<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-6136
CORUS BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0823592
(State of incorporation of organization) (I.R.S. Employer Identification No.)
3959 N. Lincoln Ave., Chicago, Illinois 60613
(Address of principal executive offices) (Zip Code)
(773) 549-7100
(Registrant's telephone number)
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 and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
As of October 31, 1996, the Registrant had 14,825,242 common shares, $0.05 par
value, outstanding.
<PAGE> 2
CORUS Bankshares, Inc.
Index to Quarterly Report on Form 10-Q
September 30, 1996
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION. PAGE
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Condition (unaudited) -
September 30, 1996, December 31, 1995 and September 30, 1995. 1
Condensed Consolidated Statements of Income (unaudited) -
Three and Nine Months Ended September 30, 1996 and 1995. 2
Condensed Consolidated Statements of Cash Flows (unaudited) -
Nine Months Ended September 30, 1996 and 1995. 3
Notes to Condensed Consolidated Financial Statements (unaudited). 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K. 12
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30 December 31 September 30
(thousands) 1996 1995 1995
----------- ---------- ------------
<S> <C> <C> <C>
Assets
Cash and due from banks - noninterest bearing $ 61,798 $ 104,805 $ 91,625
Federal funds sold 17,000 3,170 18,165
Interest-bearing deposits with banks - 25,000 25,000
Securities:
Available for sale, at fair value 408,158 364,404 367,572
Held to maturity, at amortized cost 12,948 14,567 16,024
---------- ---------- ----------
Total Securities 421,106 378,971 383,596
Loans, net of unearned discount 1,606,759 1,558,782 1,435,766
Less: Allowance for possible loan losses 35,195 25,640 22,816
---------- ---------- ----------
Net Loans 1,571,564 1,533,142 1,412,950
Premises and equipment, net 27,743 26,794 26,969
Accrued interest receivable and other assets 42,357 40,907 38,351
Goodwill, net of accumulated amortization 12,952 12,303 12,897
---------- ---------- ----------
Total Assets $2,154,520 $2,125,092 $2,009,553
========== ========== ==========
Liabilities & Shareholders' Equity
Deposits:
Noninterest-bearing $ 188,751 $ 209,881 $ 214,185
Interest-bearing 1,656,549 1,688,659 1,567,993
---------- ---------- ----------
Total Deposits 1,845,300 1,898,540 1,782,178
Short-term borrowings 10,085 1,828 6,617
Federal Home Loan Bank advances 40,000 - -
Accrued interest payable and other liabilities 38,213 28,071 31,728
---------- ---------- ----------
Total Liabilities 1,933,598 1,928,439 1,820,523
Minority Interest - 1,927 2,197
Shareholders' Equity
Common stock, Surplus & Retained Earnings 211,059 188,342 181,037
Net unrealized gains on available for sale securities 9,863 6,384 5,796
---------- ---------- ----------
Total Shareholders' Equity 220,922 194,726 186,833
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $2,154,520 $2,125,092 $2,009,553
========== ========== ==========
</TABLE>
See accompanying notes.
1
<PAGE> 4
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------- --------------------
(thousands, except per share data) 1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest Income $47,568 $44,218 $144,863 $123,533
Interest Expense 20,211 18,252 60,106 53,419
------- ------- -------- --------
Net Interest Income 27,357 25,966 84,757 70,114
Provision for Possible Loan Losses 4,000 1,500 12,000 2,979
------- ------- -------- --------
Net Interest Income after Provision
for Possible Loan Losses 23,357 24,466 72,757 67,135
Noninterest Income:
Service charges on deposit accounts 2,330 2,328 7,233 7,126
Trust services 112 110 326 323
Gain on dispositions of loans 2,388 321 5,137 1,432
Other income 179 545 909 2,752
Trading account gains, net - - - 297
Securities and other financial
instruments gains (losses), net 1,244 325 2,863 (763)
------- ------- -------- --------
Total noninterest income 6,253 3,629 16,468 11,167
Noninterest Expense:
Salaries and employee benefits 6,200 6,885 19,714 18,693
Net occupancy 1,044 1,015 3,009 2,985
Data processing 707 538 1,913 1,602
FDIC deposit insurance 2 (111) 9 1,686
Goodwill amortization 767 593 2,128 1,663
Other expenses 3,802 4,213 11,167 11,719
------- ------- -------- --------
Total noninterest expense 12,522 13,133 37,940 38,348
------- ------- -------- --------
Income before income taxes 17,088 14,962 51,285 39,954
Income tax expense 6,086 5,386 18,156 14,215
------- ------- -------- --------
Net Income $11,002 $ 9,576 $ 33,129 $ 25,739
======= ======= ======== ========
Net Income per Common Share $ 0.73 $ 0.63 $ 2.21 $ 1.67
======= ======= ======== ========
