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, 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 October 31, 2001
----- -------------------------------
VOTING COMMON STOCK, $5.00 PAR VALUE 894,911 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,
2001 2000 2000
--------------- -------------- ---------------
ASSETS
Cash and due from banks $ 133,670 $ 156,425 $ 118,043
Federal funds sold 97,600 96,700 -
--------------- -------------- ---------------
Total cash and cash equivalents 231,270 253,125 118,043
--------------- -------------- ---------------
Investment securities:
Held-to-maturity, at amortized cost 25,710 33,519 35,292
Available-for-sale, at fair value 852,678 707,000 668,225
--------------- -------------- ---------------
Total investment securities 878,388 740,519 703,517
--------------- -------------- ---------------
Gross loans 2,223,081 2,081,871 2,005,306
Less: Allowance for loan losses (39,629) (37,001) (35,536)
--------------- -------------- ---------------
Net loans 2,183,452 2,044,870 1,969,770
--------------- -------------- ---------------
Premises and equipment 98,132 93,278 87,078
Interest receivable 23,901 24,113 20,953
Intangible assets 49,892 52,218 23,388
Other assets 29,315 32,387 32,253
--------------- -------------- ---------------
TOTAL ASSETS $ 3,494,350 $ 3,240,510 $ 2,955,002
=============== ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 492,639 $ 467,155 $ 423,371
Time and savings 2,439,272 2,088,074 1,885,855
--------------- -------------- ---------------
Total deposits 2,931,911 2,555,229 2,309,226
Securities sold under agreements to repurchase and federal
funds purchased 220,235 369,218 345,648
Long-term debt 50,963 50,963 50,963
Other liabilities 25,780 31,407 26,950
--------------- -------------- ---------------
TOTAL LIABILITIES 3,228,889 3,006,817 2,732,787
--------------- -------------- ---------------
Commitments and contingencies -- -- --
STOCKHOLDERS' EQUITY:
Preferred stock 3,201 3,219 3,231
Non-voting common stock - $5.00 par value, authorized
1,000,000; issued and outstanding September 30, 2001,
December 31, 2000 and September 30, 2000 - 36,409 182 182 182
Voting common stock - $5.00 par value, authorized 2,000,000;
issued and outstanding September 30, 2001 - 895,654;
December 31, 2000 - 899,879; and September 30, 2000 - 899,846 4,478 4,499 4,499
Surplus 65,081 65,081 65,081
Undivided profits 170,968 148,502 142,149
Accumulated other comprehensive income, net of taxes 21,551 12,210 7,073
--------------- -------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 265,461 233,693 222,215
--------------- -------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,494,350 $ 3,240,510 $ 2,955,002
=============== ============== ===============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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,
------------------ ------------------
2001 2000 2001 2000
-------- -------- -------- --------
INTEREST INCOME:
Interest and fees on loans $ 45,582 $ 43,268 $135,681 $124,157
Interest on investment securites:
Taxable 10,915 9,339 31,770 27,204
Non-taxable 237 343 774 1,098
Federal funds sold 1,422 676 7,065 1,763
-------- -------- -------- --------
Total interest income 58,156 53,626 175,290 154,222
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits 22,133 19,270 70,274 54,552
Securities sold under agreements to repurchase
and federal funds purchased 1,705 5,029 7,507 13,940
Long-term debt 1,050 1,025 3,149 3,149
-------- -------- -------- --------
Total interest expense 24,888 25,324 80,930 71,641
-------- -------- -------- --------
Net interest income 33,268 28,302 94,360 82,581
Provision for loan losses 2,583 1,477 5,186 5,030
-------- -------- -------- --------
Net interest income after
provision for loan losses 30,685 26,825 89,174 77,551
-------- -------- -------- --------
NONINTEREST INCOME:
Service charges on deposit accounts 6,674 5,496 18,950 16,080
Commissions and fees from fiduciary activities 702 613 1,975 1,873
Fees for other customer services 614 581 1,918 1,842
Mortgage servicing fees 582 554 1,708 1,662
Bankcard fees 1,496 1,291 4,117 3,484
Insurance premiums earned 629 577 1,544 1,585
Gain on sale of investment securities 886 6 3,537 32
Other 845 1,046 2,310 1,494
-------- -------- -------- --------
Total noninterest income 12,428 10,164 36,059 28,052
-------- -------- -------- --------
NONINTEREST EXPENSE:
Salaries and employee benefits 13,635 11,611 40,604 34,497
Net occupancy expense 2,052 1,621 5,677 4,909
Furniture and equipment expense 1,511 1,655 4,419 4,793
