<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 JUNE 30, 1997
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) 388-3088
(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 June 30, 1997, the Registrant had 14,820,242 common shares, $0.05 par
value, outstanding.
<PAGE> 2
CORUS BANKSHARES, Inc.
Index to Quarterly Report on Form 10-Q
June 30, 1997
PART I - FINANCIAL INFORMATION. PAGE
Item 1. Financial Statements
Condensed Consolidated Statements of Condition (unaudited) -
June 30, 1997, December 31, 1996 and June 30, 1996. 1
Condensed Consolidated Statements of Income (unaudited) -
Three and Six Months Ended June 30, 1997 and 1996. 2
Condensed Consolidated Statements of Cash Flows (unaudited) -
Six Months Ended June 30, 1997 and 1996. 3
Notes to Condensed Consolidated Financial Statements
(unaudited). 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II - OTHER INFORMATION.
Item 4. Submission of Matters to a Vote of Security Holders. 13
Item 6. Exhibits and Reports on Form 8-K. 13
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30 December 31 June 30
(thousands) 1997 1996 1996
----------- ------------- ---------
<S> <C> <C> <C>
Assets
Cash and due from banks - noninterest bearing $ 52,571 $ 57,508 $ 100,249
Federal funds sold 90,400 98,500 2,470
Securities:
Available for sale, at fair value 416,669 379,029 417,855
Held to maturity, at amortized cost 10,136 11,254 13,828
---------- ---------- ---------
Total Securities 426,805 390,283 431,683
Loans, net of unearned discount 1,566,165 1,623,145 1,624,158
Less: Allowance for possible loan losses 27,750 32,668 32,035
---------- ---------- ---------
Net Loans 1,538,415 1,590,477 1,592,123
Premises and equipment, net 29,392 28,650 26,926
Accrued interest receivable and other assets 37,293 40,919 41,285
Goodwill, net of accumulated amortization 10,523 12,191 13,690
---------- ---------- ---------
Total Assets $2,185,399 $2,218,528 $2,208,426
=========== ========== ==========
Liabilities & Shareholders' Equity
Deposits:
Noninterest-bearing $ 190,264 $ 195,324 $ 209,264
Interest-bearing 1,645,877 1,705,355 1,691,124
---------- ---------- ---------
Total Deposits 1,836,141 1,900,679 1,900,388
Short-term borrowings 9,113 6,317 22,091
Federal Home Loan Bank advances 40,000 40,000 40,000
Accrued interest payable and other liabilities 39,017 35,942 36,851
---------- ---------- ----------
Total Liabilities 1,924,271 1,982,938 1,999,330
Shareholders' Equity
Common stock, Surplus & Retained Earnings 236,063 219,822 201,912
Net unrealized gains on available for sale securities 25,065 15,768 7,184
---------- ---------- ----------
Total Shareholders' Equity 261,128 235,590 209,096
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $2,185,399 $2,218,528 $2,208,426
========== ========== ==========
See accompanying notes.
