<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, 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 September 30, 2000, the Registrant had 14,158,140 common shares, $0.05 par
value, outstanding.
<PAGE> 2
Corus Bankshares, Inc.
Index to Quarterly Report on Form 10-Q
September 30, 2000
TABLE OF CONTENTS
PART I. -- FINANCIAL INFORMATION
ITEM 1. Financial Statements............................................ 1-6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 7-18
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>
SEPTEMBER 30 December 31 September 30
(Dollars in thousands) 2000 1999 1999
------------ ----------- ------------
<S> <C> <C> <C>
Assets
Cash and due from banks - noninterest bearing $ 109,999 $ 72,316 $ 86,548
Federal funds sold overnight -- 45,700 8,850
Securities:
Available-for-sale, at fair value 443,994 487,243 634,973
(amortized costs of $389,315, $443,541 & $590,362)
Held-to-maturity, at amortized cost 6,399 5,387 6,020
(fair value of $6,466, $5,466 & $6,137)
---------- ---------- ----------
Total Securities 450,393 492,630 640,993
Loans, net of unearned discount 1,940,750 1,727,357 1,698,946
Less: Allowance for loan losses 36,971 32,090 35,634
---------- ---------- ----------
Net Loans 1,903,779 1,695,267 1,663,312
Premises and equipment, net 32,137 33,880 34,240
Accrued interest receivable and other assets 52,262 39,393 42,828
Goodwill, net of accumulated amortization 5,717 9,012 9,292
---------- ---------- ----------
Total Assets $2,554,287 $2,388,198 $2,486,063
========== ========== ==========
Liabilities & Shareholders' Equity
Deposits:
Noninterest-bearing $ 228,283 $ 198,163 $ 207,715
Interest-bearing 1,830,371 1,766,257 1,865,807
---------- ---------- ----------
Total Deposits 2,058,654 1,964,420 2,073,522
Other short-term borrowings 38,315 6,866 4,701
Federal Home Loan Bank advances 40,000 40,000 40,000
Accrued interest payable and other liabilities 49,285 49,087 48,838
---------- ---------- ----------
Total Liabilities 2,186,254 2,060,373 2,167,061
Shareholders' Equity
Common Stock, Surplus & Retained Earnings 332,493 299,419 290,006
Accumulated other comprehensive income 35,540 28,406 28,996
---------- ---------- ----------
Total Shareholders' Equity 368,033 327,825 319,002
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $2,554,287 $2,388,198 $2,486,063
========== ========== ==========
</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
----------------------- ------------------------
(Dollars in thousands, except per share data) 2000 1999 2000 1999
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans:
Taxable $ 50,558 $ 40,730 $ 140,286 $ 118,130
Tax-advantaged 174 177 522 530
Deposits with banks - - - 81
Federal funds sold 388 788 1,660 1,800
Securities:
Taxable 5,602 6,941 18,136 22,683
Tax-advantaged 18 24 56 72
Dividends 1,164 1,136 3,686 3,320
Trading account - - 122 123
-------- -------- --------- ---------
Total Interest Income 57,904 49,796 164,468 146,739
Interest Expense
Deposits 25,304 22,226 73,559 66,240
Federal funds purchased 121 1 354 171
Short-term borrowing 35 30 116 77
Federal Home Loan Bank advances 682 539 1,925 1,553
-------- -------- --------- ---------
Total Interest Expense 26,142 22,796 75,954 68,041
Net Interest Income 31,762 27,000 88,514 78,698
Provision for Loan Losses - 1,000 - 3,000
-------- -------- --------- ---------
Net Interest Income after Provision for Loan Losses 31,762 26,000 88,514 75,698
Noninterest Income:
Service charges on deposit accounts 2,292 2,494 7,163 7,544
Trust and investment management services 484 545 1,597 1,569
Gain on dispositions of student loans 43 1,285 43 4,340
Other income 675 515 1,864 1,802
Trading account losses, net (159) (10) (313) (243)
Securities and other financial
instruments gains/(losses), net 4,210 (1,305) 10,245 (1,293)
-------- -------- --------- ---------
Total noninterest income 7,545 3,524 20,599 13,719
Noninterest Expense:
Salaries and employee benefits 8,156 7,952 23,098 23,856
Net occupancy 1,096 970 3,071 3,023
Data processing 620 713 1,846 2,065
Goodwill amortization 288 287 862 1,066
Depreciation - Furniture & equipment 517 612 1,639 1,827
Loss on sale of CAM/Trust 1,746 - 1,746 -
Other expenses 2,747 2,549 7,360 8,866
-------- -------- --------- ---------
Total noninterest expense 15,170 13,083 39,622 40,703
-------- -------- --------- ---------
Income before income taxes 24,137 16,441 69,491 48,714
Income tax expense 8,261 5,521 23,637 16,528
-------- -------- --------- ---------
Net Income $ 15,876 $ 10,920 $ 45,854 $ 32,186
Net Income per Share:
Basic $ 1.11 $ 0.76 $ 3.20 $ 2.23
Diluted $ 1.11 $ 0.76 $ 3.20 $ 2.22
Cash Dividends Declared Per Common Share $ 0.150 $ 0.145 $ 0.445 $ 0.430
Average Common Shares Outstanding
Basic 14,248 14,389 14,322 14,457
Diluted 14,302 14,437 14,342 14,516
</TABLE>
See accompanying notes.
