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, 2001 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) 733-2659
---------------
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, 2001
----- -----------------------------
VOTING COMMON STOCK, $5.00 PAR VALUE 898,244 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)
MARCH 31, December 31, March 31,
2001 2000 2000
----------- -------------- -----------
ASSETS
Cash and due from banks $ 136,494 $ 156,425 $ 118,473
Federal funds sold 328,800 96,700 36,500
----------- -------------- -----------
Total cash and cash equivalents 465,294 253,125 154,973
----------- -------------- -----------
Investment securities:
Held-to-maturity, at amortized cost 36,822 33,519 33,752
Available-for-sale, at fair value 707,551 707,000 674,491
----------- -------------- -----------
Total investment securities 744,373 740,519 708,243
----------- -------------- -----------
Gross loans 2,089,855 2,081,871 1,925,368
Less: Allowance for loan losses (37,197) (37,001) (34,265)
----------- -------------- -----------
Net loans 2,052,658 2,044,870 1,891,103
----------- -------------- -----------
Premises and equipment 94,621 93,278 86,087
Interest receivable 22,809 24,113 17,422
Intangible assets 50,353 52,218 25,823
Other assets 29,431 32,387 34,431
----------- -------------- -----------
TOTAL ASSETS $3,459,539 $ 3,240,510 $2,918,082
=========== ============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 507,732 $ 467,155 $ 427,074
Time and savings 2,377,235 2,088,074 1,887,519
----------- -------------- -----------
Total deposits 2,884,967 2,555,229 2,314,593
Securities sold under agreements to repurchase and federal
funds purchased 239,264 369,218 324,969
Long-term debt 50,963 50,963 50,963
Other liabilities 37,067 31,407 25,649
----------- -------------- -----------
TOTAL LIABILITIES 3,212,261 3,006,817 2,716,174
----------- -------------- -----------
Commitments and contingencies -- -- --
STOCKHOLDERS' EQUITY:
Preferred stock 3,202 3,219 3,248
Non-voting common stock - $5.00 par value, authorized
1,000,000; issued and outstanding March 31, 2001,
December 31, 2000 and March 31, 2000 - 36,409 182 182 182
Voting common stock - $5.00 par value, authorized 2,000,000;
issued and outstanding March 31, 2001 - 898,379;
December 31, 2000 - 899,879; and March 31, 2000 - 900,870 4,492 4,499 4,504
Surplus 65,081 65,081 65,081
Undivided profits 156,238 148,502 128,317
Accumulated other comprehensive income, net of taxes 18,083 12,210 576
----------- -------------- -----------
TOTAL STOCKHOLDERS' EQUITY 247,278 233,693 201,908
----------- -------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,459,539 $ 3,240,510 $2,918,082
=========== ============== ===========
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
QUARTER ENDED
MARCH 31,
------------------
2001 2000
-------- --------
INTEREST INCOME:
Interest and fees on loans $ 44,802 $ 38,881
Interest on investment securites:
Taxable 10,192 8,184
Non-taxable 283 390
Federal funds sold 3,261 910
-------- --------
Total interest income 58,538 48,365
-------- --------
INTEREST EXPENSE:
Deposits 24,122 17,014
Securities sold under agreements to repurchase
and federal funds purchased 3,733 4,127
Long-term debt 1,050 1,050
-------- --------
Total interest expense 28,905 22,191
-------- --------
Net interest income 29,633 26,174
Provision for loan losses 624 1,559
-------- --------
Net interest income after
provision for loan losses 29,009 24,615
-------- --------
NONINTEREST INCOME:
Service charges on deposit accounts 5,897 5,080
Commissions and fees from fiduciary activities 625 610
Fees for other customer services 646 611
Mortgage servicing fees 561 549
Bankcard fees 1,238 1,004
Insurance premiums earned 400 358
Gain on sale of investment securities 1,793 31
Other 728 183
-------- --------
Total noninterest income 11,888 8,426
-------- --------
NONINTEREST EXPENSE:
Salaries and employee benefits 13,238 11,291
Net occupancy expense 1,830 1,671
Furniture and equipment expense 1,443 1,616
Amortization of intangibles 2,652 1,378
Bankcard processing expense 1,297 1,061
Data processing expense 2,096 1,873
Professional services 576 494
Other 5,127 3,947
-------- --------
Total noninterest expense 28,259 23,331
-------- --------
Income before income tax expense 12,638 9,710
Income tax expense 4,234 3,350
-------- --------
NET INCOME $ 8,404 $ 6,360
======== ========
- --------------------------------------------------------------------
====================================================================
