<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 MARCH 31, 2000
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) 832-3088
(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 March 31, 2000, the Registrant had 14,369,290 common shares, $0.05 par
value, outstanding.
<PAGE> 2
Corus Bankshares, Inc.
Index to Quarterly Report on Form 10-Q
March 31, 2000
TABLE OF CONTENTS
PART I. -- FINANCIAL INFORMATION
ITEM 1.Financial Statements ............................................. 1-7
ITEM 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................... 8-18
ITEM 3.Quantitative and Qualitative Disclosures about Market Risk ....... 19
PART II. -- OTHER INFORMATION
ITEM 1.Legal Proceedings ................................................ 20
ITEM 2.Changes in Securities and Use of Proceeds ........................ 20
ITEM 3.Defaults Upon Senior Securities .................................. 20
ITEM 4.Submission of Matters to a Vote of Security Holders .............. 20
ITEM 5.Other Information ................................................ 20
ITEM 6.Exhibits and Reports on Form 8-K ................................. 21
Signatures ....................................................... 22
Exhibit 11 - Computation of Net Income per Share ................. 23
Exhibit 15 - Report on Unaudited Interim Financial Information ... 24
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31 December 31 March 31
(thousands) 2000 1999 1999
---------- ---------- ----------
<S> <C> <C> <C>
Assets
Cash and due from banks - noninterest bearing $ 75,032 $ 72,316 $ 57,394
Federal funds sold overnight 77,875 45,700 2,300
Securities:
Available-for-sale, at fair value 567,652 487,243 787,293
(amortized costs of $522,898, $443,541 & $718,485)
Held-to-maturity, at amortized cost 5,304 5,387 6,307
(fair value of $5,364, $5,466 & $6,478)
---------- ---------- ----------
Total Securities 572,956 492,630 793,600
Loans, net of unearned discount 1,784,790 1,727,357 1,631,612
Less: Allowance for loan losses 31,317 32,090 35,258
---------- ---------- ----------
Net Loans 1,753,473 1,695,267 1,596,354
Premises and equipment, net 33,334 33,880 33,714
Accrued interest receivable and other assets 49,755 39,393 93,439
Goodwill, net of accumulated amortization 8,733 9,012 9,939
---------- ---------- ----------
Total Assets $2,571,158 $2,388,198 $2,586,740
========== ========== ==========
Liabilities & Shareholders' Equity
Deposits:
Noninterest-bearing $ 206,443 $ 198,163 $ 199,596
Interest-bearing 1,929,825 1,766,257 1,917,794
---------- ---------- ----------
Total Deposits 2,136,268 1,964,420 2,117,390
Other short-term borrowings 174 6,866 969
Federal Home Loan Bank advances 40,000 40,000 40,000
Accrued interest payable and other liabilities 56,721 49,087 103,170
---------- ---------- ----------
Total Liabilities 2,233,163 2,060,373 2,261,529
Shareholders' Equity
Common Stock, Surplus & Retained Earnings 308,906 299,419 280,487
Accumulated other comprehensive income 29,089 28,406 44,724
---------- ---------- ----------
Total Shareholders' Equity 337,995 327,825 325,211
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $2,571,158 $2,388,198 $2,586,740
========== ========== ==========
</TABLE>
1
<PAGE> 4
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31
--------------------
(thousands, except per share data) 2000 1999
-------- --------
Interest Income
Interest and fees on loans:
Taxable $ 43,263 $ 38,527
Tax-advantaged 172 178
Deposits with banks -- 60
Federal funds sold 878 434
Securities:
Taxable 5,405 7,554
Tax-advantaged 19 24
Dividends 1,259 1,082
Trading account 122 36
-------- --------
Total Interest Income 51,118 47,895
Interest Expense
Deposits 23,208 21,722
Federal funds purchased 41 81
Short-term borrowing 40 17
Federal Home Loan Bank advances 611 508
-------- --------
Total Interest Expense 23,900 22,328
Net Interest Income 27,218 25,567
Provision for Loan Losses -- 1,000
-------- --------
Net Interest Income after Provision for Loan Losses 27,218 24,567
-------- --------
Noninterest Income:
Service charges on deposit accounts 2,472 2,538
Trust services 595 539
Gain on dispositions of student loans -- 1,580
Other income 519 705
Trading account losses, net (81) (67)
Securities and other financial
instruments losses, net (1,502) (26)
-------- --------
Total noninterest income 2,003 5,269
-------- --------
Noninterest Expense:
Salaries and employee benefits 7,366 8,202
Net occupancy 939 1,038
Data processing 621 651
Goodwill amortization 287 441
Depreciation - Furniture & equipment 560 589
Other expenses 2,050 3,074
-------- --------
Total noninterest expense 11,823 13,995
-------- --------
Income before income taxes 17,398 15,841
Income tax expense 5,828 5,463
-------- --------
Net Income $ 11,570 $ 10,378
Net Income per Share:
Basic $ 0.81 $ 0.71
Diluted 0.80 0.71
Cash Dividends Declared Per Common Share $ 0.145 $ 0.140
Average Common Shares Outstanding
Basic 14,369 14,522
Diluted 14,389 14,692
See accompanying notes.