Cash Dividends Declared Per Common Share $ 0.125 $ 0.100 $ 0.350 $ 0.263
======= ======= ======== ========
Weighted Average Common and Common
Equivalent Shares Outstanding 14,989 15,311 14,994 15,374
======= ======= ======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 5
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------------
(thousands) 1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 33,129 $ 25,739
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 12,000 2,979
Depreciation and amortization 1,622 1,411
Accretion of investment and loan discounts (14,673) (8,857)
Goodwill amortization 2,128 1,663
Gain on dispositions of loans (5,137) (1,432)
Decrease in trading account securities - 74,432
Trading account gains, net - (297)
Securities and other financial instruments (gains)/losses, net (2,863) 763
(Increase) decrease in accrued interest receivable and other assets (1,450) 1,919
Increase in accrued interest payable, other liabilities and
minority interest, net 8,680 302
----------- -----------
Net cash provided by operating activities 33,436 98,622
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities held to maturity 1,619 3,633
Proceeds from maturities of available for sale securities 138,855 17,356
Proceeds from sales of available for sale securities 3,376,954 911,712
Purchases of available for sale securities (3,548,837) (874,053)
Maturities of interest-bearing deposits with banks 25,000 -
Purchases of loans (3,329) (3,890)
Net increase in loans (31,126) (322,071)
Purchases of premises and equipment, net (2,571) (1,112)
Purchases of minority interest of and additional consideration
for bank subsidiaries (4,132) (54)
----------- -----------
Net cash used in investing activities (47,567) (268,479)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposit accounts (53,240) 83,680
Increase (decrease) in short-term borrowings 8,257 (3,548)
Proceeds from Federal Home Loan Bank advances 40,000 -
Proceeds from exercise of stock options 9 -
Retirements of common shares (5,233) (3,530)
Cash dividends paid on common shares (4,839) (3,620)
----------- -----------
Net cash provided by (used in) financing activities (15,046) 72,982
----------- -----------
Net decrease in cash and cash equivalents (29,177) (96,875)
Cash and cash equivalents at December 31, 1995 and 1994 107,975 206,665
----------- -----------
Cash and cash equivalents at September 30, 1996 and 1995 $ 78,798 $ 109,790
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 6
CORUS BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Condensed Consolidated Financial Statements
The Condensed Consolidated Statements of Condition, Income and Cash Flows
are unaudited. The interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods presented. The condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in CORUS Bankshares, Inc.'s (formerly known as River
Forest Bancorp, Inc.) consolidated financial statements for the three years
ended December 31, 1995 included in Bankshares' Annual Report and Form 10-K
for the year ended December 31, 1995. The results of operations for the
interim period should not be considered indicative of results to be
expected for the full year.
Net income per common share is computed by dividing net income by the
weighted average number of common shares and common share equivalents
(dilutive stock options) outstanding during the respective periods.
Certain reclassifications have been made in the 1995 financial statements
to conform to current accounting classifications.
2. Goodwill
In the second quarter of 1996, an additional $754,000 of goodwill was
recorded for the 1993 acquisition of Belmont National Bank. The additional
goodwill was the result of the settlement of contingencies related to the
purchase. The original purchase price was contingent upon the performance
of certain specified loans and assets during the post-acquisition period.
The additional goodwill is being amortized over the remaining term of the
original goodwill period of 15 years.
In addition, goodwill totaling $1.9 million was recorded during the first
six months of 1996 related to the purchase of the minority interest
ownership interests in two of the subsidiary banks. After these purchases,
there were no minority ownership interests remaining in any of the
subsidiary banks.
3. Student Loan Investigation
As disclosed in previous SEC filings, Bankshares discovered, from late 1993
to April 1994, that certain former employees in the student loan servicing
area had falsified some records of telephone calls to students whose
loans were delinquent. The telephone calls are a required action to
maintain the enforceability of a student loan's government guarantee.
Bankshares terminated the employees involved and informed the U.S.