Amortization of intangibles 2,587 1,774 7,898 4,941
Bankcard processing expense 1,427 1,269 4,116 3,599
Data processing expense 2,516 2,072 7,101 5,964
Professional services 398 538 1,542 1,497
Other 6,660 5,034 17,644 13,418
-------- -------- -------- --------
Total noninterest expense 30,786 25,574 89,001 73,618
-------- -------- -------- --------
Income before income tax expense 12,327 11,415 36,232 31,985
Income tax expense 3,791 3,936 11,799 11,033
-------- -------- -------- --------
NET INCOME $ 8,536 $ 7,479 $ 24,433 $ 20,952
======== ======== ======== ========
NET INCOME PER COMMON SHARE -
BASIC AND DILUTED $ 9.10 $ 7.94 $ 25.99 $ 22.22
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING-BASIC AND DILUTED 933,871 936,238 934,828 937,341
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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 20,952 20,952
Change in unrealized gain
on investment securities
available-for-sale, net of
taxes 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
Comprehensive income:
Net income 6,637 6,637
Change in unrealized gain
on investment securities
available-for-sale, net of
taxes of $2,766 5,137 5,137
----------
Total comprehensive income 11,774
----------
Reacquired preferred stock (12) (17) (29)
Reacquired voting common stock - -
Preferred stock dividends (42) (42)
Common stock dividends (225) (225)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at December 31, 2000 3,219 182 4,499 65,081 148,502 12,210 233,693
Comprehensive income:
Net income 24,433 24,433
Change in unrealized gain
on investment securities
available-for-sale, net of
taxes of $5,029 9,341 9,341
----------
Total comprehensive income 33,774
----------
Reacquired preferred stock (18) 1 (17)
Reacquired voting common stock (21) (1,170) (1,191)
Common stock dividends (674) (674)
Preferred stock dividends (124) (124)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at September 30, 2001 $ 3,201 $ 182 $ 4,478 $ 65,081 $ 170,968 $ 21,551 $ 265,461
=========== ======= ======== ======== =========== =============== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FIANANCIAL STATEMENTS.
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,
----------------------
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 24,433 $ 20,952
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 5,186 5,030
Depreciation and amortization 12,939 10,789
Amortization (accretion) of investment securities 455 (1,357)
Change in deferred taxes (60) (3,251)
Gain on sale of premises and equipment (84) -
Decrease/(Increase) in accrued interest receivable 212 (5,818)
(Decrease)/Increase in accrued interest payable (289) 2,621
Origination of mortgage loans held-for-resale (207,097) (83,042)
Proceeds from sales of mortgage loans held-for-resale 185,096 81,300
Gain on sales of mortgage loans held-for-resale (924) (776)
Gain on sales of investment securities (3,537) -
(Increase)/Decrease in other assets (1,326) 3,145
(Decrease)/Increase in other liabilities (5,338) 1,707
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,666 31,300
========== ==========
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (120,843) (116,442)
Calls, maturities and prepayments of investment securities, available-for-sale 356,658 202,333
Purchases of investment securities, available-for-sale (484,428) (342,995)
Calls, maturities and prepayments of investment securities, held-to-maturity 12,348 6,967
Purchases of investment securities, held-to-maturity (4,994) (205)
Proceeds from sales of premises and equipment 693 120
Purchases of premises and equipment (10,504) (7,120)
Increase in other real estate owned (572) (11)
Increase in intangible assets (5,572) (1,058)
Purchase of institutions, net of cash acquired 45,980 26,461
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (211,234) (231,950)
========== ==========
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 330,702 16,865
(Decrease)/Increase in federal funds purchased and securities sold
under agreements to repurchase (148,983) 114,745
Cash dividends paid (798) (577)
Cash paid to reacquire preferred stock (17) (44)
Cash paid to reacquire common stock (1,191) (1,593)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 179,713 129,396
========== ==========
NET DECREASE IN CASH AND CASH EQUIVALENTS (21,855) (71,254)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 253,125 189,297
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 231,270 $ 118,043
========== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FIANANCIAL STATEMENTS.