2
<PAGE> 5
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------
(thousands) 2000 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 11,570 $ 10,378
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses -- 1,000
Depreciation and amortization 847 809
Accretion of investment and loan discounts (1,584) (6,086)
Goodwill amortization 287 441
Gain on dispositions of student loans -- (1,580)
Securities and other financial instruments losses/(gains) 1,502 (1,538)
Increase in accrued interest receivable and other assets (8,556) (53,980)
Increase in accrued interest payable and other liabilities 7,266 51,753
--------- ---------
Net cash provided by operating activities 11,332 1,197
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities held-to-maturity 85 303
Proceeds from maturities of available-for-sale securities 86,329 308,553
Proceeds from sales of available-for-sale securities 2,731 12,186
Purchases of available-for-sale securities (168,637) (203,814)
Maturities of interest-bearing deposits with banks -- 13,000
Purchases of loans (256) (86,818)
Net (increase) decrease in loans (59,457) 6,529
Purchases of premises and equipment, net (301) (418)
Purchases of businesses (8) (358)
--------- ---------
Net cash (used in) provided by investing activities (139,514) 49,163
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase(decrease) in deposit accounts 171,848 (37,288)
Decrease in short-term borrowings (6,692) (23,964)
Retirements of common shares -- (1,428)
Cash dividends paid on common shares (2,083) (2,037)
--------- ---------
Net cash provided by (used in) financing activities 163,073 (64,717)
--------- ---------
Net increase (decrease) in cash and cash equivalents 34,891 (14,357)
Cash and cash equivalents at January 1 118,016 74,051
--------- ---------
Cash and cash equivalents at March 31 $ 152,907 $ 59,694
========= =========
</TABLE>
See accompanying notes
3
<PAGE> 6
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
(thousands, except per share data) Stock Surplus Earnings Income Total
-------- -------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 718 $ 10,859 $287,842 $ 28,406 $327,825
Net income 11,570 11,570
Other comprehensive income (net of income taxes):
Net change in unrealized gains on available-
for-sale securities 683 683
--------
Comprehensive income 12,253
--------
Cash dividends declared on common stock,
$0.145 per common share (2,083) (2,083)
-------- -------- -------- -------- --------
Balance at March 31, 2000 $ 718 $ 10,859 $297,329 $ 29,089 $337,995
======== ======== ======== ======== ========
</TABLE>
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
(thousands, except per share data) Stock Surplus Earnings Income Total
--------- --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $ 727 $ 4,065 $ 268,777 $ 44,561 $ 318,130
Net income 10,378 10,378
Other comprehensive income (net of income taxes):
Net change in unrealized gains on available-
for-sale securities 163 163
---------
Comprehensive income 10,541
---------
Retirement of common shares (2) (12) (1,413) (1,427)
Cash dividends declared on common stock,
$0.140 per common share (2,033) (2,033)
--------- --------- --------- --------- ---------
Balance at March 31, 1999 $ 725 $ 4,053 $ 275,709 $ 44,724 $ 325,211
========= ========= ========= ========= =========
</TABLE>
4
<PAGE> 7
CORUS BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Condensed Consolidated Financial Statements
The Condensed Consolidated Balance Sheets and Statements of Income, Cash
Flows and Changes in Shareholders' Equity 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, 1999 included in Corus' Annual Report and Form
10-K for the year ended December 31, 1999. The results of operations for
the interim period should not be considered indicative of results to be
expected for the full year.
Certain reclassifications have been made in the 1999 financial statements
to conform to current accounting classifications.