</TABLE>
1
<PAGE> 4
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- ---------------------------
(thousands, except per share data) 1997 1996 1997 1996
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income $ 47,018 $ 48,074 $ 92,727 $ 97,295
Interest Expense 20,531 19,917 40,815 39,895
--------- ---------- ---------- ----------
Net Interest Income 26,487 28,157 51,912 57,400
Provision for Possible Loan Losses 4,000 4,000 8,000 8,000
--------- ---------- ---------- ----------
Net Interest Income after Provision
for Possible Loan Losses 22,487 24,157 43,912 49,400
Noninterest Income:
Service charges on deposit accounts 2,191 2,508 4,487 4,903
Trust services 184 93 351 214
Gain on dispositions of loans 3,279 1,704 6,283 2,749
Other income 538 335 770 730
Trading account losses, net (105) 0 (194) 0
Securities and other financial
instruments gains, net 804 199 920 1,619
--------- ---------- ---------- ----------
Total noninterest income 6,891 4,839 12,617 10,215
Noninterest Expense:
Salaries and employee benefits 6,861 6,707 13,642 13,514
Net occupancy 1,033 964 2,052 1,965
Data processing 523 571 1,038 1,206
Goodwill amortization 764 698 1,532 1,361
Other expenses 3,559 3,603 7,346 7,372
--------- ---------- ---------- ----------
Total noninterest expense 12,740 12,543 25,610 25,418
--------- ---------- ---------- ----------
Income before income taxes 16,638 16,453 30,919 34,197
Income tax expense 5,848 5,811 10,826 12,070
--------- ---------- ---------- ----------
Net Income $ 10,790 $ 10,642 $ 20,093 $ 22,127
========= ========== ========== ==========
Net Income per Common Share $ 0.72 $ 0.71 $1.34 $ 1.47
========= ========== ========== ==========
Cash Dividends Declared Per Common Share $ 0.135 $ 0.125 $ 0.260 $ 0.225
========= ========== ========== ==========
Weighted Average Common and Common
Equivalent Shares Outstanding 14,971 14,992 14,986 15,002
========= ========== ========== ==========
</TABLE>
See accompanying notes.
2
<PAGE> 5
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------
(thousands) 1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $20,093 $22,127
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for possible loan losses 8,000 8,000
Depreciation and amortization 1,454 1,064
Accretion of investment and loan discounts (6,969) (9,140)
Goodwill amortization 1,532 1,361
Gain on dispositions of student loans (6,283) (2,749)
Securities and other financial instruments gains, net (612) (1,619)
Increase in accrued interest receivable and other assets (1,380) (378)
Increase in accrued interest payable, other liabilities
and minority interest, net 3,064 8,760
--------- --------
Net cash provided by operating activities 18,899 27,426
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities held to maturity 1,125 739
Proceeds from maturities of available for sale securities 246,270 94,805
Proceeds from sales of available for sale securities 35,376 1,491,040
Purchases of available for sale securities (299,978) (1,636,432)
Maturities of interest-bearing deposits with banks 0 25,000
Purchases of loans (343) (2,191)
Net (increase) decrease in loans 53,257 (54,246)
Purchases of premises and equipment, net (2,196) (1,196)
Purchases of minority interest of and additional consideration
for bank subsidiaries 0 (4,103)
--------- --------
Net cash provided by (used in) investing activities 33,511 (86,584)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposit accounts (64,538) 1,848
Increase in short-term borrowings 2,796 20,263
Proceeds from Federal Home Loan Bank advances 0 40,000
Issuance of common shares under the stock option plan 0 9
Retirements of common shares 0 (5,233)
Cash dividends paid on common shares (3,705) (2,985)
--------- --------
Net cash provided by (used in) financing activities (65,447) 53,902
--------- --------
Net decrease in cash and cash equivalents (13,037) (5,256)
Cash and cash equivalents at December 31, 1996 and 1995 156,008 107,975
--------- --------
Cash and cash equivalents at June 30, 1997 and 1996 $142,971 $102,719
========= ========
See accompanying notes.
</TABLE>
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 consolidated financial
statements for the three years ended December 31, 1996 included in CORUS'
Annual Report and Form 10-K for the year ended December 31, 1996. 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 1996 financial statements to
conform to current accounting classifications.
2. Student Loan Investigation
As disclosed previously, CORUS discovered that certain former employees in
the student loan servicing area had falsified some records of telephone
calls, from late 1993 to April 1994, to students whose loans were delinquent.
The telephone calls are a required action to maintain the enforceability of
a student loan's government guarantee. CORUS terminated the employees
involved and informed the U.S. Department of Education immediately upon
discovery of the problem and the Department commenced an investigation.
CORUS believes that the Department's investigation expanded in 1996 to
include a review of whether CORUS' student loan division engaged in improper
practices from 1988 to April 1994, including whether information contained on
guarantee claim forms may have been falsified. If it is ultimately
determined that CORUS acted illegally or violated Department policy or
regulations, CORUS 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 CORUS previously received guarantee
payments. In addition, CORUS or individual employees could be subject to
substantial penalties.