2
<PAGE> 5
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
----------------------
(Dollars in thousands) 2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 45,854 $ 32,186
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses -- 3,000
Depreciation and amortization 2,615 2,490
Accretion of investment and loan discounts (6,031) (17,949)
Goodwill amortization 862 1,066
Gain on dispositions of student loans (43) (4,340)
Securities and other financial instruments gains, net (10,245) (459)
Increase in accrued interest receivable and other assets (8,984) (1,671)
(Decrease) increase in accrued interest payable and other liabilities (3,939) 5,889
--------- ---------
Net cash provided by operating activities 20,089 20,212
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities held-to-maturity 281 593
Proceeds from maturities of available-for-sale securities 358,736 735,662
Proceeds from sales of available-for-sale securities 40,485 16,231
Purchases of available-for-sale securities (331,486) (498,891)
Maturities of interest-bearing deposits with banks -- 13,000
Purchases of loans (6,163) (87,442)
Net increase in loans (211,712) (59,433)
Bad debt recoveries 7,997 1,516
Purchases of premises and equipment, net (925) (2,625)
Purchases of businesses (22) (379)
Loss on sale of CAM/Trust 1,746 --
--------- ---------
Net cash (used in) provided by investing activities (141,063) 118,232
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposit accounts 94,234 (81,155)
Increase (decrease) in short-term borrowings 31,449 (20,232)
Retirements of common shares (6,412) (13,520)
Issuance of common shares under the stock option plan -- 3,972
Cash dividends paid on common shares (6,314) (6,162)
--------- ---------
Net cash provided by (used in) financing activities 112,957 (117,097)
--------- ---------
Net (decrease) increase in cash and cash equivalents (8,017) 21,347
Cash and cash equivalents at January 1 118,016 74,051
--------- ---------
Cash and cash equivalents at September 30 $ 109,999 $ 95,398
========= =========
</TABLE>
See accompanying notes.
3
<PAGE> 6
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
(Dollars in 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 45,854 45,854
Other comprehensive income (net of income taxes):
Net change in unrealized gains on available-
for-sale securities 7,134 7,134
-------------
Comprehensive income 52,988
-------------
Retirement of common shares (10) (159) (6,243) (6,412)
Cash dividends declared on common stock,
$0.445 per common share (6,368) (6,368)
----------- ----------- -------------- -------------- -------------
Balance at September 30, 2000 $ 708 $ 10,700 $ 321,085 $ 35,540 $ 368,033
=========== =========== ============== ============== =============
CORUS BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
Accumulated
Other
Common Retained Comprehensive
(Dollars in thousands, except per share data) Stock Surplus Earnings Income Total
----------- ----------- -------------- -------------- -------------
Balance at December 31, 1998 $ 727 $ 4,065 $ 268,777 $ 44,561 $ 318,130
Net income 32,186 32,186
Other comprehensive income (net of income taxes):
Net change in unrealized gains on available-
for-sale securities (15,565) (15,565)
-------------
Comprehensive income 16,621
-------------
Retirement of common shares (22) (121) (13,377) (13,520)
Issuance of common shares 10 3,962 3,972
Cash dividends declared on common stock,
$0.430 per common share (6,201) (6,201)
----------- ----------- -------------- -------------- -------------
Balance at September 30, 1999 $ 715 $ 7,906 $ 281,385 $ 28,996 $ 319,002
=========== =========== ============== ============== =============
</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) that 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. 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. In June 2000, SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities" was issued further amending SFAS No. 133. SFAS No. 133 and SFAS
No. 138 establish 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 statements require 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. The statements are effective for Corus for the
fiscal quarter beginning January 1, 2001.
As of September 30, 2000, derivatives utilized by Corus include interest
rate fixed-to-floating swaps, basis swaps and floors. These derivative
instruments are utilized to reduce interest rate risk by improving the
balance between rate sensitive assets and liabilities. While the company
plans to adopt the provisions of the statement, as amended, for its
quarterly and annual reporting beginning January 1, 2001, the ultimate
impact on the corporation's financial position, results of operations, and
cash flows will depend on the interest rate environment and the nature of
any derivatives held at that time.