2. Student Loan Lawsuit
On April 7, 2000, Corus settled a lawsuit filed by the Department of
Justice in early 1999 against Corus Bank, N.A. and Corus Bankshares, Inc.
The lawsuit culminated an investigation that began in 1994 when Corus
self-reported certain errors in its student loan department.
In general terms, the settlement: 1) calls for Corus to pay $7.8 million,
2) provides Corus the right to submit and receive guarantee payments on the
majority of the $15.7 million in student loans it voluntarily withheld from
submission for claim payment and that were charged off in prior years, and
3) provides that the United States will not civilly or criminally
prosecute, Corus or any of its officers, directors or employees, except for
an Assistant Vice-President in Corus' student loan department who has pled
guilty to a one-count criminal misdemeanor.
In regard to Corus' rights under the proposed settlement to submit
previously charged off loans for claim payment, the settlement sets forth
various criteria for determining whether a loan is eligible for guarantee
payments. Corus estimates that it will be able to submit and receive
guarantee payments on between $9 million and $13 million of the $15.7
million of loans previously charged off. It is anticipated that the
recoveries will occur primarily in 2000, with the remainder of the
recoveries in 2001.
As of December 31, 1999, Corus had estimated the settlement amount at $8.4
million and recorded an accrual for that amount. With the actual settlement
amount now known, an income adjustment of $600,000 was recorded and is
reflected in the Other Expenses category of Noninterest Expense.
5
<PAGE> 8
CORUS BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. New Accounting Standards
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued effective for all fiscal periods beginning
after June 15, 1999. In June 1999, SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of SFAS
No. 133" was issued to amend SFAS No. 133 to be effective for all fiscal
years beginning after June 15, 2000. SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at
its fair value. The statement requires that changes in the derivative's
fair value be recognized currently in earnings unless specific accounting
criteria are met and the hedge is considered to be highly effective.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting.
Corus uses derivative instruments to manage interest rate risk and market
risk in its loan and common stock portfolios, respectively. The statement
is effective for Corus for the fiscal quarter beginning January 1, 2001.
Corus has not yet quantified the impact of adopting this statement on its
financial position or results of its operations.
4. Segment Reporting
In 1998, Corus adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information". For purposes of this statement,
Management has determined that Corus Bankshares and Corus Bank are primary
operating segments within Corus. Corus Bank derives a significant portion
of its total revenues from interest income offering commercial, mortgage,
home equity, student and personal loans. It also provides general banking
services such as checking, savings, money market and time deposit accounts;
trust and investment management and a variety of other services. Corus Bank
is a wholly owned subsidiary of Corus Bankshares.
Transactions between the reportable segments are recorded on the reportable
segments' financial statements and significant inter-segment accounts and
transactions have been eliminated in the preparation of the consolidated
financial statements.
On the following page is a summary of significant segment information as
required by SFAS No. 131:
6
<PAGE> 9
CORUS BANKSHARES, INC.
SIGNIFICANT SEGMENT INFORMATION
FOR THE THREE MONTHS ENDED MARCH 31, 2000
Corus Corus Inter-segment Consolidated
Bankshares Bank Eliminations
--------- --------- ------------- ------------
(in thousands)
Income Statement Data
Total Revenues (1) $ 11,515 $ 29,271 $ (11,565) $ 29,221
Net Income 11,570 11,565 (11,565) 11,570
Average Balance Sheet Data
Total Assets 347,021 2,314,203 (186,645) 2,474,579
Shareholders' equity 324,799 173,978 (173,978) 324,799
Financial Highlights
Return on Equity (ROE) 14.25% 26.74%
Return on Assets (ROA) 1.87% 2.01%
Efficiency Ratio (2) 38.67% 39.78%
CORUS BANKSHARES, INC.
SIGNIFICANT SEGMENT INFORMATION
FOR THE THREE MONTHS ENDED MARCH 31, 1999
Corus Corus Inter-segment Consolidated
Bankshares Bank Eliminations
--------- --------- ------------- ------------
(in thousands)
Income Statement Data
Total Revenues (1) $ 10,899 $ 29,674 $ (9,737) $ 30,836
Net Income 10,378 9,737 (9,737) 10,378
Average Balance Sheet Data
Total Assets 348,066 2,397,561 (164,290) 2,581,337
Shareholders' equity 319,216 159,124 (159,124) 319,216
Financial Highlights
Return on Equity (ROE) 13.00% 24.82%
Return on Assets (ROA) 1.61% 1.65%
Efficiency Ratio 43.10% 44.36%
(1) Total revenues for Corus Bankshares include dividends received from Corus
Bank totaling $10.0 million in 2000 and equity in undistributed net income
of subsidiaries totaling $1.6 and $9.7 million in 2000 and 1999,
respectively.
