<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission File Number 0-11172
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC.
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
State of South Carolina 57-0738665
- ---------------------------------------- -----------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1230 Main Street
Columbia, South Carolina 29201
- ---------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (803) 733-3456
---------------
Securities Registered Pursuant to Section 12(b) of the Act:
None
- -----------------------------------------------------------------------------
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $5.00 per value
- -----------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
Regulation S-K is not contained herein, and will not be contained, to be the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Registrant's Voting and Nonvoting Common Stock
held by non-affiliates as of March 10, 2000 was $54,159,348.
As of March 10, 2000, there were 901,444 outstanding shares of the Registrant's
Voting Common Stock, $5.00 par value per share, and 36,409 outstanding shares of
its Non-Voting Common Stock, $5.00 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
(1) Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1999, are incorporated by reference into Part II.
(2) Portions of the Registrant's definitive Proxy Statement dated March 24,
2000, for the Annual Meeting of Shareholders to be held April 26, 2000, are
incorporated by reference into Part III.
<PAGE>
PART I.
Item 1. BUSINESS
First Citizens Bancorporation of South Carolina, Inc. ("Bancorporation" or
"Registrant"), a South Carolina corporation, is a bank holding company organized
in 1982 which owns all the outstanding stock of First-Citizens Bank and Trust
Company of South Carolina ("FCB") and The Exchange Bank of South Carolina, Inc.
("Exchange"), its banking subsidiaries.
FCB was organized in 1969 from the merger of one of its predecessor banks,
Citizens Bank, which was organized in 1936 as the Anderson Brothers Bank, and
another of its predecessor banks, The Commercial Bank and Trust Company, which
was organized in 1913 as the Homestead Bank. As of December 31, 1999, FCB
operated 133 offices in 90 communities throughout the state.
Exchange was acquired by Bancorporation on August 20, 1999 in a transaction
recorded as a purchase. Its predecessor, Exchange Bank of South Carolina, was
organized in 1932 as The Exchange Bank of Kingstree. Exchange provides banking
services through four offices in Williamsburg and Georgetown Counties in South
Carolina. Further information concerning the acquisition is contained in the
information incorporated herein by reference in Item 7 of this report.
The principal role of Bancorporation is to supervise and coordinate the
activities of its subsidiaries and to provide them with capital and services of
various kinds. The corporation derives substantially all of its income from
dividends it receives from FCB. Such dividends are determined generally in
relation to FCB's earnings, deposit growth and capital position.
FCB and Exchange, which are the principal assets and sources of income of
Bancorporation, are engaged in the general banking business throughout South
Carolina and offer a full range of banking services, including regular and
interest checking, money market, savings and time deposit accounts, personal and
business loans and trust services. Wateree Enterprises, Inc., a wholly-owned
subsidiary of FCB, through its wholly-owned subsidiary, Wateree Life Insurance
Company, issues credit life, accident and health insurance on FCB borrowers.
Another wholly-owned subsidiary of Wateree Enterprises, Inc. is Wateree Agency,
Inc., which acts as agent for the sale of insurance to the FCB's customers.
Another of FCB's subsidiaries, Congaree Investors Services, offers various
investment products, including annuities, discount brokerage services and third-
party mutual funds, to FCB's customers.
Bancorporation also is the parent company of FCB/SC Capital Trust I
("FCB/SC"), a Delaware business trust. FCB/SC was organized during 1998 for the
sole purpose of issuing and selling $50,000,000 aggregate liquidation amount of
8.25% capital securities. The net proceeds from such sale, together with the
proceeds from FCB/SC's issuance of its common securities to Bancorporation, were
invested in a like aggregate face amount of Bancorporation's 8.25% junior
deferrable interest subordinated debentures which mature on March 15, 2028. The
capital securities and the junior subordinated debentures are subject to
optional redemption at any time on or after March 15, 2008. Bancorporation has
entered into a guaranty agreement which, when taken together with its
obligations under the trust agreement under which FCB/SC exists, the junior
subordinated debentures, and the indenture under which the debentures were
issued, provides a full and unconditional guarantee on a subordinated basis by
Bancorporation of FCB/SC's payment of distributions and other payments on the
capital securities.
Employees
Bancorporation has no salaried employees. As of December 31, 1999, FCB and
Exchange, and FCB's subsidiaries, had 1,176 full-time equivalent employees.
Bancorporation and its subsidiaries are not parties to any collective bargaining
agreement and relations with employees are considered to be good.
Supervision and Regulation
Bancorporation is a bank holding company registered with the Federal Reserve
Board (the "FRB") under the Bank Holding Company Act of 1956, as amended (the
"BHCA") and, as such, is subject to supervision and examination by, and the
regulations and reporting requirements of, the FRB under the BHCA.
Bancorporation's activities are limited to those permitted for bank holding
companies under the BHCA, and it is required to obtain the prior approval of the
FRB before it may acquire direct or indirect control of more than 5% of the
outstanding voting stock, or substantially all of the assets of, any other
financial institution or bank holding company. Additionally, the BHCA prohibits
Bancorporation from acquiring ownership or control of more than 5% of the
outstanding voting stock of any company engaged in an activity that is not
permitted for bank holding companies.
<PAGE>
Bank holding companies are required to serve as a source of financial
strength for their depository institution subsidiaries, and, if their depository
institution subsidiaries become undercapitalized, bank holding companies may be
required to guarantee the subsidiaries' compliance with capital restoration
plans filed with their regulators, subject to certain limits.
As insured, state-chartered banks that are not members of the Federal Reserve
System, FCB and Exchange are subject to supervision and examination by, and the
regulations and reporting requirements of, the Federal Deposit Insurance
Corporation ("FDIC") and the South Carolina State Board of Financial
Institutions (the "SC Board"). Absent approval of the FDIC, they are prohibited
from engaging as principal in activities that are not permitted for national
banks, and are prohibited from acquiring or retaining any equity investment of a
type not permitted for national banks.
As subsidiaries of Bancorporation, FCB and Exchange are subject to
restrictions under Federal law on the amount of, and their ability to enter
into, transactions with, or investments in the securities of, Bancorporation and
certain other affiliated entities.
Though they are not members of the Federal Reserve System, FCB and Exchange
are subject to the FRB's reserve requirements applicable to all banks, and their
businesses are significantly influenced by the fiscal policies of the FRB. The
actions and policy directives of the FRB determine to a significant degree FCB's
and Exchange's cost and the availability of funds and the rates of interest
charged on their loans and paid on their deposits.
The FRB, the FDIC and the SC Board have broad powers to enforce laws and
regulations applicable to Bancorporation, FCB and Exchange, and to require
corrective action of conditions affecting the safety and soundness of FCB and
Exchange. Among others, these powers include cease and desist orders, the
imposition of civil penalties and the removal of officers and directors.
Statistical Data
Certain statistical disclosures for bank holding companies required by Guide
3 are included in the section entitled "Management's Discussion and Analysis" on
pages 5 through 25 of the Registrant's 1999 Annual Report to Shareholders which
is incorporated herein by reference.
Competition
Because South Carolina allows statewide branch banking, the Bank must compete
in local markets throughout the state with other depository institutions. The
Bank is subject to intense competition from various financial institutions and
other companies or firms that engage in similar activities, both for local
business in individual communities and for business in the national market. The
Bank competes for deposits with other commercial banks, savings and loan
associations, credit unions and with the issuers of commercial paper and other
securities, such as shares in money market funds. In making loans, the Bank
competes with other commercial banks, savings and loan associations, consumer
finance companies, credit unions, leasing companies and other lenders. In
addition, competition for personal and corporate trust services is offered by
insurance companies, other businesses and individuals.
A factor which also has increased competition in the Bank's local markets is
reciprocal interstate banking legislation. Prior to adoption of the federal
"Interstate Banking Law" described below, South Carolina law allowed bank
holding companies in 12 other Southeastern states and the District of Columbia
to acquire banks and bank holding companies in South Carolina, provided that
reciprocal legislation had been passed in such other state or district. As a
result, a number of large bank holding companies located in other states and
having consolidated resources greater than those of Bancorporation (among them
four of the largest in the Southeastern United States) acquired banks located in
South Carolina with which the Bank competes in its local markets. The Bank is
the second largest bank owned by a South Carolina based holding company.