3. 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
as well as 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:
5
<PAGE> 8
CORUS BANKSHARES, INC.
SIGNIFICANT SEGMENT INFORMATION
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Corus Corus Inter-segment Consolidated
(Dollars in thousands) Bankshares Bank Eliminations
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total Revenues (1) $ 17,772 $ 33,766 $ (12,231) $ 39,307
Net Income 15,876 12,231 (12,231) 15,876
AVERAGE BALANCE SHEET DATA
Total Assets 380,332 2,376,558 (230,915) 2,525,975
Shareholders' equity 352,921 223,889 (223,889) 352,921
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
Corus Corus Inter-segment Consolidated
(Dollars in thousands) Bankshares Bank Eliminations
------------ ------------ ------------- -------------
INCOME STATEMENT DATA
Total Revenues (1) $ 10,883 $ 30,580 $ (10,938) $ 30,525
Net Income 10,920 10,938 (10,938) 10,920
AVERAGE BALANCE SHEET DATA
Total Assets 356,508 2,357,650 (172,363) 2,541,795
Shareholders' equity 327,958 166,372 (166,372) 327,958
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
Corus Corus Inter-segment Consolidated
(Dollars in thousands) Bankshares Bank Eliminations
------------ ------------ ------------- -------------
INCOME STATEMENT DATA
Total Revenues (2) $ 50,865 $ 94,532 $ (36,284) $ 109,113
Net Income 45,854 36,284 (36,284) 45,854
AVERAGE BALANCE SHEET DATA
Total Assets 364,591 2,366,391 (206,856) 2,524,126
Shareholders' equity 339,662 194,203 (194,203) 339,662
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
Corus Corus Inter-segment Consolidated
(Dollars in thousands) Bankshares Bank Eliminations
------------ ------------ ------------- -------------
INCOME STATEMENT DATA
Total Revenues (2) $ 33,147 $ 90,079 $ (30,809) $ 92,417
Net Income 32,186 30,809 (30,809) 32,186
AVERAGE BALANCE SHEET DATA
Total Assets 354,606 2,385,506 (168,776) 2,571,336
Shareholders' equity 325,171 163,200 (163,200) 325,171
</TABLE>
(1) Total revenues for Corus Bankshares include dividends received and equity in
undistributed net income from Corus Bank totaling $12.2 and $10.9 million for
the three months ended September 30, 2000 and 1999, respectively.
(2) Total revenues for Corus Bankshares include dividends received and equity in
undistributed net income from Corus Bank totaling $36.3 and $30.8 million for
the nine months ended September 30, 2000 and 1999, respectively.
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, 2000 AND 1999
OPERATING RESULTS
For the three months ended September 30, 2000, net income was $15.9 million, or
$1.11 per share on a diluted basis, an increase of 45.4% from net income of
$10.9 million, or $0.76 per share on a diluted basis, in 1999. For the nine
months ended September 30, 2000, net income was $45.9 million, or $3.20 per
share on a diluted basis, an increase of 42.5% from net income of $32.2 million,
or $2.22 per share on a diluted basis, in 1999.
Earnings for the third quarter of 2000 represented annualized returns of 18.0%
on equity (ROE) and 2.5% on assets (ROA) compared to 13.3% and 1.7% for the same
period in 1999. Earnings for the nine months ended September 30, 2000
represented annualized returns of 18.0% on equity (ROE) and 2.4% on assets (ROA)
compared to 13.2% and 1.7% for the same period in 1999.
Net Interest Income
The major source of earnings for Corus is net interest income, which 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 and nine months ended September 30, 2000, Corus' net interest
margin increased, versus the prior year, by 86 and 67 basis points,
respectively. This increase was achieved in spite of significant reductions in
income earned from student loan curing profits. After adjustment for the student
loan curing profits, the net interest margin for the three and nine month
periods ended September 30, 2000 improved by 104 and 89 basis points,
respectively, versus the prior year. This increase results partially from the
continuing trend to shift assets from lower margin temporary investments to
higher yielding loans. Additionally, Corus has more variable rate assets than
variable rate liabilities, which allows the company to BENEFIT from the increase
in interest rates year over year.