(2) Excludes impact of $600,000 partial reversal of student loan lawsuit
accrual
7
<PAGE> 10
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
OPERATING RESULTS
For the three months ended March 31, 2000, net income was $11.6 million, or
$0.80 per share on a diluted basis, an increase of 11.5% from net income of
$10.4 million, or $0.71 per share on a diluted basis, in 1999.
Earnings for the first quarter of 2000 represented annualized returns of
14.3% on equity (ROE) and 1.9% on assets (ROA) compared to 13.0% and 1.6%
for the same period in 1999.
Net Interest Income
The major source of earnings for Corus is net interest income. Net interest
income is the difference between interest income and fees on earning assets
and interest expense on deposits and borrowings. The related net interest
margin represents the net interest income as a percentage of the average
earning assets during the period.
During the three months ended March 31, 2000, Corus recognized $259,000 of
interest income from the accretion of acquisition discount related to
several groups of purchased, previously nonperforming student loan pools,
compared to $1.3 million for the same period in 1999.
The following table represents the impact of the student loan discount
accretion on the net interest margin for the three months ended March 31,
2000 and March 31, 1999:
<TABLE>
<CAPTION>
Three Months Ended
March 31
2000 1999
------------------
<S> <C> <C>
Net interest margin 4.76% 4.25%
Impact of student loan discount accretion (0.04) (0.21)
------ ------
Net interest margin without student loan discount accretion 4.72% 4.04%
</TABLE>
The net interest margin, net of student loan discount accretion, improved
by 68 basis points versus the prior year driven by a combination of two
factors. First, Corus continued to shift assets from lower margin temporary
investments to higher yielding loans, highlighted by an increase in the
bank's loan-to-deposit ratio to 84% versus 75% in the prior year. Second,
Corus has more variable rate assets than variable rate liabilities, which
allowed the company to benefit from the increase in interest rates year
over year.
8
<PAGE> 11
AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31
----------------------------------------------------------------------------
2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
(Dollars in Thousands) BALANCE INTEREST COST BALANCE INTEREST COST
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning Assets:
Interest-bearing deposits with banks $ -- $ -- 0.00% $ 4,044 $ 60 5.93%
Federal funds sold 61,413 878 5.72% 37,486 434 4.63%
Taxable securities other than common stocks 360,727 5,405 5.99% 592,485 7,553 5.10%
Common stocks (1) 159,963 1,734 4.34% 184,992 1,490 3.22%
Tax-advantaged securities (2) 1,241 29 9.35% 2,062 37 7.18%
Trading account securities 7,459 122 6.54% 3,260 37 4.54%
Loans, net of unearned discount (2) (3) (4) 1,743,647 43,528 9.99% 1,630,205 38,802 9.52%
- --------------------------------------------------------------------------------- -----------------------------------------
Total earning assets 2,334,450 51,696 8.86% 2,454,534 48,413 7.89%
Noninterest-earning assets:
Cash and due from banks--noninterest bearing 90,597 76,343
Allowance for loan losses (31,908) (36,248)
Premises and equipment, net 33,691 34,119
Other assets, including goodwill 47,749 52,589
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,474,579 $ 2,581,337
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits -- interest-bearing:
NOW and money market deposits $ 1,011,769 $ 12,747 5.04% $ 1,009,543 $ 10,253 4.06%
Savings deposits 158,221 1,035 2.62% 169,388 1,103 2.60%
Time deposits 663,356 9,427 5.68% 749,144 10,367 5.54%
- --------------------------------------------------------------------------------- -----------------------------------------
Total interest-bearing deposits 1,833,346 23,209 5.06% 1,928,075 21,723 4.51%
Short-term borrowings 5,571 81 5.82% 7,984 98 4.91%
Federal Home Loan Bank advances 40,000 611 6.11% 40,000 508 5.08%
- --------------------------------------------------------------------------------- -----------------------------------------
Total interest-bearing liabilities 1,878,917 23,901 5.09% 1,976,059 22,329 4.52%
Noninterest-bearing liabilities and
shareholders' equity:
Noninterest-bearing deposits 219,807 214,416
Other liabilities 51,056 71,646
Shareholders' equity 324,799 319,216
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,474,579 $ 2,581,337
- -----------------------------------------------------------------------------------------------------------------------------------
Interest income/average earning assets $ 2,334,450 $ 51,696 8.86% $ 2,454,534 $ 48,413 7.89%
Interest expense/average interest-bearing liabilities 1,878,917 23,901 5.09% 1,976,059 22,329 4.52%
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest spread $ 27,795 3.77% $ 26,084 3.37%
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest margin 4.76% 4.25%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Dividends on the bank stock portfolio reflects a tax equivalent adjustment
for the 70% dividend received deduction.