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.
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations ("FAS 141") and
No. 142, Goodwill and Other Intangible Assets ("FAS 142"). FAS 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. Under FAS 142, goodwill and intangible assets with
indefinite lives are no longer amortized but are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Separable intangible
assets that are not deemed to have indefinite lives will continue to be
amortized over their useful lives (but with no maximum life). The amortization
provisions of FAS 142 apply to goodwill and intangible assets acquired after
June 30, 2001. With respect to goodwill and intangible assets acquired prior to
July 1, 2001, Bancorporation is required to adopt FAS 142 effective January 1,
2002. Bancorporation does not expect 142 to have a material effect on its'
financial statements.
ACQUISITIONS
In July 2001, the Bank completed the acquisition of four branches from an
unrelated financial institution with total deposits of approximately $45,980.
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 and nine months ended September 30, 2001 totaled
$8,536, or $9.10 per common share and $24,433, or $25.99 per common share,
respectively. 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.
The primary factors affecting the increase in net income for the quarter ended
September 30, 2001 were a $3,860 or 14.39% increase in net interest income after
provision for loan losses, and a $2,264 or 22.27% increase in noninterest
income. These favorable changes were partially offset by a $5,212 or 20.38%
increase in noninterest expense.
The primary factors affecting the increase in net income for the nine months
ended September 30, 2001 were a $11,623 or 14.99% increase in net interest
income after provision for loan losses, and a $8,007 or 28.54% increase in
noninterest income. Included in noninterest income is a nonrecurring gain of
$2,062 related to the sale of a processing company's stock owned by
Bancorporation. These favorable changes were partially offset by a $15,383 or
20.90% increase in noninterest expense, and a $766 or 6.94% increase in income
tax expense. Included in income tax expense is $691 related to the nonrecurring
gain.
Page 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
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, 2001 and September 30, 2000 was 12.98% and 13.79%,
respectively. The decrease was primarily the result of a decrease in return on
assets from 1.01% to .97% for the quarter ended September 30, 2000 and September
30, 2001, respectively. The decrease in return on assets was due to a 14 basis
point decrease in the net interest margin after provision for loan losses to
average assets, partially offset by a 10 basis point decline in income taxes to
average assets.
Return on average stockholders' equity for the nine months ended September 30,
2001 and September 30, 2000 was 13.02% and 13.43%, respectively. The decrease
was primarily the result of a decrease in return on assets from .97% to .95% for
the nine months ended September 30, 2000 and September 30, 2001, respectively.
The decrease in return on assets was due to a 10 basis points decrease in net
interest margin to average assets after provision for loan losses, partially
offset by a 4 basis points improvement in the non-interest margin to average
assets and a 4 basis points decrease in income taxes to average assets.
Net interest income is discussed further 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
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
AVERAGE BALANCES: 2001 2000 2001 2000
----------- ----------- ----------- -----------
Total assets $3,495,962 $2,945,523 $3,428,205 $2,897,810
Interest-earning assets 3,199,731 2,703,103 3,135,556 2,654,755
Investment securities 852,820 674,777 798,470 676,952
Loans 2,190,061 1,987,378 2,132,593 1,938,405
Deposits 2,932,046 2,318,277 2,842,923 2,290,516
Noninterest-bearing deposits 487,866 425,725 472,191 416,461
Interest-bearing deposits 2,444,180 1,892,552 2,370,732 1,874,055
Interest-bearing liabilities 2,714,707 2,277,695 2,672,778 2,248,669