Shortly after notifying the Department of the problem, CORUS 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 CORUS is unable to state with
certainty were not affected by incorrect servicing history documentation. As
a result of this agreement, at June 30, 1997, there were $447,000 of
nonaccrual student loans for which CORUS has agreed not to seek guarantee
payments during the investigation. In addition, management charged off
against the allowance for possible loan losses $4.0 million of student loans
that were subject to the interim agreement during both the first and second
quarters of 1997. A total of $12.0 million of loans subject to the interim
agreement have been charged off against the allowance for possible loan
losses. The ultimate collectibility of the loans is uncertain.
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 CORUS will ultimately
incur.
CORUS does not condone or permit such improper practices and is cooperating
fully with the Department's investigation.
4
<PAGE> 7
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
OPERATING RESULTS
For the three months ended June 30, 1997, net income was $10.8 million, or
$0.72 per share, an increase of 1.4% from net income of $10.6 million, or $0.71
per share, for the same period in 1996. For the first six months of 1997, net
income was $20.0 million, or $1.34 per share, a decline of 9.2% from net income
of $22.1 million, or $1.47 per share, for the same period in 1996.
Net Interest Income
The major source of earnings for CORUS 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
CORUS' net interest income and related net interest margin, as calculated on a
fully taxable equivalent basis.
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- --------------------------
(thousands) 1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net interest income $ 26,487 $ 28,157 $ 51,912 $ 57,400
Taxable equivalent adjustment 223 273 454 552
----------- ----------- ------------ -----------
Taxable equivalent net
interest income $ 26,710 $ 28,430 $ 52,366 $ 57,952
=========== =========== ============ ===========
Average earning assets $2,117,598 $2,073,991 $2,115,492 $2,070,965
=========== =========== ============ ===========
Net interest margin (annualized) 5.05% 5.48% 4.95% 5.60%
=========== =========== ============ ===========
</TABLE>
The following represents the impact certain significant and/or nonrecurring
items had on net interest income:
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- --------------------------
(thousands) 1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Taxable equivalent net interest income $26,710 $28,430 $52,366 $57,952
Significant and/or nonrecurring items:
Discount accretion in interest income
from purchased student loan pools 1,072 3,699 2,569 7,795
Loan fees from prepayment of a
commercial real estate loan 1,145 - 1,145 538
------- ------- ------- -------
Taxable equivalent net interest income
excluding significant and/or
nonrecurring items $24,493 $24,731 $48,652 $49,619
=================================================
Net interest margin excluding
significant and/or nonrecurring items 4.63% 4.77% 4.60% 4.79%
======= ======= ======= =======
</TABLE>
5
<PAGE> 8
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
The declines in annualized net interest margin after excluding significant
and/or nonrecurring items for the second quarter and first six months of 1997,
compared with the comparable periods of 1996, were primarily due to lower rates
charged and earned on loans and investments.
The following table represents a reconciliation of fully tax equivalent net
interest income:
(thousands)
<TABLE>
<S> <C>
Fully tax equivalent net interest income for the six months ended June 30, 1996 $57,952
Change due to average earning assets fluctuations 1,247
Change due to interest rate fluctuations other than student loan discount accretion (1,465)
Change due to student loan discount accretion (5,266)
Change due to rate/volume fluctuations (102)
========
Fully tax equivalent net interest income for the six months ended June 30, 1997 $52,366
========
</TABLE>
Noninterest Income
For the second quarter of 1997, noninterest income increased $2.1 million to
$6.9 million, compared with $4.8 million in 1996. Service charge fee income
declined $317,000 to $2.2 million primarily due to lower return and overdraft
fee income. Gains on the dispositions of loans increased $1.6 million. These
gains are the result of payments made by guarantee agencies for student loan
borrowers that defaulted. Other income increased $203,000 to $538,000 due to
higher gains from the sales of other real estate owned properties. Securities
and other financial instruments gains increased $605,000 to $804,000. These
gains included a $496,000 net gain from the sales of certain bank stocks in
CORUS' portfolio and a $308,000 gain from the termination of an interest rate
swap agreement. The swap provided an interest rate hedge on a specific loan
that was prepaid in the second quarter of 1997. If an interest rate swap that
qualifies for hedge accounting treatment is terminated, the related gain or
loss is deferred as a basis adjustment to the item being hedged. However, if
the item being hedged has been eliminated, the related gain or loss is included
in securities and other financial intruments gains and losses.