(2) Interest income on tax-advantaged loans and securities reflects a tax
equivalent adjustment based on an income tax rate of 35%.
(3) Unremitted interest on nonaccrual loans is not included in the amounts.
(4) Includes net interest income derived from interest rate swap contracts.
9
<PAGE> 12
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Noninterest Income
For the three months ended March 31, 2000, noninterest income was $2.0 million,
a decrease of $3.3 million compared to 1999. Once again this decline was driven
almost entirely by two items, the change in noninterest curing income and the
impact of losses attributable to the sale of a security.
Curing income relates to nonperforming student loans purchased at a substantial
discount to face value. Corus' practice of converting these loans to performing
status and reinstating their government guarantees is referred to as "curing,"
and has represented a significant source of income to Corus over the past
several years. As a result of federal regulation, virtually all remaining
curable loans lost their eligibility to become cured on June 30, 1999 leaving
minimal curing income for 2000 and beyond. Curing income for the first three
months of 2000 was approximately $1.6 million lower than in 1999.
In March, Corus incurred a loss of $1.5 million from the sale of a portion of
the bank stock portfolio (see Common Stock Portfolio section below). Proceeds
from the sale were immediately reinvested in other bank stocks which management
believed had superior relative value.
Excluding the impact of the change in curing income and the loss on sale of
stock, noninterest income was essentially flat versus the prior year.
10
<PAGE> 13
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
FINANCIAL CONDITION
Earning Assets
The following table details the composition of Corus' earning assets:
<TABLE>
<CAPTION>
MARCH 31, 2000 December 31, 1999 March 31, 1999
(Dollars in thousands) AMOUNT PERCENT Amount Percent Amount Percent
----------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans:
Commercial real estate:
Mortgage $ 560,875 23% $ 537,603 24% $ 544,187 22%
Construction 427,884 17 378,909 17 233,297 10
Student 459,364 19 443,074 19 440,135 18
Residential first mortgage 86,316 4 92,683 4 126,412 5
Commercial 98,431 4 117,021 5 97,719 4
Home equity 130,457 5 135,603 6 163,374 7
Medical finance 20,304 1 21,201 1 24,713 1
Consumer 1,159 -- 1,263 -- 1,775 --
---------- ---------- ---------- ---------- ---------- ----------
Total loans 1,784,790 73 1,727,357 76 1,631,612 67
Securities other than common stocks 403,305 17 322,703 14 608,062 25
Common stocks 169,651 7 169,927 8 185,538 8
Federal funds sold 77,875 3 45,700 2 2,300 --
---------- ---------- ---------- ---------- ---------- ----------
Total $2,435,621 100% $2,265,687 100% $2,427,512 100%
========== ========== ========== ========== ========== ==========
</TABLE>
11
<PAGE> 14
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Loans
The following table details the composition of Corus' loan portfolio:
<TABLE>
<CAPTION>
MARCH 31, 2000 December 31, 1999 March 31, 1999
(Dollars in thousands) AMOUNT PERCENT Amount Percent Amount Percent
------------------------------ ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans:
Commercial real estate:
Mortgage $ 560,875 31% $ 537,603 31% $ 544,187 33%
Construction 427,884 24 378,909 22 233,297 14
Student 459,364 26 443,074 26 440,135 27
Residential first mortgage 86,316 5 92,683 5 126,412 8
Commercial 98,431 6 117,021 7 97,719 6
Home Equity 130,457 7 135,603 8 163,374 10
Medical finance & consumer 21,463 1 22,464 1 26,488 2
------------------------------ ----------------------------- -----------------------------
Total loans $1,784,790 100% $1,727,357 100% $1,631,612 100%
============================== ============================= =============================
</TABLE>
Commercial Real Estate Loans
The composition of the commercial real estate loan portfolio by type of
collateral securing the loan was as follows at March 31, 2000 (in thousands):
Rental apartments $152,793
Nursing homes 145,198
Hotel/Motel 239,070
Retail 57,453
Industrial 72,443
Condo/Loft conversion and other residential for sale 104,179
Office 102,185
Other 115,438
--------
Total $988,759
========
At March 31, 2000, approximately 60% of the outstanding balances of commercial
real estate loans were secured by collateral located in the six county Chicago
metropolitan area. The largest single concentration of outstanding balances
outside this area, 8%, is secured by collateral in California.