Stockholders' equity 260,880 215,813 250,923 208,406
RATIOS:
Return on average assets .97% 1.01% .95% .97%
Return on average stockholders' equity 12.98% 13.79% 13.02% 13.43%
Return on average common stockholders' equity 13.14% 14.00% 13.19% 13.64%
Net yield on average interest-earning assets (tax
equivalent) 4.16% 4.22% 4.06% 4.21%
Average loans to average deposits 74.69% 85.73% 75.01% 84.63%
Nonperforming assets to total loans .25% .24% .25% .25%
Allowance for loan losses to total loans 1.78% 1.78% 1.78% 1.78%
Allowance for loan losses to nonperforming assets N/A N/A 7.29x 7.30x
Average stockholders' equity to average total
assets 7.46% 7.33% 7.32% 7.19%
Total risk-based capital ratio N/A N/A 12.73% 13.80%
Tier I risk-based capital ratio N/A N/A 11.48% 12.21%
Tier I leverage ratio N/A N/A 7.50% 8.36%
NET INTEREST INCOME (DOLLARS IN THOUSANDS)
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, 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 QUARTERS ENDED SEPTEMBER 30,
-----------------------------------------------
INTEREST INC/EXP YIELD/ CHANGE DUE TO (2)
AVERAGE BALANCE (1) RATE ------------------ NET
---------------------- ---------------- ---------- YIELD INCREASE
2001 2000 2001 2000 2001 2000 /RATE VOLUME (DECREASE)
---------- ---------- ------- ------- ---- ---- -------- -------- -----------
INTEREST-EARNING ASSETS:
Loans (3) $2,190,061 $1,987,378 $45,761 $43,438 8.29 8.70 $(1,878) $ 4,201 $ 2,323
Investment securities:
Taxable 834,636 649,636 10,866 9,336 5.17 5.72 (861) 2,391 1,530
Non-taxable 18,184 25,141 365 528 8.03 8.40 (23) (140) (163)
Federal funds sold 156,850 40,948 1,422 676 3.60 6.57 (297) 1,043 746
---------- ---------- ------- ------- -------- -------- -----------
Total interest-earning assets 3,199,731 2,703,103 58,414 53,978 7.24 7.94 (3,059) 7,495 4,436
---------- ---------- ------- ------- -------- -------- -----------
NONINTEREST-EARNING ASSETS:
Cash and due from banks 137,274 113,320
Premises and equipment 97,676 86,806
Other, less allowance for loan losses 61,281 42,294
---------- ----------
Total noninterest-earning assets 296,231 242,420
---------- ----------
TOTAL ASSETS $3,495,962 $2,945,523
---------- ----------
INTEREST-BEARING LIABILITIES:
Deposits $2,444,180 $1,892,552 $22,133 $19,270 3.59 4.05 $(2,088) $ 4,951 $ 2,863
Federal funds purchased and
securities sold under
agreements to repurchase 219,564 334,180 1,705 5,029 3.08 5.99 (2,441) (883) (3,324)
Long-term debt 50,963 50,963 1,050 1,025 8.24 8.24 -- -- --
---------- ---------- ------- ------- -------- -------- -----------
Total interest-bearing liabilities 2,714,707 2,277,695 24,888 25,324 3.64 4.42 (4,529) 4,068 (461)
---------- ---------- ------- ------- -------- -------- -----------
NONINTEREST-BEARING LIABILITIES:
Demand deposits 487,866 425,725
Other liabilities 32,509 26,290
---------- ----------
Total noninterest-bearing liabilities 520,375 452,015
---------- ----------
TOTAL LIABILITIES 3,235,082 2,729,710
---------- ----------
Stockholders' equity 260,880 215,813
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,495,962 $2,945,523
========== ==========
Net interest spread 3.60 3.52
==== ====
Net interest margin: $33,526 $28,654 $ 1,470 $ 3,427 $ 4,897
======= ======= ======== ======== ===========
to average assets 3.80 3.87
==== ====
to average interest-earning
assets 4.16 4.22
==== ====
<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,
-------------------------------------------------
INTEREST INC/EXP YIELD/ CHANGE DUE TO (2)
AVERAGE BALANCE (1) RATE ----------------- NET
---------------------- ------------------ ---------- YIELD INCREASE
2001 2000 2001 2000 2001 2000 /RATE VOLUME (DECREASE)
---------- ---------- -------- -------- ---- ---- -------- -------- -----------
INTEREST-EARNING ASSETS:
Loans (3) $2,132,593 $1,938,405 $136,230 $124,671 8.54 8.59 $ (879) $12,438 $ 11,559
Investment securities:
Taxable 778,955 649,738 31,770 27,204 5.45 5.59 (716) 5,282 4,566
Non-taxable 19,515 27,214 1,191 1,689 8.14 8.28 (28) (470) (498)
Federal funds sold 204,493 39,398 7,065 1,763 4.62 5.98 (419) 5,721 5,302
---------- ---------- -------- -------- -------- -------- -----------