- --------------------------------------------------------------------
NET INCOME PER COMMON SHARE -
BASIC AND DILUTED $ 8.93 $ 6.73
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING-BASIC AND DILUTED 936,158 938,902
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, 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 gains
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
Comprehensive income:
Net income 21,229 21,229
Change in unrealized gains
on investment securities
available-for-sale, net of
taxes of $6,264 11,634 11,634
----------
Total comprehensive income 32,863
----------
Reacquired preferred stock (29) (16) (45)
Reacquired voting common stock (5) (226) (231)
Preferred stock dividends (127) (127)
Common stock dividends (675) (675)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at December 31, 2000 3,219 182 4,499 65,081 148,502 12,210 233,693
Comprehensive income:
Net income 8,404 8,404
Change in unrealized gains
on investment securities
available-for-sale, net of
taxes of $2,959 5,873 5,873
----------
Total comprehensive income 14,277
----------
Reacquired preferred stock (17) 3 (14)
Reacquired voting common stock (7) (405) (412)
Common stock dividends (225) (225)
Preferred stock dividends (41) (41)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at March, 2001 $ 3,202 $ 182 $ 4,492 $ 65,081 $ 156,238 $ 18,083 $ 247,278
=========== ======= ======== ======== =========== =============== ==========
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,
----------------------
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,404 $ 6,360
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 624 1,559
Depreciation and amortization 4,260 3,370
(Accretion) amortization of investment securities 938 (731)
Deferred income tax benefit (105) (134)
decrease (Increase) in interest receivable 1,304 (2,287)
Increase in interest payable 2,393 1,913
Origination of mortgage loans held-for-sale (53,664) (20,233)
Proceeds from sales of mortgage loans held-for-sale 50,346 21,134
Gains on sales of mortage loans held-for-sale (214) (64)
Gains on call or sale of investment securities (1,793) (31)
Decrease in other assets 119 1,376
Increase in other liabilities 3,267 1,114
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 15,879 13,346
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (4,880) (38,504)
Calls, maturities and prepayments of investment securities held-to-maturity 2,456 7,881
Purchases of investment securities held-to-maturity (6,697) (205)
Calls, maturities and prepayments of investment securities available-for-sale 127,112 63,308
Purchases of investment securities available-for-sale (116,835) (220,231)
Proceeds from sales of premises and equipment 0 0
Purchases of premises and equipment (2,951) (2,158)
Increase in other real estate owned (220) (39)
Increase in intangible assets (787) (87)
Purchase of institutions, net of cash acquired 0 24,478
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (2,802) (165,557)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 329,738 25,254
Increase in federal funds purchased and securities sold
under agreements to repurchase (129,954) 94,065
Cash dividends paid (266) (42)
Cash paid to reacquire preferred stock (14) (28)
Cash paid to reacquire common stock (412) (1,362)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 199,092 117,887
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 212,169 (34,324)
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 253,125 189,297
---------- ----------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 465,294 $ 154,973
========== ==========
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 2000. The significant accounting policies used during the current
quarter are unchanged from those disclosed in the 2000 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 2001 presentation.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
Statement replaces SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." It revises the standard
for accounting for securitizations and other transfers of financial assets
(including loan sales) and collateral and requires certain disclosures, but it
carries over most of the provisions of SFAS No. 125 without reconsideration.
Bancorporation adopted this statement on January 1, 2001. Adoption of this
statement did not have a material impact on the consolidated financial
statements of Bancorporation.
ACQUISITIONS (DOLLARS IN THOUSANDS)
There were no acquisitions during the quarter ending March 31, 2001.