12
<PAGE> 15
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Large Commercial Real Estate Loans
For purposes of this analysis, "large" loan means any loan with a current
balance outstanding combined with any unfunded portion totaling $10 million or
greater. Corus had thirty-eight separate "large" loans as of March 31, 2000.
The following table details the composition of the "large" loans in Corus'
commercial real estate portfolio:
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000 TOTAL "LARGE" REAL ESTATE LOANS
TOTAL -----------------------------------------------
COMMERCIAL AS A % OF TOTAL
(Dollars in thousands) RE LOANS AMOUNT COMMERCIAL RE LOANS AVERAGE BALANCE
------------------------------------------------------------
<S> <C> <C> <C> <C>
Current Balance $ 988,759 $ 474,665 48% $ 12,491
Unfunded Commitments 398,010 272,431 68% 7,169
----------------------- --------------
Total $1,386,769 $ 747,096 54% $ 19,660
============================================================
</TABLE>
The following table shows what portion of the large loans related to
construction lending:
<TABLE>
<CAPTION>
TOTAL "LARGE" CONSTRUCTION LOANS
------------------------------------------
TOTAL "LARGE" AS A % OF TOTAL "LARGE"
(Dollars in thousands) REAL ESTATE LOANS AMOUNT REAL ESTATE LOANS
------------------------------------------------------------
<S> <C> <C> <C>
Current Balance $474,665 $259,807 55%
Unfunded Commitments 272,431 266,490 98%
---------------------------------
Total $747,096 $526,297 70%
============================================================
</TABLE>
Over the past several decades, the banking industry has shown higher delinquency
and loss rates for construction loans than for commercial real estate mortgage
loans.
The commercial real estate markets have been good for many years and Corus has
had particularly impressive results. Net charge-offs on Corus' commercial real
estate loans have totaled just $246,000 from 1989 through March 31, 2000. For
the quarter ending March 31, 2000, Corus had net recoveries of $18,000. While
our commercial real estate portfolio continues to show minimal delinquencies and
virtually no losses, we recognize this sort of performance cannot persist
forever.
13
<PAGE> 16
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Securities Other Than Common Stocks
At March 31, 2000 total securities other than common stocks were $403 million,
an increase of $80 million, or 25%, compared with $323 million at December 31,
1999.
Common Stocks
At March 31, 2000, Corus had investments in the common stocks of forty-one
financial industry companies totaling $170 million, including unrealized
gains of $51 million. These investments are included in the available-for-
sale classification. At March 31, 2000, the holdings by market capitalization
were as follows:
AMOUNT OF HOLDINGS PERCENTAGE OF
MARKET CAPITALIZATION (dollars in thousands) PORTFOLIO
- -------------------------------------------------------------------------------
Over $10 billion $113,932 67%
Between $5 and $10 billion 10,583 6
Between $1 and $5 billion 26,940 16
Between $500 million and $1 billion 4,469 3
Under $500 million 13,727 8
------------------------------
Total $169,651 100%
==============================
During the three months ended March 31, 2000, Corus received dividends on the
stock portfolio of $1.3 million compared to $1.1 million during the same period
in 1999.
14
<PAGE> 17
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
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.
- -------------------------------------------------------------------------------
NONPERFORMING ASSETS
- -------------------------------------------------------------------------------
MARCH 31 December 31 March 31
(thousands) 2000 1999 1999
- ------------------------------------ ---------------------------------------
Nonperforming loans:
Residential first mortgage $ 4,783 $ 6,790 $ 9,627
Commercial real estate 1,754 1,852 1,494
Commercial 329 2,443 --
Home equity 836 766 1,168
Student 228 222 318
Medical finance 460 421 1,099
Consumer 1 54 4
---------------------------------------
Total nonperforming loans 8,391 12,548 13,710
Other real estate owned 2,900 2,071 5,326
---------------------------------------
Total nonperforming assets $11,291 $14,619 $19,036
=======================================
Nonaccrual loans included in
nonperforming loans above $ 2,290 $ 2,529 $ 4,679
90 days or more past due loans included in
nonperforming loans above $ 5,775 $ 9,686 $ 8,512
Nonperforming loans/Total loans 0.47% 0.73% 0.84%
Nonperforming assets/Total assets 0.44% 0.61% 0.74%
Overall, nonperforming assets have decreased by over 40% versus the prior year.