During September 1994, Congress adopted new legislation which, subject to
certain limitations, permits adequately capitalized and managed bank holding
companies to acquire control of a bank in any state (the "Interstate Banking
Law"). Also, beginning June 1, 1997 and subject to certain limitations, the
Interstate Banking Law permitted banks to merge with one another across state
lines. Each state was allowed to authorize mergers earlier than that date and
also choose to permit out-of-state banks to open branch offices within that
state's borders. Alternatively, a state could opt out of interstate branching
by adopting legislation before June 1, 1997. As of March 2000, South Carolina
has not adopted any such legislation in response to the Interstate Banking Law.
Statistical Disclosure
The statistical disclosures for bank holding companies required by Guide 3
are included in the information under Item 7 of this report.
<PAGE>
Item 2. PROPERTIES
Bancorporation owns in fee simple one piece of property having a book value
at December 31, 1999 of $34,462. To the limited extent necessary, it occupies
space owned by the Bank. Bancorporation's and the Bank's principal office is
located at 1230 Main Street in Columbia, South Carolina.
The Bank owns in fee simple 202 properties having a book value at December
31, 1999 of $41,632,899 which are used for its main office, branch office
locations, associated parking lots for customers and employees, or housing other
operational units of the Bank. In addition, the Bank leases 28 properties,
substantially all of which are used for branch office locations and associated
parking lots for customers and employees. All of these leases are for
relatively long terms or include renewal options considered by management of the
Bank to be adequate. Rental expense paid for these properties in 1999 was
approximately $697,000, which was offset by $1,138,000 in rental income.
The properties leased and owned are all generally considered adequate for the
Bank's purposes; however, there is a continuing program of modernization,
expansion, and the occasional replacement of facilities. Maintenance and
repairs are not significant items of expense in the Bank's operations. Items of
a capital nature are added to the property accounts, and, at such time as they
are retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the related accounts and the resulting gains or losses are
reflected in income.
For information concerning Bancorporation's commitments under current leasing
arrangements, see Note 7 to Bancorporation's Consolidated Financial Statements.
Item 3. LEGAL PROCEEDINGS
Neither Bancorporation nor FCB or Exchange are a party to, nor is any of
their property the subject of, any material or other pending legal proceeding,
other than ordinary routine proceedings incidental to their business.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information required by this item is incorporated herein by reference to
the section entitled "Market and Dividend Information Regarding Common and
Preferred Stock" on page 1 of the Registrant's 1999 Annual Report to
Shareholders.
Item 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to
the section entitled "Financial Highlights" on Page 3 of the Registrant's 1999
Annual Report to Shareholders.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by this item is incorporated herein by reference to
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 5 through 26 of the Registrant's
1999 Annual Report to Shareholders
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference to
the financial statements and supplementary data set forth on pages 27 through 50
of the Registrant's 1999 Annual Report to Shareholders.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the captions "Section 16(a) Beneficial Ownership
Reporting Compliance", "PROPOSAL 2: ELECTION OF DIRECTORS", and "Executive
Officers", on pages 5 through 7 and 9 of Registrant's definitive Proxy
Statement, dated March 24, 2000, for its Annual Meeting of Shareholders to be
held April 26, 2000, is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information under the captions "Compensation Committee Interlocks and
Insider Participation", "Directors' Fees", "Executive Compensation", "Pension
Plan" and "Employment Contracts, Termination of Employment, and
<PAGE>
Change-in-Control Arrangements" on pages 8 and 10 through 11 of Registrant's
definitive Proxy Statement, March 24, 2000, for its Annual Meeting of
Shareholders to be held April 26, 2000, is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Beneficial Ownership of Securities" on
pages 2 through 5 of Registrants's definitive Proxy Statement dated March 24,
2000, for its Annual Meeting of Shareholders to be held April 26, 2000, is
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the captions "Compensation Committee Interlocks and
Insider Participation" and "Transactions with Management", on pages 8 and 12
through 13 of Registrant's definitive Proxy Statement dated March 24, 2000, for
its Annual Meeting of Shareholders to be held April 26, 2000, is incorporated
herein by reference.
PART IV
Item 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements:
The following consolidated financial statements of First Citizens
Bancorporation of South Carolina, Inc. and subsidiaries included on pages
27 through 50 of Registrant's 1999 Annual Report to Shareholders are
incorporated by reference in Item 8.
Report of Independent Accountants
Consolidated Statements of Condition
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholders' Equity and
Comprehensive Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
All schedules are omitted as the required information is either
inapplicable or is presented in the consolidated financial statements of
the Registrant and its subsidiaries or Notes thereto incorporated herein by
reference.
(3) The following exhibits are either attached hereto or incorporated by
reference:
3.1 Articles of Incorporation of the Registrant as amended
(incorporated herein by reference to Exhibit 3.1 of the
Registrant's 1994 Annual Report on Form 10-K).
3.3 Bylaws of the Registrant as amended (incorporated herein by
reference to Exhibit 3.3 of the Registrant's 1999 Annual Report
on Form 10-K).
4.1 Amended and Restated Trust Agreement of FCB/SC Capital Trust I
(incorporated herein by reference to Exhibit 4.1 of Registrant's
Registration Statement No. 333-60319 filed with the SEC on July 31,
1998).
4.2 Form of Guaranty Agreement (incorporated herein by reference to
Exhibit 4.2 of Registrant's registration Statement No.333-60319
filed with the SEC on July 31, 1998).
4.3 Junior Subordinated Indenture between Registrant and Bankers Trust
Company, as Debenture Trustee (incorporated herein by reference to
Exhibit 4.3 of Registrant's Registration Statement No. 333-60319
filed with the SEC on July 31, 1998).
4.4 Form of Certificate evidencing Capital Securities (incorporated
herein by reference to Exhibit 4.5 in the Registrant's Registration
Statement No. 333-60319 filed with the SEC on July 31, 1998).
4.5 Form of Junior Subordinated Debenture (incorporated herein by
reference to Exhibit 4.6 in the Registrant's Registration Statement
No. 333-60319 filed with the SEC on July 31, 1998).
10.1a Term Loan Agreement (incorporated herein by reference to Exhibit
10.1 in the Registrant's 1987 Annual Report on Form 10-K).
<PAGE>
10.1b Credit Agreement between First Citizens Bancorporation of South
Carolina and Wachovia Bank, N.A. (incorporated herein by reference
to Exhibit 10.1b in the Registrant's 1997 Annual Report on
Form 10-K).
10.2 Employment Agreement between E. Hite Miller, Sr. and the Bank
dated April 21, 1998 (incorporated herein by reference to Exhibit
10.2 in the Registrant's 1998 Annual Report on From 10-K).
*10.3 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1998, between the Bank
and E. Hite Miller, Sr. (incorporated herein by reference to
Exhibit 10.3 in the Registrant's 1998 Annual Report on From 10-K).
*10.4 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1998, between the Bank
and Jim B. Apple (incorporated herein by reference to Exhibit 10.4
in the Registrant's 1998 Annual Report on From 10-K).
*10.5 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1998, between the Bank
and Jay C. Case (incorporated herein by reference to Exhibit 10.5
in the Registrant's 1998 Annual Report on From 10-K).
*10.6 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1998, between the Bank
and Charles S. McLaurin, III (incorporated herein by reference to
Exhibit 10.6 in the Registrant's 1998 Annual Report on From 10-K).
*10.7 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1998, between the Bank
and Peter M. Bristow (incorporated herein by reference to Exhibit
10.7 in the Registrant's 1998 Annual Report on From 10-K).
13. Registrant's 1999 Annual Report to Shareholders (filed herewith).
21. Subsidiaries of the Registrant (filed herewith).
27. Financial Data Schedule (filed herewith).
**99. Registrant's Definitive Proxy Statement for the Annual Meeting to
be held April 26, 2000.