As discussed in prior quarters, the unusual student loan curing profits resulted
from several groups of purchased, previously nonperforming student loans. The
decrease in this student loan income had been expected and was previously
reported. Overall, the curing profits decreased to $858,000 and $1.3 million for
the three and nine month periods ended September 30, 2000, compared to $2.0
million and $5.3 million for the same periods in 1999. The following table shows
the impact of the student loan curing profits on the net interest margin:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000 1999
----------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Net interest margin 5.41% 4.55% 5.04% 4.37%
Impact of student loan curing profits (0.15) (0.33) (0.07) (0.29)
----------------- --------------- ----------------- ----------------
Net interest margin without student loan
curing profits 5.26% 4.22% 4.97% 4.08%
================= =============== ================= ================
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN (Unaudited)
---------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30
--------------------------------------------------------------------------
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:
Federal funds sold $ 23,568 $ 388 6.59% $ 62,109 $ 788 5.07%
Taxable securities other than common stocks 345,429 5,603 6.49% 516,547 6,941 5.37%
Common stocks (1) 147,677 1,603 4.34% 184,187 1,564 3.40%
Tax-advantaged securities (2) 1,243 28 9.01% 1,573 37 9.37%
Trading account securities 536 - - % - - - %
Loans, net of unearned discount (2) (3) (4) 1,871,476 50,825 10.86% 1,655,825 41,003 9.91%
------------------------------------------------------------------------------- -----------------------
Total earning assets 2,389,929 58,447 9.78% 2,420,241 50,333 8.32%
Noninterest-earning assets:
Cash and due from banks--noninterest bearing 74,420 75,391
Allowance for loan losses (32,091) (35,760)
Premises and equipment, net 32,568 34,224
Other assets, including goodwill 61,149 47,699
---------------------------------------------------------------------------------------------------------------------------------
Total assets $2,525,975 $2,541,795
---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits -- interest-bearing:
NOW and money market deposits $1,056,454 $14,532 5.50% $ 988,686 $10,800 4.37%
Savings deposits 152,310 1,013 2.66% 166,643 1,114 2.67%
Time deposits 628,703 9,759 6.21% 738,450 10,312 5.59%
------------------------------------------------------------------------------- -------------------------
Total interest-bearing deposits 1,837,467 25,304 5.51% 1,893,779 22,226 4.69%
Short-term borrowings 8,931 156 6.99% 2,349 30 5.13%
Federal Home Loan Bank advances 40,000 682 6.82% 40,000 539 5.39%
------------------------------------------------------------------------------- -------------------------
Total interest-bearing liabilities 1,886,398 26,142 5.54% 1,936,128 22,796 4.71%
Noninterest-bearing liabilities and shareholders'
equity:
Noninterest-bearing deposits 230,004 226,701
Other liabilities 56,652 51,008
Shareholders' equity 352,921 327,958
---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $2,525,975 $2,541,795
---------------------------------------------------------------------------------------------------------------------------------
Interest income/average earning assets $ 2,389,929 $58,447 9.78% $2,420,241 $50,333 8.32%
Interest expense/average interest-bearing liabilities $ 1,886,398 26,142 5.54% $1,936,128 22,796 4.71%
---------------------------------------------------------------------------------------------------------------------------------
Net interest spread $32,305 4.24% $27,537 3.61%
---------------------------------------------------------------------------------------------------------------------------------
Net interest margin 5.41% 4.55%
---------------------------------------------------------------------------------------------------------------------------------
</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.
8
<PAGE> 11
<TABLE>
<CAPTION>
AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN (Unaudited)
------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30
--------------------------------------------------------------------------
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 $ - $ - - % $ 1,334 $ 61 6.02%
Federal funds sold 36,880 1,660 6.00% 48,973 1,800 4.90%
Taxable securities other than common stocks 384,659 18,136 6.29% 584,295 22,683 5.18%
Common stocks (1) 156,807 5,075 4.32% 186,230 4,571 3.27%
Tax-advantaged securities (2) 1,242 86 9.23% 1,581 111 9.33%
Trading account securities 2,657 122 6.12% 4,305 123 3.82%
Loans, net of unearned discount (2) (3) (4) 1,804,284 141,089 10.43% 1,623,247 118,944 9.77%
---------------------------------------------------------------------------- --------------------------
Total earning assets 2,386,529 166,168 9.28% 2,449,965 148,293 8.07%
Noninterest-earning assets:
Cash and due from banks--noninterest bearing 79,958 73,478
Allowance for loan losses (31,759) (35,894)