Department of Education immediately upon discovery of the problem and the
Department commenced an investigation.
Bankshares believes that the Department's investigation has been expanded
to include a review of whether Bankshares' student loan division has
engaged in improper practices since 1988, including whether information
contained on guarantee claim forms may have been falsified. If it is
ultimately determined that Bankshares acted illegally or violated
Department policy or regulations, Bankshares could (i) lose its government
guarantees with respect to certain student loans and (ii) be required to
repurchase a substantial amount of delinquent student loans for which
Bankshares previously received guarantee payments. In addition, Bankshares
or individual employees could be subject to substantial penalties.
4
<PAGE> 7
CORUS BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In connection with the investigation, Bankshares entered into an interim
agreement with the Department pursuant to which it agreed, pending the
conclusion of the investigation, not to request payment from any guarantor or
the Department on any loans that Bankshares is unable to state with certainty
were not affected by incorrect servicing history documentation. As a result
of this agreement, at September 30, 1996, there were $9.7 million of
nonaccrual student loans for which Bankshares has agreed not to seek guarantee
payments.
Management is unable to predict what actions, if any, the Department will
take following the completion of its investigation, and therefore cannot
estimate the amount or range of any liability that Bankshares will ultimately
incur.
Bankshares does not condone or permit such improper practices and is
cooperating fully with the investigation. Bankshares is actively working to
implement procedures designed to minimize the likelihood that such practices
can occur in the future.
5
<PAGE> 8
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
OPERATING RESULTS
The major source of earnings for Bankshares is net interest income. The
related net interest margin represents the net interest income as a percentage
of average earning assets during the period. The following table represents a
summary of Bankshares' net interest income and related net interest margin, as
calculated on a fully taxable equivalent basis.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------- ------------------------
(thousands) 1996 1995 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net interest income $ 27,357 $ 25,966 $ 84,757 $ 70,114
Taxable equivalent adjustment 261 334 813 1,058
---------- ---------- ---------- ----------
Taxable equivalent net
interest income $ 27,618 $ 26,300 $ 85,570 $ 71,172
========== ========== ========== ==========
Average earning assets $2,069,878 $1,852,563 $2,069,645 $1,809,980
========== ========== ========== ==========
Net interest margin (annualized) 5.34% 5.68% 5.51% 5.24%
========== ========== ========== ==========
</TABLE>
During the three months ended September 30, 1996, Bankshares had $3.0 million
of interest income from the accretion of acquisition discount related to
several groups of purchased, previously nonperforming student loan pools
compared with $3.9 million in the third quarter of 1995. Excluding the
accretion of the acquisition discount, the net interest margin was 4.75% and
4.83% for the quarterly periods ended September 30, 1996 and 1995,
respectively.
For the first nine months of 1996, Bankshares had $10.8 million of interest
income from the accretion of acquisition discount related to several groups of
purchased student loan pools compared with $9.3 million in the same period in
1995. Excluding the accretion of the acquisition discount, the net interest
margin was 4.81% and 4.56% for the first nine months of 1996 and 1995,
respectively.
The following table represents a reconciliation of fully tax equivalent net
interest income:
<TABLE>
<CAPTION>
<S> <C>
(thousands)
Fully tax equivalent net interest income for the nine months ended September 30, 1995 $71,172
Change due to average earning assets fluctuations 10,205
Change due to interest rate fluctuations 3,665
Change due to rate/volume fluctuations 528
-------
Fully tax equivalent net interest income for the nine months ended September 30, 1996 $85,570
=======
</TABLE>
For the third quarter of 1996, noninterest income increased $2.7 million to
$6.3 million, compared with $3.6 million for the third quarter of 1995. Gains
on the dispositions of loans increased $2.1 million in 1996. These gains are
the result of payments made by guarantee agencies for student loan borrowers
that defaulted on student loans with discounts. Other income decreased
$366,000 in 1996 primarily due to gains on sales of other real estate owned
properties in 1995. Gains from securities sales increased $919,000 due to
gains on the sales of securities in Bankshares' bank stock portfolio.
6
<PAGE> 9
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
For the first nine months of 1996, noninterest income increased $5.3 million to
$16.5 million, compared with $11.2 million in 1995. Gains on the dispositions
of loans increased $3.7 million. Other income decreased $1.8 million primarily
due to a $713,000 gain on the sale of a section of a bank parking lot and gains
on sales of other real estate owned properties in 1995. In 1996, securities
and other financial instruments gains included a gain of $1.3 million from
interest rate swaps that did not qualify for hedge accounting treatment. These
swap agreements were terminated in the first quarter of 1996.