Total interest-earning assets 3,135,556 2,654,755 176,256 155,327 7.52 7.82 (2,042) 22,971 20,929
---------- ---------- -------- -------- -------- -------- -----------
NONINTEREST-EARNING ASSETS:
Cash and due from banks 133,645 114,830
Premises and equipment 95,853 86,153
Other, less allowance for loan
losses 63,151 42,072
---------- ----------
Total noninterest-earning assets 292,649 243,055
---------- ----------
TOTAL ASSETS $3,428,205 $2,897,810
---------- ----------
INTEREST-BEARING LIABILITIES:
Deposits $2,370,732 $1,874,055 $ 70,274 $ 54,552 3.96 3.89 $ 971 $14,751 $ 15,722
Federal funds purchased and
securities sold under
agreements to repurchase 251,083 323,651 7,507 13,940 4.00 5.75 (4,256) (2,177) (6,433)
Long-term debt 50,963 50,963 3,149 3,149 8.24 8.24 - - -
---------- ---------- -------- -------- -------- -------- -----------
Total interest-bearing
liabilities 2,672,778 2,248,669 80,930 71,641 4.05 4.26 (3,285) 12,574 9,289
---------- ---------- -------- -------- -------- -------- -----------
NONINTEREST-BEARING LIABILITIES:
Demand deposits 472,191 416,461
Other liabilities 32,313 24,274
---------- ----------
Total noninterest-bearing
liabilities 504,504 440,735
---------- ----------
Total Liabilities 3,177,282 2,689,404
---------- ----------
Stockholders' equity 250,923 208,406
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,428,205 $2,897,810
========== ==========
Interest rate spread 3.47 3.56
==== ====
Net interest margin: $ 95,326 $ 83,686 $ 1,243 $10,397 $ 11,640
======== ======== ======== ======== ===========
to average assets 3.72 3.86
==== ====
To average interest-earning
assets 4.06 4.21
==== ====
<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 $4,872 or 17.00% for the
quarter ended September 30, 2001, over the comparable period in 2000. Net
interest margin to average assets decreased from 3.87% for the quarter ended
September 30, 2000 to 3.80% for the quarter ended September 30, 2001. This is
attributable to a 6 basis point decrease in the net interest margin to average
interest-earning assets (4.16% compared to 4.22% for the same comparable
periods). The mix of interest-earning assets to average total assets remained
relatively stable.
Net interest margin to average interest-earning assets decreased from 4.22% for
the quarter ended September 30, 2000 to 4.16% for the quarter ended September
30, 2001. This was attributable to a decline in the net interest position from
15.74% for the quarter ended September 30, 2000 to 15.16% for the quarter ended
September 30, 2001 (the gain from the net interest-position declined from 70
basis points to 55 basis points for the comparable quarters), partially offset
by improvement in the net interest spread from 3.52% at September 30, 2000 to
3.60% at September 30, 2001. The increase in the net interest spread was due to
the decrease in the cost of interest bearing liabilities exceeding the decrease
in the interest earned on interest-earning assets. The yield on
interest-earning assets decreased from 7.94% at September 30, 2000 to 7.24% at
September 30, 2001, or 70 basis points, while the cost of interest-bearing
liabilities decreased from 4.42% to 3.64%, or 78 basis points. The decrease in
the yield on interest-earning assets was due to a decrease in the yields on
loans, taxable investment securities and federal funds sold. The decrease in
the cost of interest-bearing liabilities was due to a decrease in the rates paid
on interest-bearing deposits and securities sold under agreements to repurchase.
CURRENT YEAR-TO-DATE PERIOD COMPARED TO PRIOR YEAR-TO-DATE PERIOD
- -----------------------------------------------------------------
Net interest income on a tax equivalent basis increased $11,640 or 13.91% for
the nine months ended September 30, 2001, over the comparable period in 2000.
Net interest margin to average assets decreased from 3.86% for the nine months
ended September 30, 2000 to 3.72% for the nine months ended September 30, 2001.
This is attributable to a 15 basis point decrease in the net interest margin to
average interest-earning assets (4.06% compared to 4.21% for the same comparable
periods). The mix of interest-earning assets to average total assets remained
relatively stable.