*Denotes a management contract or compensatory plan or arrangement in
which an executive officer or director of Registrant participates.
**Pursuant to Rule 12b-23(a)(3), this exhibit is not being refiled.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three month period ended
December 31, 1999.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: 03/27/2000 FIRST CITIZENS BANCORPORATION
---------- OF SOUTH CAROLINA, INC.
(Registrant)
By: /s/ Jay C. Case
-------------------------
Jay C. Case, Treasurer and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ E. Hite Miller Chairman of the Board 03/27/2000
- ------------------------------- ----------
E. Hite Miller, Sr.
/s/ Frank B. Holding Vice Chairman of the Board 03/27/2000
- ------------------------------- ----------
Frank B. Holding
/s/ Jim B. Apple President and Director 03/27/2000
- ------------------------------- ----------
Jim B. Apple
/s/ Peter Bristow Chief Operating Officer 03/27/2000
- ------------------------------- ----------
Peter Bristow
/s/ Jay C. Case Treasurer and Chief 03/27/2000
- ------------------------------- Financial Officer ----------
Jay C. Case
/s/ Richard W. Blackmon Director 03/27/2000
- ------------------------------- ----------
Richard W. Blackmon
/s/ George H. Broadrick Director 03/27/2000
- ------------------------------- ----------
George H. Broadrick
/s/ Walter C. Cottingham Director 03/27/2000
- ------------------------------- ----------
Dr. Walter C. Cottingham
/s/ Jack M. Edwards Director 03/27/2000
- ------------------------------- ----------
Jack M. Edwards
/s/ William E. Hancock Director 03/27/2000
- ------------------------------- ----------
William E. Hancock, III
/s/ Robert B. Haynes Director 03/27/2000
- ------------------------------- ----------
Robert B. Haynes
/s/ Wycliffe E. Haynes Director 03/27/2000
- ------------------------------- ----------
Wycliffe E. Haynes
/s/ Lewis M. Henderson Director 03/27/2000
- ------------------------------- ----------
Lewis M. Henderson
Director
- ------------------------------- ----------
Carmen P. Holding
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Dan H. Jordan Director 03/27/2000
- ------------------------------- ----------
Dan H. Jordan
/s/ N. Welch Morrisette, Jr. Director 03/27/2000
- ------------------------------- ----------
N. Welch Morrisette, Jr.
/s/ E. Perry Palmer Director 03/27/2000
- ------------------------------- ----------
E. Perry Palmer
/s/ William E. Sellers Director 03/27/2000
- ------------------------------- ----------
William E. Sellers
/s/ Henry F. Sherrill Director 03/27/2000
- ------------------------------- ----------
Henry F. Sherrill
</TABLE>
<PAGE>
FORM 10-K
EXHIBIT INDEX
Exhibit Number Exhibit
- -------------- -------
3.1 Articles of Incorporation of Registrant (incorporated herein by
reference to Exhibit 3.1 of the Registrant's 1994 Annual Report on
Form 10-K).
3.3 Bylaws of the Registrant as amended (incorporated herein by reference to
Exhibit 3.3 of the Registrant's 1997 Annual Report on Form 10-K).
4.1 Amended and Restated Trust Agreement of FCB/SC Capital Trust I
(incorporated herein by reference to Exhibit 4.1 of Registrant's
Registration Statement No. 333-60319 filed with the SEC on July 31,
1998).
4.2 Form of Guaranty Agreement (incorporated herein by reference to Exhibit
4.2 of Registrant's registration Statement No. 333-60319 filed with the
SEC on July 31, 1998).
4.3 Junior Subordinated Indenture between Registrant and Bankers Trust
Company, as Debenture Trustee (incorporated herein by reference to
Exhibit 4.3 of Registrant's Registration Statement No. 333-60319 filed
with the SEC on July 31, 1998).
4.4 Form of Certificate evidencing Capital Securities (incorporated herein
by reference to Exhibit 4.5 in the Registrant's Registration Statement
No. 333-60319 filed with the SEC on July 31, 1998).
4.5 Form of Junior Subordinated Debenture (incorporated herein by reference
to Exhibit 4.6 in the Registrant's Registration Statement No. 333-60319
filed with the SEC on July 31, 1998).
10.1a Term Loan Agreement (incorporated herein by reference to Exhibit 10.1
of the Registrant's 1987 Annual Report on Form 10-K).
10.1b Credit Agreement between First-Citizens Bancorporation of South Carolina
and Wachovia Bank, N.A. (incorporated herein by reference to Exhibit
10.1b in the Registrant's 1997 Annual Report on Form 10-K).
10.2 Employment Agreement between E. Hite Miller, Sr. and the Bank
(incorporated herein by reference to Exhibit 10.2 in the Registrant's
1998 Annual Report on From 10-K).
10.3 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1999, between the Bank and E.
Hite Miller, Sr. (incorporated herein by reference to Exhibit 10.3 in
the Registrant's 1998 Annual Report on From 10-K).
10.4 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1999, between the Bank and
Jim B. Apple (incorporated herein by reference to Exhibit 10.4 in the
Registrant's 1998 Annual Report on From 10-K).
10.5 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1999, between the Bank and
Jay C. Case (incorporated herein by reference to Exhibit 10.5 in the
Registrant's 1998 Annual Report on From 10-K).
10.6 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1999, between the Bank and
Charles S. McLaurin, III (incorporated herein by reference to Exhibit in
the Registrant's 1998 Annual Report on From 10-K).
10.7 Employee Death Benefit and Post-Retirement Noncompetition and
Consultation Agreement, dated December 31, 1999, between the Bank and
Charles D. Cook
<PAGE>
(incorporated herein by reference to Exhibit 10.7 in the Registrant's
1998 Annual Report on From 10-K).
10.8 Amended and Restated Trust Agreement of FCB/SC Capital Trust I
(incorporated herein by reference to Exhibit 4.1 of Registrant's
Registration Statement No. 333-60319 filed with the SEC on July 31,
1998).
10.9 Form of Guaranty Agreement (incorporated herein by reference to Exhibit
4.2 of Registrant's registration Statement No. 333-60319 filed with the
SEC on July 31, 1998).
10.10 Junior Subordinated Indenture between Registrant and Bankers Trust
Company, as Debenture Trustee (incorporated herein by reference to
Exhibit 4.3 of Registrant's Registration Statement No. 333-60319 filed
with the SEC on July 31, 1998).
13. Registrant's 1999 Annual Report to Shareholders (filed herewith)
21. Subsidiaries of Registrant (filed herewith)
27. Financial Data Schedule (filed herewith)
(Electronic filing only)
99. Registrant's Definitive Proxy Statement for the Annual Meeting to be
held April 26, 2000.*
*Pursuant to Rule 12b-23(a)(3), this exhibit is not being filed.
<PAGE>
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
1999 ANNUAL REPORT
<PAGE>
Nature of Business
First Citizens Bancorporation of South Carolina, Inc. ("Bancorporation"), is
a two-bank holding company headquartered in Columbia, South Carolina, with
assets of $2.73 billion at December 31, 1999. Its primary subsidiaries are
First-Citizens Bank and Trust Company of South Carolina ("Bank") and The
Exchange Bank of South Carolina ("Exchange"). The Bank provides a broad range
of banking services through 133 offices in 90 communities throughout the
state, and Exchange provides banking services through four offices in
Williamsburg and Georgetown Counties. The Bank's subsidiary is Wateree Life
Insurance Company of South Carolina, a credit life insurance company. "First
Citizens Bank" is used in marketing the Bank.
First Citizens Bancorporation of South Carolina, Inc.
P. O. Box 29
1230 Main Street
Columbia, South Carolina 29202
Annual Meeting
The Annual Meeting of Stockholders of Bancorporation will be held at 2:30
p.m. on Wednesday, April 26, 2000, at 1314 Park Street, Columbia, South
Carolina.