In the third quarter of 1996, noninterest expense decreased $611,000 to $12.5
million, compared with $13.1 million in 1995. Compensation expense decreased
$685,000 to $6.2 million, which was due to reduced loan growth in the period as
compared to the third quarter of 1995. Bankshares' has performance-based
compensation plans for its lending operations. Data processing expense
increased $169,000 to $707,000 due to onetime expenses related to the mergers
of Bankshares' subsidiary banks. FDIC deposit insurance was $2,000, compared
with a credit balance of $111,000 in 1995 due to a onetime refund of premiums
during the third quarter of 1995. The banks have been required to pay only
administrative fees for their FDIC insurance in 1996.
Goodwill amortization increased $174,000 to $767,000 in 1996 primarily due to
additional goodwill that was recorded in the second quarter of 1996 for the
acquisition of Belmont National Bank and in the first and second quarters of
1996 for the purchase of the minority interests in Bankshares' subsidiary
banks. Other expenses decreased $411,000 primarily due to lower costs for
lending operations due to the decline in loan activity, the elimination of the
minority interest of the subsidiary banks and reduced advertising expense. The
decrease in other expenses in the third quarter of 1996 occurred despite
approximately $385,000 in onetime merger expenses and a onetime charge of
approximately $210,000 for the write-down and demolition costs of a building at
Bankshares' headquarters location.
In the first nine months of 1996, noninterest expense decreased $408,000 to
$37.9 million, compared with $38.3 million in 1995. Compensation expense
increased $1.1 million due to higher performance-based compensation and
increased staffing in lending operations in the first half of 1996. FDIC
deposit insurance decreased $1.7 million due to the elimination of premiums.
The effective tax rate for the third quarter of 1996 was 35.6% versus 36.0% in
1995. The effective tax rate was 35.4% and 35.6% for the nine months ended
September 30, 1996 and 1995, respectively.
7
<PAGE> 10
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
FINANCIAL CONDITION
Interest-Earning Assets
The following table details the composition of Bankshares' earning assets.
<TABLE>
<CAPTION>
September 30 December 31 September 30
1996 1995 1995
------------ ----------- ------------
<S> <C> <C> <C>
Loans:
Commercial real estate 30% 30% 28%
Student 19 19 20
Residential mortgage 15 16 16
Home equity 9 9 7
Commercial 3 4 4
Consumer 2 2 2
----------- ---------- -----------
Total Loans 78 80 77
Securities 21 19 21
Federal funds sold and time deposits 1 1 2
----------- ---------- -----------
Total 100% 100% 100%
=========== ========== ===========
</TABLE>
Total loans at September 30, 1996 were $1.61 billion, an increase of $48.0
million, or 3.1%, from December 31, 1995. From time to time, Bankshares has
purchased nonperforming student loans at substantial discounts to the face
value of the loans. Bankshares attempts to convert these loans to performing
status and have their guarantees reinstated. The excess of the amount of
performing loans converted over the cost of the loans is accreted into income
over the estimated lives of the loans using the level-yield method. The total
discount to be accreted into income in future periods totaled $23.3 million at
September 30, 1996.
At September 30, 1996, total securities were $421.1 million, an increase of
$42.1 million, or 11.1%, from $379.0 million at December 31, 1995. This
increase was partially due to the maturity of $25.0 million of interest-bearing
deposits with banks in the third quarter of 1996, which was reinvested in
investment securities. At September 30, 1996, Bankshares held $55.3 million of
investments in equity securities of publicly-traded bank holding companies,
which were included in the available for sale securities classification. These
securities represented minority investments in 32 companies with unrealized
gains of $15.4 million. Gains of $1.5 and $2.1 million were recognized on
sales of these securities during the third quarter and first nine months of
1996, respectively.