SUBSEQUENT EVENTS
On February 14, 2001, the Bank entered into a purchase and assumption agreement
to acquire four branches from an unrelated financial institution with estimated
total deposits and loans of $56,000 and $41,000, respectively. The acquisition
is expected to be completed during the third quarter of 2001 pending regulatory
approvals.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This discussion may contain statements that could be deemed forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934 and the Private Securities Litigation Reform Act, which statements are
inherently subject to risks and uncertainties. Forward-looking statements are
statements that include projections, predictions, expectations or beliefs about
future events or results or otherwise are not statements of historical fact.
Such statements are often characterized by the use of the qualifying words (and
their derivatives) such as "expect," "believe," "estimate," "plan," "project,"
"anticipate," or other statements concerning opinions or judgments of
Bancorporation and its management about future events. Factors that could
influence the accuracy of such forward-looking statements include, but are not
limited to, the financial success or changing strategies of Bancorporations'
customers, actions of government regulators, the level of market interest rates,
and general economic conditions.
SUMMARY (DOLLARS IN THOUSANDS)
Net income for the quarter ended March 31, 2001 totaled $8,404, or $8.93 per
common share. Net income for the quarter ended March 31, 2000 totaled $6,360,
or $6.73 per common share.
The primary factors affecting the increase in net income for the quarter ended
March 31, 2001 were a $4,394 or 17.85% increase in net interest income after
provision for loan losses, and a $3,462 or 41.09% increase in noninterest
income. Included in noninterest income is a nonrecurring gain of $1,793 related
to a nonmonetary exchange of a processing company's stock owned by
Bancorporation. These favorable changes were partially offset by a $4,928 or
21.12% increase in noninterest expense, and a $884 or 26.39% increase in income
tax expense. Included in income tax expense is $601 related to the nonrecurring
gain.
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, 2001 and March 31, 2000 were 14.22% and 12.50%, respectively.
The increase was primarily the result of an increase in return on average assets
from .90% to 1.02% for the quarter ended March 31, 2000 and March 31, 2001,
respectively. The increase in return on assets was due to a 24 basis point
increase in noninterest income to average assets. This was offset by an
increase of 12 basis points in noninterest expense to average assets.
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: 2001 2000
----------- -----------
Total assets $3,353,687 $2,817,140
Interest-earning assets 3,057,506 2,575,796
Investment securities 751,988 641,689
Loans 2,078,094 1,868,559
Total liabilities 3,113,981 2,613,606
Deposits 2,728,660 2,236,351
Noninterest-bearing deposits 456,248 399,327
Interest-bearing deposits 2,272,412 1,837,024
Interest-bearing liabilities 2,626,182 2,191,200
Stockholders' equity 239,706 203,534
SELECTED RATIOS:
Return on average assets 1.02% .90%
Return on average stockholders' equity 14.22% 12.50%
Return on average common stockholders' equity 14.41% 12.70%
Net yield on average interest-earning assets (tax equivalent) 3.98% 4.15%
Average loans to average deposits 76.24% 83.55%
Nonperforming assets to total loans .21% .17%
Allowance for loan losses to total loans 1.78% 1.78%
Allowance for loan losses to nonperforming assets 8.68x 10.90x
Average stockholders' equity to average total assets 7.15% 7.22%
Total risk-based capital ratio 12.14% 13.20%
Tier I risk-based capital ratio 10.89% 11.96%
Tier I leverage ratio 7.02% 8.16%
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 taxable equivalent basis for the quarters ended March 31,
2001 and 2000.