Contents
<TABLE>
<S> <C>
Market and Dividend Information Regarding Common and Preferred Stock........ 1
Financial Highlights........................................................ 3
To Our Stockholders......................................................... 4
Management's Discussion and Analysis........................................ 5
Report of Management........................................................ 26
Report of Independent Accountants........................................... 27
Consolidated Financial Statements........................................... 28
Official Organization Section............................................... 51
</TABLE>
Market and Dividend Information Regarding Common and Preferred Stock
There is a limited over-the-counter market for Bancorporation's voting
common stock. The stock is not listed on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"). Quotations are
published in South Carolina newspapers circulated in Bancorporation's major
metropolitan markets and may be obtained through securities brokers having
offices in South Carolina. Local broker-dealers, Interstate/Johnson Lane and
Scott & Stringfellow, effect agency transactions in Bancorporation's voting
common stock from time to time.
There is no trading market for any class of Bancorporation's preferred stock
or for its non-voting common stock. All trading activity for those classes of
Bancorporation's stock is in privately negotiated transactions.
The following ranges of high and low bid prices for Bancorporation's voting
common stock were supplied by one of the broker-dealers making a market in the
stock. The prices represent quotations between broker-dealers, which do not
include markups, markdowns or commissions, and may not represent actual
transactions.
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
High Low High Low
------- ------- ------- -------
<S> <C> <C> <C> <C>
1st quarter.................................. $370.00 $250.00 $350.00 $290.00
2nd quarter.................................. 305.00 275.00 375.00 350.00
3rd quarter.................................. 295.00 290.00 380.00 375.00
4th quarter.................................. 292.00 275.00 380.00 350.00
</TABLE>
The approximate numbers of record holders of Bancorporation's voting common
stock and non-voting common stock at December 31, 1999 were 1,140 and 4,
respectively.
1
<PAGE>
Holders of the voting and non-voting common stock of Bancorporation are
entitled to such dividends as may be declared from time to time by the Board
of Directors from funds legally available. However, Bancorporation has adopted
a policy of paying no cash dividends on its voting and non-voting common
stock. This policy reflects the desire of the Board of Directors to maintain
Bancorporation's risk-based capital ratios through the retention of earnings.
Certain regulatory requirements restrict the payment of dividends and
extensions of credit from banking subsidiaries to bank holding companies. As
Bancorporation has a policy of paying no cash dividends on its common stock,
these restrictions have not historically affected Bancorporation's ability to
meet its obligations. Additional restrictions relating to capital requirements
and dividends are discussed on page 19 of "Management's Discussion and
Analysis" and in Note 13 of "Notes to Consolidated Financial Statements."
2
<PAGE>
TO OUR STOCKHOLDERS:
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Percent
1999 1998 Change
---------- ---------- -------
<S> <C> <C> <C>
Earnings (Dollars in thousands):
Net income..................................... $ 24,646 $ 23,618 4.35%
Net income per common share.................... 26.35 25.30 4.15
Book value per common share.................... 208.77 185.41 12.60
Preferred dividends paid....................... 171 171 --
Year-End Balances (Dollars in thousands):
Total assets................................... $2,726,585 $2,483,768 9.78%
Investment securities.......................... 562,992 623,828 (9.75)
Loans.......................................... 1,854,520 1,573,069 17.89
Deposits....................................... 2,222,033 2,037,487 9.06
Stockholders' equity........................... 200,073 174,175 14.87
Average Balances (Dollars in thousands):
Total assets................................... $2,606,572 $2,332,634 11.74%
Investment securities.......................... 635,210 599,704 5.92
Loans.......................................... 1,691,597 1,495,930 13.08
Deposits....................................... 2,097,678 1,909,183 9.87
Stockholders' equity........................... 187,826 169,422 10.86
Financial Ratios:
Return on average assets....................... .95 1.01 (5.94)%
Return on average stockholders' equity......... 13.12 13.94 (5.88)
Average stockholders' equity to average total
assets at year-end............................ 7.21 7.26 (.69)
Share Data (year-end):
Common shares outstanding...................... 942,614 921,684 2.27%
Weighted average common shares outstanding..... 928,792 926,744 0.22
Preferred shares outstanding................... 68,132 68,132 --
</TABLE>
3
<PAGE>
TO OUR STOCKHOLDERS:
The year 1999 brought continuing market expansion and growth for our
company.
We invested in five new offices in the growing communities of Irmo,
Lexington, North Myrtle Beach, Simpsonville and Mt. Pleasant. We consolidated
two offices in Columbia and one office in Anderson, to reduce overlapping
coverage in our markets.
Loans grew 17.89% to $1.85 billion, while deposits grew 9.06% to $2.22
billion. Total assets grew 9.78% to $2.72 billion. This growth was the result
of our sales success and the acquisition of The Exchange Bank of South
Carolina which had $85,228 in deposits and $62,122 in loans at the time of
acquisition. With the strength in our balance sheet in 1999, we enjoyed a
quality asset mix, solid sources of funds, an adequate allowance for loan
losses and a strong capital base.
Our operations continue to post strong results. Net income increased 4.35%
to $24.6 million, representing an increase in net income per common share from
$25.30 in 1998 to $26.35 in 1999. The improvement in net income was primarily
due to an increase in average interest earning assets from $2.14 billion in
1998 to $2.38 billion in 1999. Additionally, we emphasize the generation of
non-interest income and the control of non-interest expense during the year.
During 1999 we continued our sales culture development. We recognize the
need to develop fee-based income as we compete in today's financial services
market. In addition to our trust, credit life and mortgage services, we added
investment officers throughout the state. As a result, we are able to offer
our customers investment products in branches of First Citizens and Exchange
Bank.
The Y2K project consumed significant resources during 1999. Our project team
worked diligently to address potential data processing and customer service
issues. As a result of their hard work and vigorous commitment to the project,
Y2K was a non-event for our customers.
During 1999, we developed a three-year strategic plan that focuses on a high
level of customer service, market segmentation, human resources and
technology. These strategies are designed to align our banking team behind
high quality service and products, allow our employee associates to handle
responsibilities that best suit their skills, attract and retain employees in
alignment with our business model, and provide technology that will allow us
to compete with non-banks in the areas of cost, reliability, and speed of
delivery.
Our exceptional group of employee associates provides us with the capability
to implement our strategies. Our position in our markets, our products and our
substantial strengths would be impossible without them. In addition, the
support and encouragement of you, our shareholders, will continue to
strengthen our franchise and allow us to take advantage of future
opportunities.
_________________________________ _____________________________________
E. Hite Miller, Sr. Jim B. Apple
Chairman President
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion and other data presented below analyze major factors and
trends regarding the financial condition and results of operations of First
Citizens Bancorporation of South Carolina, Inc. ("Bancorporation") and its
principal subsidiaries, First Citizens Bank and Trust Company of South
Carolina ("Bank"), and The Exchange Bank of South Carolina ("Exchange").
Bancorporation is a two-bank holding company headquartered in Columbia, South
Carolina. The Bank provides commercial banking and related financial products
and services throughout South Carolina. Exchange provides banking services
principally in Williamsburg and Georgetown counties in South Carolina.
On August 20, 1999, Bancorporation acquired Exchange to form a two-bank
holding company. The transaction was accounted for under the purchase method
of accounting.
The following discussion and analysis should be read in conjunction with the
financial information and the consolidated financial statements of
Bancorporation (including the notes thereto) contained in this document. To
the extent that any statement in this Management's Discussion and Analysis is
not a statement of historical fact and could be considered a forward-looking
statement, actual results could differ materially from those in the forward-
looking statement.
The Bank's deposits are insured by the Federal Deposit Insurance Corporation
("FDIC") to the extent permitted by law. The FDIC and the South Carolina State
Board of Financial Institutions have regulatory responsibilities for the Bank
and Exchange. Bancorporation is subject to regulation as a bank holding
company by the Board of Governors of the Federal Reserve System and its voting
common stock is registered with the Securities and Exchange Commission.
Reference should also be made to the accompanying detailed historical
information presented elsewhere in this report.
RESULTS OF OPERATIONS
Summary (Dollars in thousands)
Net income for the year ended December 31, 1999, totaled $24,646, or $26.35
per common share. Net income for 1998 was $23,618, or $25.30 per common share.
