,651 and
$254,130 at September 30, 2000 and September 30, 1999, respectively. This
growth is primarily attributable to repurchase agreements.
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 September 30, 2000 and 1999.
Page 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
CAPITAL RESOURCES (CONTINUED)
CAPITAL RATIOS September 30,
-----------------
2000 1999
------- --------
Tier I leverage ratio 8.36% 8.58%
Total risk-based capital ratio 13.80% 14.07%
Tier I 12.21% 12.69%
Tier II 1.59% 1.38%
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 13
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 - The following exhibits are either attached hereto or
incorporated by reference:
3.1 Articles of Incorporation of the Registrant as amended (incorporated
herein by reference to Exhibit 3.1 of the Registrant's 1994 Annual
Report on Form 10-K).
3.3 Bylaws of the Registrant as amended (incorporated herein by reference
to Exhibit 3.3 of the Registrant's 1999 Annual Report on Form 10-K).
4.1 Amended and Restated Trust Agreement of FCB/SC Capital Trust I
(incorporated herein by reference to Exhibit 4.1 of Registrant's
Statement No. 333-60319 filed with the SEC on July 31, 1998).
4.2 Form of Guaranty Agreement (incorporated herein by reference to
Exhibit 4.2 of Registrant's registration Statement No. 333-60319 filed
with the SEC on July 31, 1998).
4.3 Junior Subordinated Indenture between Registrant and Bankers Trust
Company, as Debenture Trustee (incorporated herein by reference to
Exhibit 4.3 of registrant's Registration Statement No. 333-60319 filed
with the SEC on July 31, 1998).
4.4 Form of Certificate evidencing Capital Securities (incorporated herein
by reference to Exhibit 4.5 in the Registrant's Registration Statement
No. 333-60319 filed with the SEC on July 31, 1998).
4.5 Form of Junior Subordinated Debenture (incorporated herein by
reference to Exhibit 4.6 in the Registrant's Registration Statement
No. 333-60319 filed with the SEC on July 31, 1998).
11 Statement re computation of per share earnings (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) No reports on Form 8-K were filed during the quarter ended September
30,2000
Page 14
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: November 14, 2000 By:/S/ Craig L. Nix
------------------ -----------------------------------
Craig L. Nix, Senior Vice President
(Controller)
Page 15