Page 7
TABLE 2: COMPARATIVE AVERAGE BALANCE SHEETS AND TAXABLE EQUIVALENT RATE/VOLUME VARIANCE (DOLLARS IN THOUSANDS)
AS OF AND FOR THE QUARTER ENDED MARCH 31,
------------------------------------------------------------
Yield/ Change Due to(2)
Average Balance Interest Inc/Exp(1) Rate ---------------- Net
------------------------ ------------------ -------------- Yield Increase
2001 2000 2001 2000 2001 2000 /Rate Volume (Decrease)
----------- ----------- -------- -------- ------- ----- ------- -------- -----------
INTEREST-EARNING ASSETS:
Loans (3) $2,078,094 $1,868,559 $44,988 $39,061 8.78% 8.41% $1,328 $ 4,599 $ 5,927
Investment securities:
Taxable 730,770 612,553 10,289 8,184 5.71 5.37 417 1,688 2,105
Non-taxable 21,218 29,136 435 600 8.20 8.24 (3) (162) (165)
Federal funds sold 227,424 65,548 3,094 910 5.52 5.58 (50) 2,234 2,184
----------- ----------- -------- -------- ------- -------- -----------
Total interest-earning assets 3,057,506 2,575,796 58,806 48,755 7.80 7.61 1,692 8,359 10,051
----------- ----------- -------- -------- ------- -------- -----------
NONINTEREST-EARNING ASSETS:
Cash and due from banks 134,606 116,823
Premises and equipment 94,245 85,135
Other, less allowance for loan
losses 67,330 39,386
----------- -----------
Total noninterest-earning assets 296,181 241,344
----------- -----------
TOTAL ASSETS $3,353,687 $2,817,140
----------- -----------
INTEREST-BEARING LIABILITIES:
Deposits 2,272,412 $1,837,024 $24,121 $17,014 4.30 3.73 $2,427 $ 4,680 $ 7,107
Federal funds purchased and
securities sold under
agreements to repurchase 302,807 303,213 3,665 4,127 4.91 5.47 (457) (5) (462)
Long-term debt 50,963 50,963 1,050 1,050 8.24 8.24 0 0 0
----------- ----------- -------- -------- ------- -------- -----------
Total interest-bearing
liabilities 2,626,182 2,191,200 28,836 22,191 4.45 4.07 1,970 4,675 6,645
----------- ----------- -------- -------- ------- -------- -----------
NONINTEREST-BEARING LIABILITIES:
Demand deposits 456,248 399,327
Other liabilities 31,551 23,079
----------- -----------
Total noninterest-bearing
liabilities 487,799 422,406
----------- -----------
TOTAL LIABILITIES 3,113,981 2,613,606
----------- -----------
Stockholders' equity 239,706 203,534
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,353,687 $2,817,140
=========== ===========
NET INTEREST SPREAD 3.35% 3.54%
======= =====
NET INTEREST MARGIN: $ 29,970 $ 26,564 ($278) $ 3,684 $ 3,406
======== ======== ======= ======== ===========
to average assets 3.62% 3.77%
======= =====
to average interest-earning
assets 3.98% 4.15%
======= =====
<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 (CONTINUED)
Net interest income on a taxable equivalent basis increased $3,406 or 12.82% for
the quarter ended March 31, 2001, over the comparable period in 2000. Net
interest margin to average assets decreased from 3.77% for the quarter ended
March 31, 2000 to 3.62% for the quarter ended March 31, 2001. This is
attributable to a 17 basis point decrease in the net interest margin to average
interest-earning assets (3.98% compared to 4.15% for the same comparable
periods), and a decrease in the ratio of earning assets to average assets from
91.43% at March 31, 2000 to 91.17% at March 31, 2001.
Net interest margin to average interest-earning assets decreased from 4.15% for
the quarter ended March 31, 2000 to 3.98% for the quarter ended March 31, 2001.
This was attributable to a decline in the net interest spread from 3.54% for the
quarter ended March 31, 2000 to 3.35% for the quarter ended March 31, 2001. 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 4.07% at March 31, 2000 to 4.45% at March 31, 2001, or 38 basis points,
while the yield on interest-earning assets increased from 7.61% to 7.80%, or 19
basis points. The increase in the cost of interest-bearing liabilities was due
to an increase in the rates paid on deposits (primarily CDs). The increase in
the yield on interest-earning assets was due to an increase in the yields on
loans and taxable investment securities.
NONINTEREST INCOME AND EXPENSE (DOLLARS IN THOUSANDS)
Noninterest income increased by $3,462 or 41.09% for the quarter ended March 31,
2001, over the comparable period in 2000 due to increases in service charges on
deposits, bankcard fees and gain on sale of securities. Service charges on
deposits increased by $817 or 16.08% over the comparable period primarily due to
overall deposit growth. Bankcard activities increased by $234 or 23.31%. Gain
on sale on securities increased $1,762 or 5683.87% over the comparable period.
This increase was due to the recognition of a nonrecurring gain of $1,793 due to
the nonmonetary exchange of a processing company's stock owned by
Bancorporation.