Premises and equipment, net 33,139 34,167
Other assets, including goodwill 56,259 49,620
------------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,524,126 $2,571,336
------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits -- interest-bearing:
NOW and money market deposits $ 1,038,414 $40,986 5.26% $ 996,151 $ 31,243 4.18%
Savings deposits 155,541 3,071 2.63% 168,424 3,332 2.64%
Time deposits 661,036 29,502 5.95% 760,197 31,666 5.55%
---------------------------------------------------------------------------- --------------------------
Total interest-bearing deposits 1,854,991 73,559 5.29% 1,924,772 66,241 4.59%
Short-term borrowings 9,528 470 6.58% 6,491 247 5.08%
Federal Home Loan Bank advances 40,000 1,925 6.42% 40,000 1,553 5.18%
---------------------------------------------------------------------------- --------------------------
Total interest-bearing liabilities 1,904,519 75,954 5.32% 1,971,263 68,041 4.60%
Noninterest-bearing liabilities and shareholders'
equity:
Noninterest-bearing deposits 225,863 219,979
Other liabilities 54,082 54,923
Shareholders' equity 339,662 325,171
------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,524,126 $2,571,336
------------------------------------------------------------------------------------------------------------------------------
Interest income/average earning assets $ 2,386,529 $166,168 9.28% $2,449,965 $148,293 8.07%
Interest expense/average interest-bearing
liabilities $ 1,904,519 75,954 5.32% $1,971,263 68,041 4.60%
------------------------------------------------------------------------------------------------------------------------------
Net interest spread $ 90,214 3.96% $ 80,252 3.47%
------------------------------------------------------------------------------------------------------------------------------
Net interest margin 5.04% 4.37%
------------------------------------------------------------------------------------------------------------------------------
</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 AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Noninterest Income
For the three and nine months ended September 30, 2000, noninterest income was
$7.5 and $20.6 million, respectively, representing an increase of $4.0 and $6.9
million compared to the same periods in 1999. This change was driven almost
entirely by two items, the impact of gains attributable to the sales of
securities and the offsetting decline in noninterest student loan curing income.
In the third quarter of 2000, Corus realized a gain of $4.2 million from the
sale of a portion of the bank stock portfolio (see Common Stocks section below).
This third quarter gain, combined with the net gain incurred in the first two
quarters, results in a year-to-date gain of over $10.2 million. In comparison,
for both the three and nine month periods ended September 30, 1999, Corus had
incurred net losses from the common stock portfolio and related financial
instruments transactions of $1.3 million.
Conversely, during the first three quarters of 2000, Corus has recognized only
$43,000 of noninterest student loan curing income compared to $1.3 and $4.3
million for the three and nine-month periods ended September 30, 1999. This
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.
Excluding the impact of the gain on sale of stock and the change in curing
income, noninterest income was essentially flat versus the prior year.
Noninterest Expense
For the three months ended September 30, 2000, noninterest expense increased by
$2.1 million compared to 1999. This increase was driven primarily by a $1.7
million loss incurred on the sale of the investment advisory and trust
operations.
Total proceeds from the sale of the investment and advisory unit and trust
operations included $1 million cash at closing. In addition, Corus is entitled
to receive a percentage of the revenues of the businesses over the next five
years, for maximum proceeds of $3.25 million. As accounting rules do not allow
for the recording of contingent revenues, these future receipts will be treated
as income when received.
In addition to the loss on the sale, noninterest expense increased as a result
of Corus' introduction of Totally Free Checking in the third quarter of 2000.
The new checking account initiative resulted in incremental advertising costs
to-date of approximately $300,000.
In spite of the impact of the $1.7 million loss on sale and the incremental
advertising expenses noted above, noninterest expense declined by $1.1 million
or 2.7%, for the nine months ended September 30, 2000. The decline was due, in
part to the impact of winding down the student loan curing operation, which
reduced the cost of salaries and benefits. In addition, expenses were lower in
2000 due to the effect of the partial reversal of the student loan settlement
expense accrual in January 2000 and write-off in the first quarter of 1999 of
certain building and improvement expenses. Finally, 2000 has seen a decline in
expenses related to depreciation, data processing and goodwill amortization.