The primary factors affecting the increase in net income were a $7,219 or
7.82% increase in net interest income, and a $4,020 or 13.91% increase in
noninterest income. These favorable changes were partially offset by a $1,243
or 28.89% increase in the provision for loan losses, an $8,739 or 10.84%
increase in noninterest expense, and a $229 or 1.80% increase in the provision
for income taxes.
The increase in earnings from 1997 to 1998 was primarily due to a $6,676 or
7.79% increase in net interest income, and a $4,126 or 16.65% increase in
noninterest income. These favorable changes were partially offset by a $7,951
or 10.94% increase in noninterest expense and a $941 or 7.99% increase in the
provision for income taxes.
Return on average stockholders' equity and average assets are key measures
of earnings performance. Return on average stockholders' equity for 1999 was
13.12% compared to 13.94% in 1998, and 15.02% in 1997. Return on average
assets for 1999 was .95% compared to 1.01% in 1998, and 1.05% in 1997.
Table 1 provides a summary of the statements of income, financial condition
and selected ratios for the last five years. A more detailed analysis of each
component of Bancorporation's net income is included under the appropriate
captions which follow.
5
<PAGE>
TABLE 1: SUMMARY OF OPERATIONS
(Dollars in thousands--except for per share data)
<TABLE>
<CAPTION>
Five Year
Compound
1999 1998 1997 1996 1995 Growth Rate
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income......... $ 175,414 $ 165,371 $ 151,137 $ 134,217 $ 118,015 11.95%
Interest expense........ 75,856 73,032 65,474 57,552 53,527 13.19
---------- ---------- ---------- ---------- ----------
Net interest income..... 99,558 92,339 85,663 76,665 64,488 11.05
Provision for loan
losses................. 5,546 4,303 4,241 4,574 2,686 16.74
---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses............ 94,012 88,036 81,422 72,091 61,802 10.76
---------- ---------- ---------- ---------- ----------
Service charges and
fees................... 32,919 28,871 24,730 21,465 19,704 12.01
Investment securities
gains.................. 8 36 51 792 --
---------- ---------- ---------- ---------- ----------
Total noninterest
income................. 32,927 28,907 24,781 22,257 19,704 12.02
---------- ---------- ---------- ---------- ----------
Salaries and employee
benefits............... 41,396 36,674 32,752 28,697 28,298 8.42
Other expense........... 47,952 43,935 39,906 36,376 33,873 8.02
---------- ---------- ---------- ---------- ----------
Total noninterest
expense................ 89,348 80,609 72,658 65,073 62,171 8.20
---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 37,591 36,334 33,545 29,275 19,335 20.46
Income tax expense...... 12,945 12,716 11,775 10,321 6,777 21.11
---------- ---------- ---------- ---------- ----------
Net income.............. $ 24,646 $ 23,618 $ 21,770 $ 18,954 $ 12,558 20.14
========== ========== ========== ========== ==========
Net income per common
share.................. $ 26.35 $ 25.30 $ 23.24 $ 20.02 $ 13.13 20.81
========== ========== ========== ========== ==========
Book value per common
share.................. $ 208.77 $ 185.41 $ 166.95 $ 139.21 $ 115.32 15.77
========== ========== ========== ========== ==========
Weighted average common
shares outstanding..... 928,792 926,744 929,222 938,320 943,533 (.34)
========== ========== ========== ========== ==========
Selected Ratios:
Return on average
assets................. .95% 1.01% 1.05% 1.04% .76%
Return on average
stockholders' equity... 13.12 13.94 15.02 15.52 12.04
Return on average common
stockholders' equity... 13.36 14.22 15.37 15.95 12.44
Net yield on average
interest-earning assets
(tax equivalent)....... 4.23 4.36 4.54 4.62 4.35
Average loans to average
deposits............... 80.64 78.35 76.68 75.89 70.60
Net loan losses to
average loans.......... .12 .14 .12 .19 .11
Nonperforming loans to
total loans............ .16 .14 .19 .24 .35
Allowance for loan
losses to total loans.. 1.78 1.80 1.83 1.85 1.90
Allowance for loan
losses to nonperforming
loans.................. 1,092.87 1,259.16 956.98 770.44 543.50
Average stockholders'
equity to average total
assets................. 7.21 7.26 6.96 6.67 6.31
Common stockholders'
equity to total
assets................. 7.08 7.12 6.80 6.49 6.11
Total risk-based capital
ratio.................. 13.79 14.27 10.49 10.39 10.35
Tier 1 risk-based
capital ratio.......... 12.47 13.01 9.13 8.90 8.62
Tier 1 leverage ratio... 8.49 8.43 6.21 6.02 5.64
Selected average
balances:
Total assets............ $2,606,572 $2,332,634 $2,082,086 $1,831,195 $1,652,266 10.93%
Interest-earning
assets................. 2,387,059 2,148,348 1,918,921 1,691,031 1,508,486 11.03
Investment securities... 635,210 599,704 538,086 470,617 471,425 5.51
Loans................... 1,691,597 1,495,930 1,343,256 1,191,431 1,014,818 13.38
Deposits................ 2,097,608 1,909,183 1,751,791 1,570,015 1,437,442 8.84
Noninterest-bearing
deposits............... 374,992 331,466 294,929 259,709 227,161 11.70
Interest-bearing
deposits............... 1,722,686 1,577,717 1,456,862 1,315,306 1,210,281 7.32
Interest-bearing
liabilities............ 2,029,000 1,815,346 1,627,301 1,440,619 1,305,347 9.22
Stockholders' equity.... 187,826 169,422 144,961 122,110 104,245 15.30
</TABLE>
6
<PAGE>
Net interest income (Dollars in thousands)
Net interest income represents the principal source of earnings for
Bancorporation. Net interest income is the amount by which interest income
exceeds interest expense and is the primary measure used to evaluate the
efficiency of management of interest-earning assets and interest-bearing
liabilities.
Table 2 compares average balance sheet items and analyzes net interest
income on a tax equivalent basis for the years ended December 31, 1999, 1998
and 1997.
TABLE 2: COMPARATIVE AVERAGE BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------
1999 1998 1997
---------------------------- ---------------------------- ----------------------------
Average Interest Yield/ Average Interest Yield/ Average Interest Yield/
Balance Inc/Exp(1) Rate Balance Inc/Exp(1) Rate Balance Inc/Exp(1) Rate
---------- ---------- ------ ---------- ---------- ------ ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(2)................ $1,691,597 $140,729 8.32% $1,495,930 $129,930 8.69% $1,343,256 $118,779 8.84%
Investment securities:
Taxable................ 609,456 30,917 5.07 572,155 31,599 5.52 502,412 28,588 5.69
Non-taxable............ 25,754 2,190 8.50 27,549 2,410 8.75 35,674 3,061 8.58
Federal funds sold...... 60,252 2,953 4.90 49,064 2,551 5.20 28,167 1,503 5.34
Other earning assets.... -- -- -- 3,650 240 6.58 9,412 630 6.69
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest-earning
assets................ 2,387,059 176,789 7.41 2,148,348 166,730 7.76 1,918,921 152,561 7.95
---------- -------- ---------- -------- ---------- --------
Noninterest-earning
assets:
Cash and due from
banks.................. 110,369 88,473 81,052
Premises and equipment.. 81,751 69,776 54,155
Other, less allowance
for loan losses........ 27,393 26,037 27,958
Total noninterest-
earning assets......... 219,513 184,286 163,165
---------- ---------- ----------
Total assets............ $2,606,572 $2,332,634 $2,082,086
========== ========== ==========
Interest-bearing
liabilities:
Deposits................ $1,722,686 $ 59,825 3.47 $1,577,717 $ 60,257 3.82 $1,456,862 $ 56,844 3.90
Short-term borrowings... 255,960 11,882 4.64 193,699 9,199 4.75 159,275 7,762 4.87
Long-term debt.......... 50,354 4,149 8.24 43,930 3,576 8.14 11,164 868 7.77
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest-bearing
liabilities............ 2,029,000 75,856 3.74 1,815,346 73,032 4.02 1,627,301 65,474 4.02
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Net interest spread..... 3.67% 3.74% 3.93%
==== ==== ====
Noninterest-bearing
liabilities:
Demand deposits......... 374,992 331,466 294,929
Other liabilities....... 14,754 16,400 14,895
---------- ---------- ----------
Total noninterest-
bearing liabilities... 389,746 347,866 309,824
Stockholders' equity.... 187,826 169,422 144,961
---------- ---------- ----------
Total liabilities and
stockholders' equity... $2,606,572 $2,332,634 $2,082,086
========== ========== ==========
Net interest income..... $100,933 $ 93,698 $ 87,087
======== ======== ========
Interest income to
earning assets......... 7.41% 7.76% 7.95%
Interest expense to
earnings assets........ 3.18 3.40 3.41
==== ==== ====
Net interest income to
earning assets......... 4.23% 4.36% 4.54%
==== ==== ====
</TABLE>
- --------
(1) Non-taxable interest income has been adjusted to a taxable equivalent rate
using the federal income tax rate of 35%.