For the first six months of 1997, noninterest income increased $2.4 million to
$12.6 million, compared with $10.2 million in 1996. Service charge fee income
declined $416,000 to $4.5 million primarily due to lower return and overdraft
fee income. Gains on the dispositions of loans increased $3.5 million. 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.
Noninterest Expense
In the second quarter of 1997, noninterest expense increased $197,000, or 1.6%,
to $12.7 million, compared with $12.5 million in 1996. In the first six months
of 1997, noninterest expense increased $192,000, or 0.8%, to $25.6 million,
compared with $25.4 million in 1996. CORUS' efficiency ratio for the second
quarter and first six months of 1997 was 36.4% and 37.5%, respectively.
The effective tax rate for the second quarter of 1997 was 35.1% versus 35.3% in
1996. For the six months ended June 30, 1997 and 1996, the effective tax rate
was 35.0% and 35.3%, respectively.
6
<PAGE> 9
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
FINANCIAL CONDITION
Earning Assets
The following table details the composition of CORUS' earning assets:
<TABLE>
June 30, 1997 December 31, 1996 June 30, 1996
(Dollars in thousands) Amount Percent Amount Percent Amount Percent
------------ ------- ------------ --------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Loans:
Commercial real estate $ 672,913 32% $ 655,793 31% $ 625,458 30%
Student 404,828 20 402,859 19 391,894 19
Residential first mortgage 251,744 12 286,042 14 319,093 16
Home equity 162,293 8 188,755 9 193,548 9
Commercial 48,557 2 61,852 3 61,626 3
Consumer 25,830 1 27,844 1 32,539 2
------------ ------ ------------ -------- ------------ ------
Total Loans 1,566,165 75 1,623,145 77 1,624,158 79
Securities other than common stocks 318,070 16 297,672 14 385,063 19
Common stocks 108,735 5 92,611 4 46,620 2
Federal funds sold 90,400 4 98,500 5 2,470 -
------------ ------ ------------ -------- ------------ ------
Total $2,083,370 100% $2,111,928 100% $2,058,311 100%
============ ====== ============ ======== ============ ======
</TABLE>
Total loans at June 30, 1997 were $1.57 billion, a decline of $57.0 million, or
3.5%, from December 31, 1996. Commercial real estate loans increased $17.1
million, or 2.6%, from December 31, 1996. At June 30, 1997, December 31, 1996
and June 30, 1996, the commercial real estate loan portfolio was comprised of
the following:
<TABLE>
June 30 December 31 June 30
(thousands) 1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Commercial real estate mortgage loans $585,427 $614,506 $585,793
Construction loans 87,486 41,287 39,665
------------ ------------ ------------
Total commercial real estate loans $672,913 $655,793 $625,458
============ ============ ============
</TABLE>
At June 30, 1997, unfunded construction loan commitments totaled $123.9
million.
7
<PAGE> 10
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
The composition of the commercial real estate loan portfolio by type of
collateral securing the loan was as follows at June 30, 1997 (in thousands):
<TABLE>
<S> <C>
Investor-owned residential real estate $221,325
Healthcare/Nursing 102,763
Retail 96,247
Industrial 66,660
Hotel/Motel 58,230
Office 53,900
Condo/Loft conversion 35,093
Other 38,695
--------
Total $672,913
========
</TABLE>
From time to time, CORUS has purchased nonperforming student loans at
substantial discounts to the face value of the loans. CORUS 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 $16.9 million at June 30, 1997.