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, 2000 AND 1999
FINANCIAL CONDITION
Earning Assets
The following table details the composition of Corus' earning assets:
<TABLE>
<CAPTION>
(Dollars in thousands) SEPTEMBER 30, 2000 December 31, 1999 September 30, 1999
AMOUNT PERCENT Amount Percent Amount Percent
--------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans $1,940,750 81% $1,727,357 76% $1,698,946 72%
Securities other than common stocks 296,433 12 322,703 14 472,043 20
Common stocks 153,960 7 169,927 8 168,950 7
Federal funds sold -- -- 45,700 2 8,850 1
--------------------- ------------------------- -------------------------
Total $2,391,143 100% $2,265,687 100% $2,348,789 100%
===================== ========================= =========================
Loans
The following table details the composition of Corus' loan portfolio:
(Dollars in thousands) SEPTEMBER 30, 2000 December 31, 1999 September 30, 1999
AMOUNT PERCENT Amount Percent Amount Percent
--------------------- -------------------------- -------------------------
Loans:
Commercial Real Estate:
Mortgage $ 677,153 34% $ 537,603 31% $ 550,527 32%
Construction 499,230 26 378,909 22 344,974 20
Student 457,958 24 443,074 26 438,165 26
Home equity 123,713 6 135,603 8 145,023 9
Commercial 87,524 5 117,021 7 95,254 6
Residential first mortgage 76,246 4 92,683 5 101,487 6
Medical finance & consumer 18,926 1 22,464 1 23,516 1
--------------------- ------------------------- -------------------------
Total Loans $1,940,750 100% $1,727,357 100% $1,698,946 100%
===================== ========================= =========================
</TABLE>
11
<PAGE> 14
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Large Commercial Real Estate (CRE) 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. As of September 30, 2000, Corus had 52 separate "large" loans. The
following tables and graph detail the composition of these "large" loans in the
commercial real estate portfolio (in millions):
<TABLE>
<CAPTION>
TOTAL COMMERCIAL REAL ESTATE LOANS
------------------------------------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000
----------------------------------------------------------------------------
Large Large Loans Deferred
Construction Term less than Loan Fees/ Total CRE
Loans Loans $10MM Other Discounts Loans
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current Balance $ 391 $ 317 $ 480 $ (12) $ 1,176
Outstanding Commitments 364 - 101 N/A 465
----------------------------------------------------------------------------
Total $ 755 $ 317 $ 581 $ (12) $ 1,641
============================================================================
</TABLE>
<TABLE>
<CAPTION>
LARGE CONSTRUCTION LOANS - BY SIZE
============================================================================================================================
AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------
$10MM to $20MM to $30MM to $40MM to As % of
$20MM $30MM $40MM $50MM Total Total
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current Balance $ 90 $ 183 $ 80 $ 38 $ 391 52%
Outstanding Commitments 72 160 120 12 364 48%
--------------------------------------------------------------------------------------------
Total $ 162 $ 343 $ 200 $ 50 $ 755 100%
============================================================================================
LARGE TERM LOANS - BY SIZE
============================================================================================================================
AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------
$10MM to $20MM to $30MM to $40MM to As % of
$20MM $30MM $40MM $50MM Total Total
--------------------------------------------------------------------------------------------
Current Balance $ 141 $ 145 $ 31 $ - $ 317 100%
Outstanding Commitments - - - - - - %
--------------------------------------------------------------------------------------------
Total $ 141 $ 145 $ 31 $ - $ 317 100%
============================================================================================
</TABLE>
[TOTAL LARGE COMMERCIAL REAL ESTATE LOANS CHART]
--------------------------------------------------------------------------------
CHART DATA FOR LARGE COMMERCIAL REAL ESTATE LOANS
--------------------------------------------------------------------------------
$10MM to $20MM to $30MM to $40MM to
$20MM $30MM $40MM $50MM Total
---------------------------------------------------
Construction $ 90 $ 183 $ 80 $ 38 $ 391
Term 141 145 31 -- 317
Commitments 72 160 120 12 364
------ ------ ------ ------ ------
Total $ 303 $ 488 $ 231 $ 50 $1,072
====== ====== ====== ====== ======
--------------------------------------------------------------------------------
12
<PAGE> 15
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
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 $222,000 from 1989 through
September 30, 2000. For the nine months ending September 30, 2000, Corus had net
recoveries of $42,000. While our commercial real estate portfolio continues to
show minimal delinquencies and virtually no losses, we recognize this sort of
performance cannot persist forever.
The following tables break out commercial real estate loans by property type and
location:
COMMERCIAL REAL ESTATE LOANS - BY PROPERTY TYPE
--------------------------------------------------------------------------------
(Dollars in millions) AS OF SEPTEMBER 30, 2000
-----------------------------------------
ALL LOANS LARGE LOANS
----------------- --------------------
AMOUNT % AMOUNT %
----------------- --------------------
Hotel $ 285 24% $ 205 29%
Condo/loft conversion 201 17 169 24
Rental apartments 162 14 67 10
Office 158 13 84 12
Nursing Homes 129 11 78 11
Vacant Land 97 8 58 8
Warehouse / Light industrial 67 6 16 2
Retail 53 5 16 2
Other 36 3 15 3
Deferred Loan Fees / Other Discounts (12) (1) (9) (1)
----------------- --------------------
Total $ 1,176 100% $ 699 100%
================= ====================
COMMERCIAL REAL ESTATE LOANS - BY LOCATION
--------------------------------------------------------------------------------
(Dollars in millions) AS OF SEPTEMBER 30, 2000
-----------------------------------------
ALL LOANS LARGE LOANS
----------------- --------------------
AMOUNT % AMOUNT %
----------------- --------------------
Illinois $ 600 51% $ 312 45%
California 135 11 95 14
New York 89 8 64 9
Texas 79 7 58 8
Arizona 65 6 61 9
Indiana 40 3 31 4
Other 180 15 87 12
Deferred Loan Fees / Other Discounts (12) (1) (9) (1)
----------------- --------------------
Total $ 1,176 100% $ 699 100%
================= ====================
13
<PAGE> 16
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Securities Other Than Common Stocks
At September 30, 2000 total securities other than common stocks were $296
million, a decrease of $27 million, or 8%, compared with $323 million at
December 31, 1999.