(2) Nonaccrual loans are included in the average loan balances. Income on such
loans is generally recognized on a cash basis.
7
<PAGE>
Net interest income on a tax equivalent basis increased $7,235 or 7.72% from
$93,698 in 1998 to $100,933 in 1999. The increase was primarily attributable
to the increased volume of earnings assets, since net interest margin
decreased from 4.36% in 1998 to 4.23% in 1999.
Interest income on a tax equivalent basis increased $10,059 or 6.03% in 1999
primarily due to the increased volume of earning assets. Average earning
assets increased 11.11% to $2,387,059 or 91.58% of average assets in 1999,
compared with $2,148,348 or 92.10% in 1998. The two primary types of earning
assets are loans and investment securities. The yield on earning assets
decreased by 35 basis points from 7.76% in 1998 to 7.41% in 1999. The primary
reasons for the decrease in yield during the period were strong competition
for quality loans, the effect of increased interest rates on loans and
investments which were not being fully realized during 1999, and a less
favorable mix of earning assets (particularly the mix of investment securities
and federal funds sold) to maintain adequate liquidity for Y2K purposes.
Average loans were 70.86% and 69.63% of average earning assets in 1999 and
1998, respectively. The yield on loans decreased 37 basis points from 8.69% in
1998 to 8.32% in 1999 largely due to competitive market factors and lower
interest rates prevailing in the market for 1998 and much of 1999. The yield
on investment securities decreased 45 basis points from 5.52% to 5.07%
primarily due to investment purchases during the declining rate environments
of 1997, 1998 and early 1999.
Interest expense increased $2,824 or 3.87% in 1999 primarily due to an
increase in the volume of average interest-bearing liabilities from $1,815,346
in 1998 to $2,029,000 or 11.77% in 1999. Average interest-bearing deposits
increased $144,969 or 9.19% attributable primarily to a 16.78% increase in the
average balance of NOW accounts, a 7.10% increase in the average balance of
market rate saving accounts and a 5.69% increase in average time deposits. The
average rate paid on interest-bearing liabilities decreased to 3.74% in 1999
compared to 4.02% in 1998 due to a decline in interest rates paid and a more
favorable mix of deposits. In 1999, average demand deposits and NOW accounts
composed 44.36% of total average deposits, compared to 42.28% in 1998.
The net interest margin, computed by dividing net interest income by average
earning assets, reflects the impact of noninterest-bearing funds on net
interest income. Average non-interest-bearing liabilities increased $41,880,
or 12.04% in 1999 to 16.33% of average earning assets, from 15.43% in 1998.
Table 3 shows the impact of balance sheet changes which occurred during 1999
and 1998, and the changes in yields and rates.
Net interest income on a tax equivalent basis for 1998 increased $6,611 or
7.59% from 1997. The increase was primarily attributable to an increase in the
volume of interest-earning assets which was offset by a decrease in net
interest margin. The net interest margin decreased 18 basis points from 4.54%
in 1997 to 4.36% in 1998. Average earning assets increased 11.96% to
$2,148,348, or 92.10% of average total assets in 1998, compared to $1,918,921
or 92.16% in 1997. Interest expense increased $7,558 or 11.54% in 1998
primarily due to a $188,045, or 11.56% increase in interest-bearing
liabilities.
8
<PAGE>
TABLE 3: TAXABLE EQUIVALENT RATE/VOLUME VARIANCE ANALYSIS
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 compared to 1998 1998 compared to 1997
------------------------------ ------------------------------
Change Due To(1) Change Due To(1) Net
------------------ Net Income ------------------ Increase
1999 1998 1997 Yield/Rate Volume (Decrease) Yield/Rate Volume (Decrease)
-------- -------- -------- ---------- ------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income(2):
Loans(3)................ $140,729 $129,930 $118,779 $ (5,480) $16,279 $10,799 $(1,551) $13,267 $11,716
Investment securities:
Taxable................ 30,917 31,599 28,588 (2,573) 1,891 (682) (839) 3,850 3,011
Non-taxable............ 2,190 2,410 3,061 (67) (153) (220) 60 (711) (651)
-------- -------- -------- -------- ------- ------- ------- ------- -------
Total investment
securities............ 33,107 34,009 31,649 (2,640) 1,738 (902) (779) 3,139 2,360
Other earning assets.... -- 240 630 -- (240) (240) (11) (379) (390)
Federal funds sold and
securities purchased
under agreements to
resell................. 2,953 2,551 1,503 (146) 548 402 (39) 1,087 1,048
-------- -------- -------- -------- ------- ------- ------- ------- -------
Total interest-earning
assets................. $176,789 $166,730 $152,561 $ (8,266) $18,325 $10,059 $(2,380) $17,114 $14,734
-------- -------- -------- -------- ------- ------- ------- ------- -------
Interest expense:
NOW accounts........... $ 9,536 $ 8,871 $ 7,847 $ (705) $ 1,370 $ 665 $ (159) $ 1,183 $ 1,024
Market rate savings.... 10,076 9,981 9,234 (573) 668 95 195 552 747
Other accounts......... 372 467 443 (75) (20) (95) 58 (34) 24
Time deposits in excess
of $100 thousand...... 6,353 7,154 6,791 (771) (30) (801) (79) 442 363
Other time deposits.... 33,488 33,784 32,529 (2,481) 2,185 (296) (495) 1,750 1,255
-------- -------- -------- -------- ------- ------- ------- ------- -------
Total deposits......... $ 59,825 $ 60,257 $ 56,844 $ (4,605) $ 4,173 $ (432) $ (480) $ 3,893 $ 3,413
Short-term borrowings... 11,882 9,199 7,762 (206) 2,889 2,683 (198) 1,635 1,437
Long-term debt.......... 4,149 3,576 868 44 529 573 41 2,667 2,708
-------- -------- -------- -------- ------- ------- ------- ------- -------
Total interest-bearing
liabilities............ $ 75,856 $ 73,032 $ 65,474 $ (4,767) $ 7,591 $ 2,824 $ (637) $ 8,195 7,558
-------- -------- -------- -------- ------- ------- ------- ------- -------
Net interest income..... $100,933 $ 93,698 $ 87,087 $ (3,499) $10,734 $ 7,235 $(1,743) $ 8,919 $ 7,176
======== ======== ======== ======== ======= ======= ======= ======= =======
</TABLE>
- --------
(1) Yield/rate-volume changes have been allocated to each category based on
the percentage of each to the total change.
(2) Non-taxable interest income has been adjusted to a taxable equivalent rate
using the federal income tax rate of 35%.
(3) Balances of nonaccrual loans and related cash basis income have been
included for computational purposes.
9
<PAGE>
Noninterest income (Dollars in thousands)
Noninterest income for Bancorporation primarily consists of service charges
on deposit accounts, credit card processing fees, trust fees, mortgage
servicing fees and fees generated from other bank-related activities. Table 4
provides a comparison for the various components of noninterest income for the
years ended December 31, 1999, 1998 and 1997.