Net interest margin to average interest-earning assets decreased from 4.21% for
the nine months ended September 30, 2000 to 4.06% for the nine months ended
September 30, 2001. This was primarily attributable to a decline in the net
interest spread from 3.56% for the nine months ended September 30, 2000 to 3.47%
for the nine months ended September 30, 2001. The decline in the net interest
spread was due to the decrease in interest earned on interest-earning assets
exceeding the decrease in the cost of interest-bearing liabilities. The yield
on interest-earning assets decreased from 7.82% at September 30, 2000 to 7.52%
at September 30, 2001, or 30 basis points, while the cost of interest-bearing
liabilities decreased from 4.26% to 4.05%, or 21 basis points. The decrease in
the yield on interest-earning assets was primarily due to a decrease in the
yields on taxable investment securities and federal funds sold. The decrease in
the cost of interest-bearing liabilities was primarily due to a decrease in the
rates paid on securities sold under agreements to repurchase.
NONINTEREST INCOME AND EXPENSE (DOLLARS IN THOUSANDS)
CURRENT QUARTER COMPARED TO PRIOR YEAR QUARTER
- ----------------------------------------------------
Noninterest income increased by $2,264 or 22.27% for the quarter ended September
30, 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 $1,178 or 21.43% over the comparable period primarily due
to overall deposit growth. Bankcard fees increased by $205 or 15.88%. Gain on
sale of securities increased by $880 over the comparable period.
Noninterest expense increased by $5,212 or 20.38% for the quarter ended
September 30, 2001 over the comparable period in 2000 due to increases in
salaries and employee benefits expense, amortization of intangibles, data
processing expense and bankcard processing expense. Salaries and employee
benefits expense increased $2,024 or 17.43% 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 $813 or 45.83% over the comparable period due to the goodwill
related to the acquisition of seven new branches in December 2000. Data
processing expense increased $444 or 21.43% over the comparable period due to
the on-going growth realized by Bancorporation. Bankcard processing expense
increased by $158 or 12.45% over the comparable period due to increased bankcard
activity.
Overall, the noninterest margin (noninterest income less noninterest expense) to
average assets remained constant at a negative 2.08% for the quarter ended
September 30, 2000 and for the quarter ended September 30, 2001. This was due
to a 4 basis point decrease in non-interest expense to average assets, offset by
a 4 basis point increase in non-interest income to average assets.
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 $8,007 or 28.54% for the nine months ended
September 30, 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 $2,870 or 17.85% over the comparable
period primarily due to overall deposit growth. Bankcard fees increased by $633
or 18.17%. Gain on sale of securities increased by $3,505 over the comparable
period.
Noninterest expense increased by $15,383 or 20.90% for the nine months ended
September 30, 2001 over the comparable period in 2000 due to increases in
salaries and employee benefits expense, amortization of intangibles, data
processing expense and bankcard processing expense. Salaries and employee
benefits expense increased $6,107 or 17.70% 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 $2,957 or 59.85% over the comparable period due to the goodwill
related to the acquisition of seven new branches in December 2000. Data
processing expense increased $1,137 or 19.06% over the comparable period due to
the on-going growth realized by Bancorporation. Bankcard processing expense
increased by $517 or 14.37% 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 2.10% for the nine months ended
September 30, 2000 to a negative 2.06% for the nine months ended September 30,
2001. This was due to a 12 basis point increase in non-interest income to
average assets and an 8 basis point increase in non-interest expense to average
assets.
INCOME TAXES (DOLLARS IN THOUSANDS)
Total income tax expense decreased by $145 or 3.68% for the quarter ended
September 30, 2001 over the comparable period in 2000 due to the decrease in the
effective tax rate. Total income tax expense increased by $766 or 6.94% for the
nine months ended September 30, 2001 over the comparable period in 2000 due to
the increase in net income. The effective tax rate was 32.57% and 34.49% at
September 30, 2001 and September 30, 2000, respectively.