The declines are evident across nearly all categories.
Nonperforming residential first mortgage loans are secured by first mortgages on
primarily owner-occupied, residential property. At March 31, 2000, other real
estate owned was comprised of three commercial real estate properties with
aggregate book values of $550,000 and fifteen residential properties with
aggregate book values of $2.3 million. During the first quarter of 2000, Corus
sold eight residential properties with aggregate book values of $951,000 for a
net gain of $71,000.
Excluded from the preceding 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 above nonperforming asset table totaled $22.6,
$21.9 and $14.5 million at March 31, 2000, December 31, 1999, and March 31,
1999, respectively.
15
<PAGE> 18
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Allowance for Loan Losses
Management believes that the level of the allowance for loan losses was adequate
at March 31, 2000. A reconciliation of the activity in the allowance for loan
losses is as follows:
Three Months Ended
March 31
---------------------------
(thousands) 2000 1999
---------------------------
Balance at beginning of period $ 32,090 $ 35,773
Provision for loan losses -- 1,000
Less charge-offs:
Commercial real estate loans -- 38
Student loans 74 703
Residential first mortgage loans -- 83
Home equity loans 1,172 993
Commercial loans 116 50
Consumer loans 14 62
---------------------------
Total charge-offs 1,376 1,929
---------------------------
Add recoveries:
Commercial real estate loans 18 13
Student loans 22 47
Residential first mortgage loans -- 1
Home equity loans 540 339
Commercial loans 11 2
Consumer loans 12 12
---------------------------
Total recoveries 603 414
---------------------------
Net charge-offs (773) (1,515)
---------------------------
Balance at March 31 $ 31,317 $ 35,258
===========================
Loans at March 31 $ 1,784,790 $ 1,631,612
===========================
Allowance as a percentage of loans 1.75% 2.16%
===========================
16
<PAGE> 19
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Student Loan Lawsuit
Refer to Note 2 of the Notes to Condensed Consolidated Financial Statements.
Liabilities
The following table details the composition of deposit products by type:
MARCH 31 December 31 March 31
2000 1999 1999
-------- ----------- --------
Demand 10% 10% 10%
Savings 7 8 8
NOW 5 5 4
Money Market 46 45 43
Certificates of Deposit 32 32 35
--- --- ---
Total 100% 100% 100%
=== === ===
At March 31, 2000, December 31, 1999 and March 31, 1999, Corus had retail
certificates of deposit obtained from brokers of $312, $272 and $368 million,
respectively.
Capital
Corus' consolidated leverage ratio (Tier 1 capital/total average quarterly
assets) was 12.14% at March 31, 2000, well in excess of the minimum regulatory
level of 5.00%. The consolidated Tier 1 and total risk-based capital ratios were
15.47% and 17.91%, respectively, exceeding the minimum well-capitalized Tier 1
and total risk-based capital ratios of 6.00% and 10.00%, respectively.
Year 2000 Disclosure
As of March 31, 2000, Corus has not experienced significant Year 2000 related
disruptions from either third party or internally developed systems. Corus
believes that the preparation efforts put forth locally and globally prevented
critical failures in the industry as a whole. Corus continues to closely monitor
systems and vendors throughout 2000 for Y2K-related occurrences. Several
benefits have been realized due to Year 2000 preparations including documented
and tested business recovery plans, thorough system inventories and a detailed
understanding of system interfaces. Corus does not consider the overall
financial impact of the Year 2000 project, at the latest estimated cost of $1.3
million, to be material.
17
<PAGE> 20
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
FORWARD-LOOKING STATEMENTS
This filing contains forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be identified by, among other things, the use of
forward-looking terms such as "may," "intends," "expects," "anticipates,"
"estimates," "projects," "target," "forecasts" or "seeks" or the negative of
such terms or other variations on such terms or comparable terminology. 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;
- - Changes in management's estimate of the adequacy of the allowance for loan
losses;
- - Changes in the level and direction of loans 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;
- - The purchase of the second mortgage high-loan-to-value portfolio and the
capability of Corus to minimize loan delinquencies and charge-offs of the
acquired loans; and
- - The ability of Corus to generate additional fee income from its
acquisitions of an investment management business.