8
<PAGE> 11
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Allowance for Possible Loan Losses
The allowance for possible loan losses is based on management's analysis of
individual loans, prior and current loss experience, overall growth in the
portfolio, current economic conditions, and other factors. A reconciliation of
the activity in Bankshares' allowance for possible loan losses is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------- ---------------------------
(thousands) 1996 1995 1996 1995
------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 32,035 $ 21,513 $ 25,640 $ 20,157
Provision for possible loan losses 4,000 1,500 12,000 2,979
Charge-offs (1,924) (298) (4,413) (688)
Recoveries 1,084 101 1,968 368
------------ ----------- ------------ -----------
Balance at September 30 $ 35,195 $ 22,816 $ 35,195 $ 22,816
============ =========== ============ ===========
Total loans at September 30 $1,606,759 $1,435,766 $1,606,759 $1,435,766
============ =========== ============ ===========
Allowance as a percentage of loans 2.19% 1.59% 2.19% 1.59%
============ =========== ============ ===========
Annualized net charge-offs
as a percentage of:
Total loans 0.21% 0.05% 0.20% 0.03%
============ =========== ============ ===========
Annualized provision for
possible loan losses 21.00% 13.13% 20.38% 10.74%
============ =========== ============ ===========
</TABLE>
The increase in net charge-offs for the third quarter and first nine months of
1996 was due to home equity charge-offs. For the quarter and nine months ended
September 30, 1996, net home equity charge-offs were $1.8 and $4.2 million,
respectively. The net charge-offs were partially reduced by net recoveries
from commercial and commercial real estate loans of $905,000 for the third
quarter and $1.6 million for the first nine months of 1996.
9
<PAGE> 12
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Nonperforming Assets
The following table presents a summary of nonperforming assets' book value.
Nonperforming loans are nonaccrual loans, restructured loans and 90 days or
more past due loans still accruing interest. Excluded from the table are
delinquent and guaranteed student loans that are not subject to the interim
agreement described in Note 3 of the Notes to Condensed Consolidated Financial
Statements. Guaranteed student loans more than 90 days past due and not
included in the table totaled $14.7, $13.9 and $13.2 million at September 30,
1996, December 31, 1995 and September 30, 1995, respectively.
<TABLE>
<CAPTION>
(thousands) September 30 December 31 September 30
1996 1995 1995
------------ ----------- ------------
<S> <C> <C> <C>
Nonperforming loans:
Residential mortgage $ 18,189 $ 7,828 $ 3,432
Commercial real estate 7,157 1,973 2,877
Commercial 435 381 297
Home equity 1,944 1,119 1,330
Student 10,095 6,837 5,480
Consumer 1,046 663 757
---------- --------- ---------
Total nonperforming loans 38,866 18,801 14,173
Other real estate owned 1,776 1,589 1,589
---------- --------- ---------
Total nonperforming assets $ 40,642 $ 20,390 $ 15,762
========== ========= =========
Nonaccrual loans included in
non-performing loans above $ 14,670 $ 8,536 $ 7,937
========== ========= =========
Nonperforming loans/Total loans 2.42% 1.21% 0.99%
Nonperforming assets/Total assets 1.89% 0.96% 0.78%
Allowance for loan losses/
nonperforming loans 90.55% 125.75% 160.98%
</TABLE>
Nonperforming residential mortgage loans are adequately secured by first
mortgages on owner-occupied, residential property. Therefore, minimal losses
are anticipated for any of the nonperforming residential mortgage loans.
Student Loan Investigation
Refer to Note 3 of the Notes to Condensed Consolidated Financial Statements on
page 4 for further information.
10
<PAGE> 13
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
LIABILITIES
The following table details the composition of deposit products by type.
<TABLE>
<CAPTION>
September 30 December 31 September 30
1996 1995 1995
------------ ----------- ------------
<S> <C> <C> <C>
Demand 10% 11% 10%
NOW 5 5 6
Money Market 51 48 52
Savings 11 12 14
Certificates of Deposit 23 24 18
----------- ---------- -----------
Total 100% 100% 100%
=========== ========== ===========
</TABLE>
The increase in the percentage of money market deposits at September 30, 1996
was due to a decrease in retail certificates of deposit obtained from brokers.
At September 30, 1996, Bankshares had $159.9 million of retail certificates of
deposit. In the second quarter of 1996, Bankshares obtained $40.0 million of
Federal Home Loan Bank advances. The advances have a term of 5 years, an
interest rate of 3-month LIBOR and reprice quarterly. Management intends to
utilize outside funding sources, as necessary, to support loan growth.
CAPITAL
Bankshares' consolidated leverage ratio (Tier 1 capital/total average quarterly
assets) was 9.13% at September 30, 1996, well in excess of the minimum
regulatory level of 5%. The consolidated Tier 1 and total risk-based capital
ratios were 13.78% and 15.03%, respectively, exceeding the well-capitalized
Tier 1 and total risk-based capital ratios of 6.00% and 10.00%, respectively.