FINANCIAL CONDITION
INVESTMENT SECURITIES (DOLLARS IN THOUSANDS)
As of September 30, 2001, the investment portfolio totaled $878,388, compared to
$703,517 at September 30, 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 94.27% and 92.52% U.S. government and
government agency securities as of September 30, 2001 and September 30, 2000,
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, 2001, loans totaled $2,223,081, compared to $2,005,306 at
September 30, 2000, an increase of $217,775, or 10.86%, which is primarily the
result of normal loan growth. Between September 30, 2000 and September 30,
2001, approximately $32,000 of loans were acquired from other financial
institutions. The composition of the loan portfolio has not shifted
significantly since September 30, 2000. Loan growth was 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 that
is adequate to absorb potential losses inherent in the loan portfolio.
Management believes that the provision taken during the nine months ended
September 30, 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 September 30,
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 AS OF AND FOR THE
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------- -------- -------- --------
ALLOWANCE FOR LOAN LOSSES: 2001 2000 2001 2000
-------- -------- -------- --------
Balance at beginning of period $38,459 $35,437 $37,001 $32,972
Provision for loan losses 2,583 1,477 5,186 5,030
-------- -------- -------- --------
Charge-offs (1,784) (1,705) (3,645) (3,545)
Recoveries 371 327 1,087 1,079
-------- -------- -------- --------
Net charge-offs (1,413) (1,378) (2,558) (2,466)
-------- -------- -------- --------
Balance at end of period $39,629 $35,536 $39,629 $35,536
-------- -------- -------- --------
Nonperforming assets $ 5,434 $ 4,869 $ 5,434 $ 4,869
Annualized net charge-offs to:
Average loans .26% .28% .16% .17%
Loans at end of period .25% .27% .15% .16%
Allowance for loan losses 14.15% 15.43% 8.63% 9.27%
FUNDING SOURCES (DOLLARS IN THOUSANDS)
Bancorporation's primary source of funds is its deposit base. Total deposits
increased $622,685 or by 26.97% from September 30, 2000 to September 30, 2001.
Between September 30, 2000 and September 30, 2001, approximately $231,431 of
deposits were acquired from other financial institutions. Additionally,
$188,162 of securities sold under agreements to repurchase were reclassified to
deposits in February, 2001. Average deposits were $2,842,923 and $2,290,516 at
September 30, 2001 and September 30, 2000, respectively.
Short-term borrowings in the form of securities sold under agreements to
repurchase are another source of funds. Short-term borrowings decreased
$125,413 or 36.28% from September 30, 2000 to September 30, 2001, primarily due
to the reclassification discussed in the previous paragraph. Average short-term
borrowings were $251,083 and $323,651 at September 30, 2001 and September 30,
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 September 30, 2001 and 2000.
Page 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
CAPITAL RESOURCES (CONTINUED)
CAPITAL RATIOS
September 30,
----------------
2001 2000
-------- -------
Tier I leverage ratio 7.50% 8.36%
Total risk-based capital ratio 12.73% 13.80%
Tier I 11.48% 12.21%
Tier II 1.25% 1.59%
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 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 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
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).
10.1 Employment Agreement between E. Hite Miller, Sr. and the Bank dated
April 21, 1998 (incorporated herein by reference to Exhibit 10.2 in
the Registrant's 1998 Annual Report on Form 10-K).
*10.2 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1998, between the Bank and
E. Hite Miller, Sr. (incorporated herein by reference to Exhibit 10.3
in the Registrant's 1998 Annual Report on Form 10-K).
Page 14
*10.3 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1998, between the Bank and
Jim B. Apple (incorporated herein by reference to Exhibit 10.4 in the
Registrant's 1998 Annual Report on Form 10-K).
*10.4 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1998, between the Bank and
Jay C. Case (incorporated herein by reference to Exhibit 10.5 in the
Registrant's 1998 Annual Report on Form 10-K).
*10.5 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1998, between the Bank and
Charles S. McLaurin, III (incorporated herein by reference to Exhibit
10.6 in the Registrant's 1998 Annual Report on Form 10-K).
*10.6 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1998, between the Bank and
Charles D. Cook (incorporated herein by reference to Exhibit 10.7 in
the Registrant's 1998 Annual Report on Form 10-K).
11 Statement re computation of per share earnings (filed herewith).
* Denotes a management contract or compensatory plan or arrangement in
which an executive officer or director of Registrant participates.
(b) No reports on Form 8-K were filed during the quarter ended September
30, 2001
Page 15
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 13, 2001 By: /S/ Craig L. Nix
----------------------- -----------------------------
Craig L. Nix
(Chief Financial Officer)
Page 16