At June 30, 1997, residential first mortgage and home equity loans declined
$34.3 and $26.5 million, or 12.0% and 14.0%, respectively, compared with
December 31, 1996. During 1996, management strengthened the underwriting
guidelines for both residential first mortgage and home equity loans, which led
to a significant reduction in loan originations.
At June 30, 1997, total securities were $426.8 million, an increase of $36.5
million, or 9.4%, from $390.3 million at December 31, 1996. At June 30, 1997,
CORUS held $108.7 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 42 companies with unrealized gains of $38.7 million. Changes in
the market value of these securities are included in shareholders' equity on an
after-tax basis, but are not included in income until the securities are sold.
During the second quarter and first six months of 1997, the pretax unrealized
gains on this portfolio increased by $9.2 and $14.5 million, respectively.
On July 3, 1997, CORUS entered into two six-month option collar agreements to
minimize the market risk associated with the bank stock portfolio. The collar
agreements consist of a purchased put option and a written call option on the
S&P 500 index. Both the put and call options have a combined notional value
of $113.0 million with the put option strike price at 915 and the call option
strike price at 1,036. The $3.4 million net cost of the agreements will be
amortized on a straight-line basis and included in securities and other
financial instruments gains and losses.
The purchased put options will be carried at market value with any unrealized
gains included, net of tax, in net gains on available for sale securities in
shareholders' equity. Any realized gains from the exercise or settlement of
the put options will be deferred as a basis adjustment to the related
securities. The written call options will also be carried at market value with
any losses included in securities and other financial instruments gains and
losses.
8
<PAGE> 11
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Allowance for Possible Loan Losses
A reconciliation of the activity in CORUS' allowance for possible loan losses
is as follows:
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- ---------------------------
(thousands) 1997 1996 1997 1996
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 30,329 $ 29,525 $ 32,668 $ 25,640
Provision for possible loan losses 4,000 4,000 8,000 8,000
Charge-offs (6,797) (1,558) (13,335) (2,489)
Recoveries 218 68 417 884
------------ ----------- ------------ -----------
Balance at June 30 $ 27,750 $ 32,035 $ 27,750 $ 32,035
============ =========== ============ ===========
Loans at June 30 $1,566,165 $1,624,158 $1,566,165 $1,624,158
============ =========== ============ ===========
Allowance as a percentage of loans 1.77% 1.97% 1.77% 1.97%
============ =========== ============ ===========
</TABLE>
The increase in net charge-offs in the second quarter of 1997 was due to a $4.0
million charge-off of delinquent student loans and $2.3 million of home equity
net charge-offs. For the first six months of 1997, there were net charge-offs
of $8.0 million for student loans and $4.3 million for home equity loans. The
student loan charge-offs were for a portion of the loans that CORUS has agreed
not to seek guarantee payments under an interim agreement with the U.S.
Department of Education until the conclusion of the Department's investigation.
Refer to the student loan investigation section following for further
information. Home equity loans that were originated at up to 100% of the
underlying property's value are charged off when they become delinquent 120
days past the due date. The underwriting guidelines for home equity loans were
strengthened in 1996 resulting in a significant decrease in loan originations.
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
student loans that CORUS has no reason to believe have lost their guarantee.
Guaranteed student loans more than 90 days past due and not included in the
table totaled $12.4, $15.2 and $11.7 million at June 30, 1997, December 31,
1996 and June 30, 1996, respectively.