Noninterest expense increased by $4,928 or 21.12% for the quarter ended March
31, 2001 over the comparable period in 2000 due to increases in salaries and
employee benefits, amortization of intangibles, data processing expense and
bankcard processing expense. Salaries and employee benefits increased $1,947 or
17.24% over the comparable period primarily due to an increase in the number of
employees, the addition of seven new branches in December 2000, and merit
increases. Amortization of intangibles increased by $1,274 or 92.45% over the
comparable period due to the goodwill related to the acquisition of seven new
branches in December 2000. Data processing expense increased $223 or 11.91%
over the comparable period due to the on-going growth realized by
Bancorporation. Bankcard processing expense increased by $236 or 22.24% 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 2.11% for the quarter ended March 31,
2000 to a negative 1.98% for the quarter ended March 31, 2001. This was due to
a 24 basis point increase in noninterest income to average assets, offset by a
11 basis point increase in non-interest expense 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 $884 or 26.39% for the quarter ended March
31, 2001 over the comparable period in 2000 due to the increase in net income.
The effective tax rate was 33.5% and 34.5% at March 31, 2001 and March 31, 2000,
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, 2001, the investment portfolio totaled $744,373, compared to
$708,243 at March 31, 2000. The investment portfolio increased as funds were
shifted from federal funds sold to the bond portfolio. Bancorporation continues
to invest primarily in short-term U.S. government obligations and agency
securities to minimize credit, interest rate and liquidity risk. The investment
portfolio consisted of 91.88% and 90.84% U.S. government and government agency
securities as of March 31, 2001 and March 31, 2000, 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, 2001, loans totaled $2,089,855, compared to $1,925,368 at March
31, 2000, an increase of $164,487, or 8.54%, which is the result of normal loan
growth and acquisitions. Between March 31, 2000 and March 31, 2001,
approximately $32,592 of loans were acquired from other financial institutions.
The composition of the loan portfolio has not shifted significantly since March
31, 2000. Loan growth was funded through core deposits and short-term borrowed
funds.
During the month of February 2001, Bancorporation sold approximately $22 million
of mortgage loans to a third party investor. The effect on the consolidated
statements of income was not significant.
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 quarter ended March 31,
2001 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, 2001
and 2000 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
QUARTER ENDED
MARCH 31,
------------------
ALLOWANCE FOR LOAN LOSSES: 2001 2000
-------- --------
Balance at beginning of period $37,001 $32,972
Provision for loan losses 624 1,559
-------- --------
Charge-offs (767) (700)
Recoveries 339 434
-------- --------
Net charge-offs (428) (266)
-------- --------
Balance at end of period $37,197 $34,265
-------- --------
Nonperforming assets $ 4,285 $ 3,143
Annualized net charge-offs to:
Average loans .08% .06%
Loans at end of period .08% .06%
Allowance for loan losses 4.60% 3.11%
FUNDING SOURCES (DOLLARS IN THOUSANDS)
Bancorporation's primary source of funds is its deposit base. Total deposits
increased $570,374 or by 24.64% from March 31, 2000 to March 31, 2001. Between
March 31, 2000 and March 31, 2001, approximately $189,123 of deposits were
acquired from other financial institutions. Additionally, $226,096 formerly
classified as securities sold under agreements to repurchase were reclassified
to deposits at the beginning of February, 2001. Average deposits were
$2,728,660 and $2,236,351 at March 31, 2001 and March 31, 2000, 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 decreased $85,705 or by 26.37% from March 31, 2000
to March 31, 2001, primarily due to the reclassification discussed in the
previous paragraph. Average short-term borrowings were $302,807 and $303,213 at
March 31, 2001 and March 31, 2000, 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, 2001 and 2000.
CAPITAL RATIOS MARCH 31,
---------------
2001 2000
----- -----
Tier I leverage ratio 7.02% 8.16%
Total risk-based capital ratio 12.14% 13.20%
Tier I 10.89% 11.96%
Tier II 1.25% 1.24%
ITEM 3. 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, 2000.
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- 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 1997 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
Registration 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).
(b) No reports on Form 8-K were filed during the quarter ended March 31, 2001
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, 2001 By: /s/ Craig L. Nix
----------------- ---------------------------
Craig L. Nix
(Chief Financial Officer)
Page 13