Corus undertakes no obligation to revise or update these forward-looking
statements to reflect events or circumstances after the date of this filing.
18
<PAGE> 21
ITEM 3. - CORUS BANKSHARES, INC.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
There has been no material change from Corus' disclosure in item 7a of its 1999
10-K.
19
<PAGE> 22
CORUS BANKSHARES, INC.
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS.
Refer to Note 2 of the Notes to Consolidated Condensed Financial Statements.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS.
This item has been omitted from this Form 10-Q since it is inapplicable or would
contain a negative response.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES.
This item has been omitted from this Form 10-Q since it is inapplicable or would
contain a negative response.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
This item has been omitted from this Form 10-Q since it is inapplicable or would
contain a negative response
ITEM 5: OTHER INFORMATION.
None.
20
<PAGE> 23
CORUS BANKSHARES, INC.
PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3a Amended and Restated Articles of Incorporation is incorporated herein by
reference to Exhibit 4.1 to the Form S-8 filing dated May 22, 1998;
3b By-Laws are incorporated herein by reference to Exhibit 4.2 to the Form S-8
filing dated May 22, 1998;
11 Computation of Net Income per Common Share.
15 Report on unaudited interim financial information.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None
21
<PAGE> 24
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)
May 11, 2000 By: /s/ Timothy H. Taylor
---------------------
Timothy H. Taylor
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer
and duly authorized Officer
of Registrant)
22
<PAGE> 1
EXHIBIT 11 - CORUS BANKSHARES, INC.
COMPUTATION OF NET INCOME PER SHARE
Three Months Ended
March 31
(thousands, except per share amounts) 2000 1999
------- -------
Denominator for basic earnings per share - average
common shares outstanding 14,369 14,522
Dilutive common stock options 20 170
------- -------
Denominator for diluted earnings per share 14,389 14,692
======= =======
Numerator: Net income attributable to common shares $11,570 $10,378
======= =======
Net income per share:
Basic $ 0.81 $ 0.71
Diluted 0.80 0.71
23
<PAGE> 1
EXHIBIT 15 - CORUS BANKSHARES, INC.
REPORT ON UNAUDITED INTERIM FINANCIAL INFORMATION
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have reviewed the accompanying condensed balance sheet of Corus Bankshares,
Inc. and subsidiary as of March 31, 2000, and the related condensed statements
of income and cash flows for the three-month periods ended March 31, 2000 and
1999. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Arthur Andersen
Chicago, Illinois
May 11, 2000
24
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 75,032
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 77,875
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 567,652
<INVESTMENTS-CARRYING> 5,304
<INVESTMENTS-MARKET> 5,364
<LOANS> 1,784,790
<ALLOWANCE> 31,317
<TOTAL-ASSETS> 2,571,158
<DEPOSITS> 2,136,268
<SHORT-TERM> 174
<LIABILITIES-OTHER> 56,721
<LONG-TERM> 40,000
0
0
<COMMON> 718
<OTHER-SE> 337,277
<TOTAL-LIABILITIES-AND-EQUITY> 2,571,158
<INTEREST-LOAN> 43,435
<INTEREST-INVEST> 6,805
<INTEREST-OTHER> 878
<INTEREST-TOTAL> 51,118
<INTEREST-DEPOSIT> 23,208
<INTEREST-EXPENSE> 23,900
<INTEREST-INCOME-NET> 27,218
<LOAN-LOSSES> 0
<SECURITIES-GAINS> (1,502)
<EXPENSE-OTHER> 11,823
<INCOME-PRETAX> 17,398
<INCOME-PRE-EXTRAORDINARY> 17,398
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,570
<EPS-BASIC> 0.81
<EPS-DILUTED> 0.80
<YIELD-ACTUAL> 4.76
<LOANS-NON> 2,290
<LOANS-PAST> 5,775
<LOANS-TROUBLED> 326
<LOANS-PROBLEM> 5,120
<ALLOWANCE-OPEN> 32,090
<CHARGE-OFFS> 1,376
<RECOVERIES> 603
<ALLOWANCE-CLOSE> 31,317
<ALLOWANCE-DOMESTIC> 31,317
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