9
<PAGE> 12
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
(thousands) June 30 December 31 June 30
1997 1996 1996
-------------- ------------ -----------
<S> <C> <C> <C>
Nonperforming loans:
Residential first mortgage $22,460 $22,687 $14,648
Commercial real estate 5,444 1,139 6,213
Commercial 10 12 42
Home equity 3,611 2,844 2,033
Student 975 7,114 9,216
Consumer 880 1,409 683
------------- ----------- ----------
Total nonperforming loans 33,380 35,205 32,835
Other real estate owned 3,881 2,691 1,382
------------- ----------- ----------
Total nonperforming assets $37,261 $37,896 $34,217
============= =========== ==========
Nonaccrual loans included in
non-performing loans above $ 9,686 $ 7,427 $10,241
============= =========== ==========
Nonperforming loans/Total loans 2.13% 2.17% 2.02%
Nonperforming assets/Total assets 1.70% 1.71% 1.55%
Allowance for loan losses/
nonperforming loans 83.13% 92.79% 97.56%
</TABLE>
Nonperforming residential first mortgage loans are secured by first mortgages
on primarily owner-occupied, residential property. At June 30, 1997, other
real estate owned was comprised of four commercial real estate properties with
a carrying value of $314,000 and twenty-four single-family, residential
properties with a carrying value of $3.6 million. During the first six months
of 1997, six commercial real estate properties that had a carrying value of
$1.1 million were sold for a net gain of $204,000 and ten single-family,
residential properties that had a carrying value of $1.5 million were sold for
a net gain of $18,000.
Student Loan Investigation
Refer to Note 2 of the Notes to Condensed Consolidated Financial Statements on
page 4 for further information.
Liabilities
The following table details the composition of deposit products by type:
<TABLE>
June 30 December 31 June 30
1997 1996 1996
------- ----------- -------
<S> <C> <C> <C>
Demand 10% 10% 11%
NOW 5 5 5
Money Market 51 49 48
Savings 10 10 11
Certificates of Deposit 24 26 25
----- ----- -----
Total 100% 100% 100%
===== ===== =====
</TABLE>
10
<PAGE> 13
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
At June 30, 1997, December 31, 1996 and June 30, 1996, CORUS had retail
certificates of deposit obtained from brokers of $180.1, $227.3 and $219.8
million, respectively.
Capital
CORUS' consolidated leverage ratio (Tier 1 capital/total average quarterly
assets) was 10.2% at June 30, 1997, well in excess of the minimum regulatory
level of 5%. The consolidated Tier 1 and total risk-based capital ratios were
15.5% and 16.8%, respectively, exceeding the minimum well-capitalized Tier 1
and total risk-based capital ratios of 6.00% and 10.00%, respectively.
Operating, Investing and Financing Activities
Net cash provided by operating activities totaled $18.9 million for the first
six months of 1997, compared with $27.5 million for the same period in 1996.
The decrease was primarily due to a smaller increase in accrued interest
payables and other liabilities.
Net cash provided by investing activities totaled $33.5 million for the first
six months of 1997, compared with net cash used in investing activities of
$86.6 million in 1996. This change occurred primarily due to a decrease in the
amount of loans outstanding in 1997.
Net cash used in financing activities totaled $65.4 million for the first six
months of 1997, compared with net cash provided by financing activities of
$53.9 million in 1996. The decrease in 1997 was primarily due to a reduction
in deposits and the borrowing of Federal Home Loan Bank advances in 1996.
ACCOUNTING DEVELOPMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No.
128 requires the presentation of both basic earnings per share and diluted
earnings per share. Basic earnings per share will be computed by dividing net
income by the weighted-average number of common shares outstanding. Diluted
earnings per share will be computed in the same manner as currently used by
CORUS in computing earnings per share. SFAS No. 128 will be effective for
CORUS' 1997 annual report. If SFAS No. 128 had been in effect during 1997,
basic earnings per share would have been $0.73 and $1.36 per share and diluted
earnings per share would have been $0.72 and $1.34 per share for the three and
six months ended June 30, 1997, respectively.
11
<PAGE> 14
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
FORWARD-LOOKING STATEMENTS
Statements made about CORUS' future economic performance, strategic plans or
objectives, revenue or earnings projections, or other financial items and
similar statements are not guarantees of future performance, but are
forward-looking statements. By their nature, these statements are subject to
numerous uncertainties that could cause actual results to differ materially
from those in the statements. Important factors that might cause CORUS' actual
results to differ materially include, but are not limited to, the following:
- - Federal and state legislative and regulatory developments, including the
ultimate resolution of the student loan investigation by the U.S.