Common Stocks
At September 30, 2000, Corus had investments in the common stocks of 38
financial industry companies totaling $154 million, including net unrealized
gains of $58 million. These investments are included in the available-for-sale
classification. At September 30, 2000, the holdings by market capitalization
were as follows:
AMOUNT OF PERCENTAGE OF
MARKET CAPITALIZATION (Dollars in thousands) HOLDINGS PORTFOLIO
--------------------------------------------------------------------------------
Over $10 billion $ 100,173 65%
Between $5 and $10 billion 12,746 8
Between $1 and $5 billion 24,836 16
Between $500 million and $1 billion 8,421 6
Under $500 million 7,784 5
-----------------------------
Total $ 153,960 100%
=============================
During the three and nine months ended September 30, 2000, Corus received
dividends on the stock portfolio of $1.2 and $3.7 million, respectively,
compared to $1.1 and $3.3 million during the same periods in 1999. In addition,
as mentioned previously, Corus sold a portion of the portfolio in September 2000
for $6.2 million, recognizing a gain of $4.2 million.
14
<PAGE> 17
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Nonperforming Assets
Nonperforming loans are nonaccrual loans, restructured loans and 90 days or more
past due loans still accruing interest. Overall, Corus' nonperforming assets
have decreased by 55% versus the prior year. The declines are evident across
nearly all categories, as shown below:
--------------------------------------------------------------------------------
NONPERFORMING ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31 September 30
(Dollars in thousands) 2000 1999 1999
--------------- -------------- --------------
<S> <C> <C> <C>
Nonperforming loans:
Residential first mortgage $ 3,684 $ 6,790 $ 8,152
Commercial real estate 2,382 1,852 1,618
Commercial 7 2,443 5,042
Home equity 899 766 1,268
Student loans 135 222 197
Medical finance 393 421 645
Consumer 44 54 25
--------------- -------------- --------------
Total nonperforming loans 7,544 12,548 16,947
Other real estate owned 1,887 2,071 3,807
--------------- -------------- --------------
Total nonperforming assets $ 9,431 $ 14,619 $ 20,754
=============== ============== ==============
Nonaccrual loans included in
nonperforming loans above $ 1,365 $ 2,529 $ 2,528
90 days or more past due loans included in
nonperforming loans above $ 6,114 $ 9,686 $ 14,050
Nonperforming loans/Total loans 0.39% 0.73% 1.00%
Nonperforming assets/Total assets 0.37% 0.61% 0.83%
</TABLE>
Nonperforming residential first mortgage loans are secured by first mortgages on
primarily owner-occupied, residential property. At September 30, 2000, other
real estate owned was comprised of one commercial real estate property with a
book value of $132,000 and twelve residential properties with aggregate book
values of $1.7 million. During the third quarter of 2000, Corus sold seven
residential properties with aggregate book values of $552,000 for a net gain of
$109,000. There were also net recoveries on residential properties during the
third quarter totaling $30,000.
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 $23.6,
$21.9 and $18.6 million at September 30, 2000, December 31, 1999, and September
30, 1999, respectively.
15
<PAGE> 18
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Allowance for Loan Losses
Management believes that the level of the allowance for loan losses was adequate
at September 30, 2000. A reconciliation of the activity in the allowance for
loan losses is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------------------ ------------------------------------
(Dollars in thousands) 2000 1999 2000 1999
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 32,129 $ 35,464 $ 32,090 $ 35,773
Provision for loan losses - 1,000 - 3,000
Less charge-offs:
Commercial real estate loans - - - 38
Student loans 80 139 203 1,280
Residential first mortgage loans 55 23 55 109
Home equity loans 709 1,281 2,687 3,089
Commercial loans - - 116 72
Consumer loans 21 3 55 67
------------------------------------ ------------------------------------
Total charge-offs 865 1,446 3,116 4,655
------------------------------------ ------------------------------------
Add recoveries:
Commercial real estate loans 9 72 42 109
Student loans 5,387 15 6,660 153
Residential first mortgage loans - - - 1
Home equity loans 307 451 1,249 1,127
Commercial loans 1 57 12 60
Consumer loans 3 21 34 66
------------------------------------ ------------------------------------
Total recoveries 5,707 616 7,997 1,516
------------------------------------ ------------------------------------
Net recoveries/(charge-offs) 4,842 (830) 4,881 (3,139)
------------------------------------ ------------------------------------
Balance at September 30 $ 36,971 $ 35,634 $ 36,971 $ 35,634
==================================== ====================================
Loans at September 30 $ 1,940,750 $ 1,698,946 $ 1,940,750 $ 1,698,946
==================================== ====================================
Allowance as a percentage of loans 1.90% 2.10% 1.90% 2.10%
==================================== ====================================
</TABLE>
As of September 30, 2000, Corus has recovered $6.6 million of previously charged
off student loans. Overall, Corus estimates that it will be able to submit and
receive guarantee payments on between $10 million and $14 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.