During the first quarter of 1996, Bankshares repurchased 202,000 shares of
common stock, or 1.3% of shares outstanding at December 31, 1995, under the
previously announced 1,000,000 share repurchase program that was approved by
the Board of Directors. There were no repurchases in the second or third
quarters of 1996. As of September 30, 1996, a total of 417,500 shares had been
repurchased under the program.
OPERATING, INVESTING AND FINANCING ACTIVITIES
Net cash provided by operating activities totaled $33.4 million for the first
nine months of 1996, compared with $98.6 million for the same period in 1995.
The change was primarily attributable to fluctuations in the level of trading
account securities.
Net cash used in investing activities totaled $47.6 million for the first nine
months of 1996, compared with $268.5 million in 1995. The decrease was
primarily due to a lower level of loan originations net of repayments in 1996.
Net cash used in financing activities totaled $15.0 million for the first nine
months of 1996, compared with net cash provided by financing activities of
$73.0 million in 1995. The decrease in 1996 was primarily due to a reduction
in the level of retail certificates of deposit obtained from brokers. In the
second quarter of 1996, Bankshares received proceeds of $40.0 million from
Federal Home Loan Bank advances. During the first nine months of 1996,
Bankshares repurchased 202,000 common shares.
11
<PAGE> 14
CORUS BANKSHARES, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 3 of the Notes to Condensed Consolidated
Financial Statements for information regarding an investigation by the
U.S. Department of Education into whether Bankshares' student loan
division has engaged in improper practices.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 11 - Computation of Net Income per Common Share is on page
12.
(b) Reports on Form 8-K.
None.
SIGNATURE
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.
CORUS BANKSHARES, INC.
(Registrant)
November 12, 1996 By: /s/ Michael J. McClure
------------------------
Michael J. McClure
First Vice President and
Chief Accounting Officer
(Principal Accounting
Officer and duly authorized
Officer of Registrant)
12
<PAGE> 1
EXHIBIT 11 - CORUS BANKSHARES, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Nine Months Ended
September 30
(thousands) 1996 1995
---------------- --------------
<S> <C> <C>
Net Income (A) $33,129 $25,739
================ ==============
Weighted Average Common Shares Outstanding 14,837 15,203
Weighted Average Common Share Equivalents (1) 157 171
---------------- --------------
Weighted Average Common Shares and
Common Stock Equivalents (B) 14,994 15,374
================ ==============
Net Income per Common Share (A/B) $ 2.21 $ 1.67
================ ==============
</TABLE>
(1) Common share equivalents result from stock options being treated as if they
had been exercised and are computed by application of the treasury stock
method.
13
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 61,798
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 17,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 408,158
<INVESTMENTS-CARRYING> 12,948
<INVESTMENTS-MARKET> 12,965
<LOANS> 1,606,759
<ALLOWANCE> 35,195
<TOTAL-ASSETS> 2,154,520
<DEPOSITS> 1,845,300
<SHORT-TERM> 10,085
<LIABILITIES-OTHER> 38,213
<LONG-TERM> 40,000
0
0
<COMMON> 741
<OTHER-SE> 220,181
<TOTAL-LIABILITIES-AND-EQUITY> 2,154,520
<INTEREST-LOAN> 125,733
<INTEREST-INVEST> 17,223
<INTEREST-OTHER> 1,907
<INTEREST-TOTAL> 144,863
<INTEREST-DEPOSIT> 57,866
<INTEREST-EXPENSE> 60,106
<INTEREST-INCOME-NET> 84,757
<LOAN-LOSSES> 12,000
<SECURITIES-GAINS> 2,863
<EXPENSE-OTHER> 37,940
<INCOME-PRETAX> 51,285
<INCOME-PRE-EXTRAORDINARY> 51,285
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,129
<EPS-PRIMARY> 2.21
<EPS-DILUTED> 2.21
<YIELD-ACTUAL> 5.46
<LOANS-NON> 14,670
<LOANS-PAST> 24,196
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 25,640
<CHARGE-OFFS> 4,413
<RECOVERIES> 1,968
<ALLOWANCE-CLOSE> 35,195
<ALLOWANCE-DOMESTIC> 27,996
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 7,199
</TABLE>