TABLE 4: NONINTEREST INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
Percent Percent
1999 Change 1998 Change 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts.. $18,998 16.05% $16,371 13.48% $14,426
Commission and fees from fiduciary
activities.......................... 2,022 32.07 1,531 17.95 1,298
Fees for other customer services..... 2,301 3.70 2,219 3.26 2,149
Mortgage servicing................... 2,193 (.81) 2,211 1.14 2,186
Bankcard discount.................... 4,052 25.06 3,240 16.17 2,789
Insurance premiums earned............ 1,815 (3.41) 1,879 27.48 1,474
Other................................ 1,546 6.18 1,456 217.21 459
------- ----- ------- ------ -------
Total............................... $32,927 13.91% $28,907 16.65% $24,781
======= ===== ======= ====== =======
</TABLE>
The 13.91% increase in noninterest income in 1999 compared to 1998 is
primarily attributed to increases in service charges, bankcard processing fees
and trust fees comprising 65%, 20% and 12% of the total increase in
noninterest income, respectively. Exchange earned $78 in noninterest income
from the date of acquisition through December 31, 1999.
The increase in service charges is attributable to strong deposit growth,
repricing of service charges and a continued emphasis on collections. Average
deposits increased 9.9% in 1999 compared to 1998. Bankcard discount represents
fees charged for processing merchant credit card sales. The increase in
bankcard discount is due to increased merchant activity in 1999 compared to
1998. Trust fees increased in 1999 due to growth in the number and volume of
trust accounts.
The 16.65% increase in noninterest income from 1997 to 1998 was primarily
due to an increase in service charges on deposit accounts as a result of
growth in the number of deposit accounts, the repricing of charges and an
increased emphasis on collection of service charges.
10
<PAGE>
Noninterest expense (Dollars in thousands)
Noninterest expense for Bancorporation primarily consists of salaries and
employee benefits, net occupancy expense, furniture and equipment expense,
data processing fees and amortization of intangibles. Table 5 provides a
comparison of the various components of noninterest expense for the years
ended December 31, 1999, 1998 and 1997.
TABLE 5: NONINTEREST EXPENSE
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
Percent Percent
1999 Change 1998 Change 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits....... $41,396 12.88% $36,674 11.97% $32,752
Net occupancy expense of premises.... 6,074 11.59 5,443 16.20 4,684
Furniture and equipment expense...... 6,884 23.06 5,594 22.14 4,580
Amortization of intangibles.......... 5,423 (21.25) 6,886 (20.39) 8,650
Bankcard processing fees............. 4,374 18.28 3,698 31.00 2,823
Data processing fees................. 7,084 8.32 6,540 14.94 5,690
Professional services................ 2,263 37.15 1,650 75.35 941
Other................................ 15,850 12.22 14,124 12.65 12,538
------- ------ ------- ------ -------
Total............................... $89,348 10.84% $80,609 10.94% $72,658
======= ====== ======= ====== =======
</TABLE>
The 10.84% increase in noninterest expense in 1999 compared to 1998 is
primarily attributable to increases in salary and employee benefits expense
net occupancy expense and furniture and equipment expense. Exchange
contributed $592 of noninterest expense from the date of acquisition through
December 31, 1999. Together these increases represent approximately 76% of the
total increase of $8,739 from 1998 to 1999. These increases are partially
offset by the 21.25% decrease in amortization of intangibles. Other categories
increased due to the on-going growth realized by Bancorporation.
Salaries and employee benefits increased 12.88% primarily due to an
investment in new personnel in 1999 and the addition of Exchange staff from
August 20, 1999 to December 31, 1999. Full time equivalent employees were
1,176 and 1,147 at December 31, 1999 and 1998, respectively, an increase in
the workforce of 6.19%. Merit increases, performance bonuses (primarily
related to Y2K) and increased contributions to fund Bancorporation's benefit
plans also contributed to the increase.
Net occupancy expense and furniture and equipment expense increased 35.65%
in 1999 compared to 1998 largely due to higher depreciation, increased
maintenance expense and the addition of Exchange from August 20, 1999 to
December 31, 1999. These increases were expected as the level of assets placed
in service continues to increase.
The decline in amortization of intangibles in 1999 compared to 1998 is due
to a runoff of goodwill recorded in previous periods. The average balance of
goodwill for the years ended December 31, 1999 and 1998, was $14,676 and
$15,030, respectively.
The 10.94% increase in noninterest expense from 1997 to 1998 was primarily
due to increased salaries and employee benefits, expense, net occupancy
expense and furniture and equipment expense. Salary and employee benefits
expense, increased primarily due to the increased number of employees and
merit increases. Net occupancy expense and furniture and equipment expense
increased primarily due to investments made to expand and maintain existing
facilities and the quality of assets placed into service. Other expense
categories increased due to the on-going growth realized by Bancorporation.
11
<PAGE>
Income taxes (Dollars in thousands)
Total income tax expense included in the Consolidated Statements of Income
was $12,945, $12,716 and $11,775 for the years ended December 31, 1999, 1998
and 1997, respectively. The effective tax rate in those years was 34.1%, 34.9%
and 35.1%, respectively.
Income taxes computed at the statutory rate are reduced primarily by the
interest earned on state and municipal debt securities and obligations (which
are exempt from federal taxes) and other items permanently included in or
excluded from taxable income. Interest on these items fluctuates from year to
year causing the change in the effective tax rate.
FINANCIAL CONDITION
Investment securities (Dollars in thousands)
As of December 31, 1999, the investment portfolio totaled $562,992, compared
to $623,828 as of December 31, 1998. The decrease in the investment portfolio
was due to a shift from investment securities to federal funds sold to provide
for Y2K liquidity. Bancorporation continues to invest primarily in short-term
U.S. Government obligations, thereby minimizing credit, interest rate and
liquidity risk. The portfolio was comprised of 90.30% and 90.74% U.S.
Government obligations at December 31, 1999 and 1998, respectively. The
remainder of the investment portfolio principally consists of municipal notes,
bonds and equity securities.
Average investment securities as a percentage of average earning assets
decreased from 27.91% as of December 31, 1998, to 26.61% as of December 31,
1999, with substantially all the decrease occurring in investments in U. S.
Government obligations. The decrease in the percentage of investment
securities was due to loan demand and the reinvestment of some maturing
securities in federal funds sold to provide liquidity for Y2K. Investment
securities remain the second largest component of interest-earning assets.
The weighted average maturity of U.S. Government obligations held in the
portfolio was 12.4 months at December 31, 1999, compared to 10.6 months at
December 31, 1998. The weighted average maturity of State and Political
obligations held in the portfolio was 66.8 months at December 31, 1999,
compared to 78 months at December 31, 1998. The weighted average maturity of
Other Securities obligations held in the portfolio was 162.4 months at
December 31, 1999, compared to 168.7 months at December 31, 1998. The
amortized cost and estimated fair value of debt securities at December 31,
1999 and 1998 are shown in Table 6.
Investment securities available-for-sale are held for expected liquidity
requirements, capital planning and asset/liability management. Such
securities, recorded at fair value, were $522,326 or 92.78% of the total
investment portfolio at December 31, 1999, compared with $32,542 or 5.22% at
December 31, 1998. The unrealized gain on investment securities available-for-
sale, net of tax, was $3,669 and $8,397 at December 31, 1999 and 1998,
respectively. The increase of available-for-sale securities as a percentage of
the total investment portfolio is due to the transfer of a majority of the
treasury portfolio from held-to-maturity to available-for-sale through the
adoption of Statement of Financial Accounting Standards No. 133.
Investment securities held-to-maturity recorded at amortized cost totaled
$40,666, or 7.22% of the total investment portfolio at December 31, 1999,
compared to $591,286, or 94.78% at December 31, 1998. The amortized cost of
such securities exceeded their estimated fair value by $211, or .52% at
December 31, 1999. The estimated fair values of such securities exceeded their
amortized cost by $3,183, or .54% at December 31, 1998.