16
<PAGE> 19
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Liabilities
The following table details the composition of deposit products by type:
SEPTEMBER 30 December 31 September 30
2000 1999 1999
------------- -------------- -------------
Demand 11% 10% 10%
Savings 7 8 8
NOW 5 5 4
Money Market 47 45 44
Certificates of Deposit 30 32 34
------------- -------------- -------------
Total 100% 100% 100%
============= ============== =============
At September 30, 2000, December 31, 1999 and September 30, 1999, Corus had
retail certificates of deposit obtained from brokers of $254, $272 and $344
million, respectively.
Capital
Corus' consolidated leverage ratio (Tier 1 capital/total average quarterly
assets) was 12.95% at September 30, 2000, well in excess of the minimum
regulatory level of 5.00%. The consolidated Tier 1 and total risk-based capital
ratios were 15.71% and 18.24%, respectively, exceeding the minimum
well-capitalized Tier 1 and total risk-based capital ratios of 6.00% and 10.00%,
respectively.
Sale of Investment Advisory & Trust Operations
On October 6, 2000, Corus sold its investment advisory unit, commonly referred
to as Corus Asset Management ("CAM"), and trust operations. The sale agreement
calls for Corus to receive $1 million at closing and an "earn-out" provision
that will allow Corus to share in a percentage of the revenues of the businesses
over the next five years. Corus can earn a maximum of $2.25 million from the
"earn-out" provision. As accounting rules do not allow any of the potential
gains from the earn-out provision to be considered when reporting gain or loss
on the sale, Corus recorded a third quarter loss of $1.7 million from the sale.
Thus, all receipts from the "earn-out" will be treated as income as received
over the next five years.
17
<PAGE> 20
ITEM 2. - CORUS BANKSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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; and
- 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.
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 AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Market Risk Management
Corus' operations are subject to risk resulting from interest rate fluctuations
to the extent that there is a difference between the amount of interest-earning
assets and the amount of interest-bearing liabilities that reprice, mature,
and/or are prepaid/withdrawn. The principal objective of Corus' asset/liability
management activities is to provide maximum levels of net interest income while
maintaining acceptable levels of interest rate and liquidity risk and
facilitating funding requirements. Corus utilizes an interest rate sensitivity
model as the primary quantitative tool in measuring the amount of interest rate
risk that is present at the end of each quarter. The model uses income
simulation to quantify the effects of various interest rate scenarios on the
projected net interest income over a five-year period. Factored into the
modeling is the use of derivative financial instruments, including interest rate
swaps and floors. The indices of these derivatives correlate to on-balance sheet
instruments and modify net interest sensitivity to levels deemed to be
appropriate.
Interest rate sensitivity as of September 30, 2000 is as follows:
Rate Shock Amount (1) (2.0)% (1.0)% 0.0% 1.0% 2.0%
------ ------ ---- ---- ----
Percent change in the next 12 month's
net interest income (1.5)% (1.9)% - 3.0% 5.8%
Overall, Corus' projected one-year sensitivity to interest rates has increased
since December 31, 1999. This increase is primarily the result of two factors.
First, growth in floating-rate asset balances has been greater than that of
floating-rate liabilities. Second, certain interest rate floor contracts
expired.
Corus is also exposed to price risk however that risk has not changed materially
since last reported in our latest annual 10K filing.
(1) These "shocks" represent instantaneous changes from current rates.
19
<PAGE> 22
CORUS BANKSHARES, INC.
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS.
This item has been omitted from this Form 10-Q since it is inapplicable or would
contain a negative response.
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
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.
A Form 8-K was filed on October 10, 2000 regarding the sale of the
investment advisory unit and trust operations to Cole Taylor Bank.
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)
November 13, 2000 By: /s/ Michael E. Dulberg
----------------------
Michael E. Dulberg
First Vice President and Chief
Accounting Officer
(Principal Accounting Officer and duly
authorized Officer of Registrant)
22