Department of Education;
- - Changes in management's estimate of the adequacy of the allowance for
possible loan losses;
- - Changes in the level and direction of loan delinquencies and write-offs;
- - Interest rate movements and their impact on customer behavior and CORUS'
net interest margin;
- - Changes in the overall mix of CORUS' loan and deposit products;
- - The impact of repricing and competitors' pricing initiatives on loan and
deposit products;
- - CORUS' ability to adapt successfully to technological changes to meet
customers' needs and developments in the marketplace;
- - CORUS' ability to access cost-effective funding; and
- - Economic conditions.
12
<PAGE> 15
CORUS BANKSHARES, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Shareholders was held on May 21, 1997.
(c) At the Annual Meeting of Shareholders the following matters were
submitted to a vote of the shareholders:
(1) The election of seven directors to the Board of Directors to serve
until the next annual meeting of shareholders or until their
successors are elected and take office:
Director Votes For Votes Withheld
------------ ---------- --------------
Joseph C. Glickman 14,585,478 10,996
Robert J. Glickman 14,588,078 8,396
Karl H. Horn 14,570,012 26,462
Michael Levitt 14,588,078 8,396
Rodney D. Lubeznik 14,576,692 19,782
Michael Tang 14,576,992 19,482
William H. Wendt, III 14,588,058 8,416
(2) The ratification of the appointment of Arthur Andersen LLP as CORUS'
independent accountants for the 1997 fiscal year:
Votes For Votes Against Abstentions
---------- ------------- -----------
14,577,984 28,866 9,624
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 11 - Computation of Net Income per Common Share is on page
15.
(b) Reports on Form 8-K.
None.
13
<PAGE> 16
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)
July 17, 1997 By: /s/ Michael J. McClure
----------------------
Michael J. McClure
First Vice President and
Chief Accounting Officer
(Principal Accounting
Officer and duly authorized
Officer of Registrant)
14
<PAGE> 1
EXHIBIT 11 - CORUS BANKSHARES, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Six Months Ended
June 30
(thousands, except per share amounts) 1997 1996
---------------- ---------------
<S> <C> <C>
Net Income (A) $20,093 $22,127
========== ==========
Weighted Average Common Shares Outstanding 14,820 14,842
Weighted Average Common Share Equivalents (1) 166 160
---------- ----------
Weighted Average Common Shares and
Common Stock Equivalents (B) 14,986 15,002
========== ==========
Net Income per Common Share (A/B) $ 1.34 $ 1.47
========== ==========
</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.
15
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 52,571
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 90,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 416,669
<INVESTMENTS-CARRYING> 10,136
<INVESTMENTS-MARKET> 10,406
<LOANS> 1,566,165
<ALLOWANCE> 27,750
<TOTAL-ASSETS> 2,185,399
<DEPOSITS> 1,836,141
<SHORT-TERM> 9,113
<LIABILITIES-OTHER> 39,017
<LONG-TERM> 40,000
0
0
<COMMON> 741
<OTHER-SE> 260,387
<TOTAL-LIABILITIES-AND-EQUITY> 2,185,399
<INTEREST-LOAN> 80,017
<INTEREST-INVEST> 9,563
<INTEREST-OTHER> 3,147
<INTEREST-TOTAL> 92,727
<INTEREST-DEPOSIT> 39,348
<INTEREST-EXPENSE> 40,815
<INTEREST-INCOME-NET> 51,912
<LOAN-LOSSES> 8,000
<SECURITIES-GAINS> 920
<EXPENSE-OTHER> 25,610
<INCOME-PRETAX> 30,919
<INCOME-PRE-EXTRAORDINARY> 30,919
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,093
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.34
<YIELD-ACTUAL> 4.91
<LOANS-NON> 9,686
<LOANS-PAST> 33,380
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 32,668
<CHARGE-OFFS> 13,335
<RECOVERIES> 417
<ALLOWANCE-CLOSE> 27,750
<ALLOWANCE-DOMESTIC> 27,750
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