12
<PAGE>
TABLE 6: INVESTMENT SECURITIES
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ------------------- -------------------
Estimated Taxable Estimated Estimated
Amortized Fair Equivalent Amortized Fair Amortized Fair
Cost Value Yield* Cost Value Cost Value
--------- --------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Held-to-Maturity:
U. S. government
obligations:
Within one year........ $ 1,750 $ 1,751 5.99% $298,688 $300,485 $259,201 $259,532
One to five years...... 8,497 8,311 5.28 267,404 268,459 263,514 264,546
Five to ten years...... 500 468 6.81 -- -- -- --
-------- -------- ----- -------- -------- -------- --------
Total................. 10,747 10,530 5.46 566,092 568,944 522,715 524,078
-------- -------- ----- -------- -------- -------- --------
Obligations of states
and political
subdivisions:
Within one year........ 2,513 2,519 7.47 1,793 1,798 4,854 4,866
One to five years...... 13,048 13,089 7.66 10,173 10,252 7,876 7,981
Five to ten years...... 8,925 8,875 8.04 5,474 5,679 11,896 12,166
Over ten years......... 5,022 5,023 10.78 7,123 7,145 8,038 8,079
-------- -------- ----- -------- -------- -------- --------
Total................. 29,508 29,506 8.29 24,563 24,874 32,664 33,092
-------- -------- ----- -------- -------- -------- --------
Other securities:
Within one year........ 120 121 6.31 -- -- 145 143
One to five years...... 29 24 8.32 260 259 411 407
Five to ten years...... 50 45 9.15 50 50 50 48
Over ten years......... 212 229 5.43 321 342 511 529
-------- -------- ----- -------- -------- -------- --------
Total................. 411 419 6.34 631 651 1,117 1,127
-------- -------- ----- -------- -------- -------- --------
Total Held-to-Maturity.. 40,666 40,455 7.52 591,286 594,469 556,496 558,297
======== ======== ===== ======== ======== ======== ========
Available-for-Sale:
U. S. government
obligations:
Within one year........ 265,845 265,845 5.01 -- -- -- --
One to five years...... 231,562 231,562 5.55 -- -- -- --
-------- -------- ----- -------- -------- -------- --------
Total................. 497,407 497,407 5.26 -- -- -- --
-------- -------- ----- -------- -------- -------- --------
Obligations of states
and political
subdivisions:
Five to ten years....... 5 5 10.75 -- -- -- --
-------- -------- ----- -------- -------- -------- --------
Marketable equity
securities............. 24,914 24,914 NM 32,542 32,542 31,913 31,913
-------- -------- ----- -------- -------- -------- --------
Total Available-for-
Sale................... 522,326 522,326 5.27 32,542 32,542 31,913 31,913
======== ======== ===== ======== ======== ======== ========
Total portfolio........ $562,992 $562,781 5.74 $623,828 $627,011 $588,409 $590,210
======== ======== ===== ======== ======== ======== ========
</TABLE>
- --------
*Taxable equivalent yield was calculated using the incremental statutory
federal income tax rate of 35%.
NM--Not meaningful
Loans (Dollars in thousands)
Loans comprise the largest portion of earning assets of Bancorporation, with
average loans accounting for 70.87% and 69.63% of average earning assets as of
December 31, 1999 and 1998, respectively. Gross loans increased $281,451 or
17.89% to $1,854,520 as of December 31, 1999, from $1,573,069 as of December
31, 1998. Of the total increase, $63,242 represented loans obtained in
acquisitions. The remaining loan growth of $218,209 represents an internal
growth rate for loans of 13.87%. Most of the increase in loans was
attributable to an increase in loans secured by 1-4 family residential
properties, which increased $97,920 or 13.58%, followed
13
<PAGE>
by loans to individuals for household, family and other personal expenditures,
which increased $80,653 or 23.93%. The composition of the loan portfolio at
December 31 for the last five years is presented in Table 7. Bancorporation
desires to make business loans for productive purposes where the business has
adequate capital and management expertise to succeed. Consumer loans are
granted for many purposes, provided that underwriting criteria are met. The
ability and willingness of the borrower to repay debt are primary factors
considered in granting credit. Repayment ability is established by review of
past and future cash flow coverage for businesses and debt-to-income ratio for
consumers. The willingness of the borrower to repay debt is reviewed through
trade credit for businesses and credit bureau reports and other traditional
methods for consumers. Collateral guarantees, loan-to-value ratios and loan
terms are based on industry and/or regulatory standards depending on loan
purpose and the composition of collateral provided.
TABLE 7: LOAN PORTFOLIO COMPOSITION
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------- ----------------- ----------------- ----------------- -----------------
% of % of % of % of % of
Amount Gross Amount Gross Amount Gross Amount Gross Amount Gross
---------- ------ ---------- ------ ---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate--
construction.......... $ 49,254 2.66% $ 38,138 2.42% $ 23,837 1.67% $ 18,228 1.44% $ 16,334 1.47%
Real estate--mortgage.. 818,807 44.15 720,887 45.83 617,117 43.20 555,149 43.72 459,283 41.22
Real estate--
commercial............ 345,116 18.61 297,918 18.94 272,520 19.08 236,800 18.65 200,088 17.96
Loans for purchasing
and carrying
securities............ 1,283 .47 643 .04 817 .06 681 .05 614 .06
Loans to farmers....... 8,643 .07 8,984 .57 7,917 .55 6,806 .54 6,338 .57
Commercial and
industrial loans...... 174,556 9.41 140,541 8.93 128,584 9.00 102,404 8.06 92,641 8.31
Loans to individuals
for household, family
and other personal
expenditures.......... 417,603 22.52 337,051 21.43 356,612 24.97 337,589 26.59 332,817 29.86
Other loans............ 39,258 2.11 28,907 1.84 21,033 1.47 12,122 .95 6,144 .55
---------- ------ ---------- ------ ---------- ------ ---------- ------ ---------- ------
Total loans............ $1,854,520 100.00% $1,573,069 100.00% $1,428,437 100.00% $1,269,779 100.00% $1,114,259 100.00%
========== ====== ========== ====== ========== ====== ========== ====== ========== ======
</TABLE>
TABLE 8: SELECTED LOAN MATURITIES AND INTEREST RATE SENSITIVITY--
DECEMBER 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Over 1
1 year through 5 Over 5
Total or less years years
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Type of Loan:
Construction and land development.... $ 49,254 $ 36,982 $ 12,272 $ --
Commercial, financial and
agricultural........................ 568,856 135,909 339,760 93,187
Real estate, individual and other.... 1,236,410 143,950 962,997 129,463
---------- -------- ---------- --------
Total............................... $1,854,520 $316,841 $1,315,029 $222,650
========== ======== ========== ========
Rate Sensitivity for Loans (over one
year):
Predetermined interest rates......... $1,246,580 $1,054,443 $192,137
Floating or adjustable interest
rates............................... 291,099 260,586 30,513
---------- ---------- --------
Total............................... $1,537,679 $1,315,029 $222,650
========== ========== ========
</TABLE>
Allowance for loan losses (Dollars in thousands)
An analysis of activity in the allowance for loan losses as of December 31
for the past five years is presented in Table 9. The allowance for loan losses
is managed and maintained through charges to the provision for loan losses.
Loan charge-offs and recoveries are charged or credited directly to the
allowance for loan losses.
14
<PAGE>
It is the policy of Bancorporation to maintain an allowance for loan losses
which is adequate to absorb probable losses inherent in the loan portfolio.
Management believes that the provision taken in 1999 was appropriate to
provide an allowance for loan losses which considers the past experience of
charge-offs, the level of past due and nonaccrual loans, the size and mix of
the loan portfolio, credit classifications and general economic conditions in
Bancorporation's market areas.
TABLE 9: ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Beginning allowance for loan losses.... $28,306 $26,135 $23,483 $21,153 $19,249
Charge-offs:
Commercial, financial and
agricultural......................... 689 1,080 685 1,188 497
Real estate--mortgage................. 398 698 563 506 421
Installment loans to individuals...... 2,288 2,078 2,037 1,660 1,036
All other loans....................... 8 13 6 -- --
------- ------- ------- ------- -------
Total charge-offs.................... 3,383 3,869 3,291 3,354 1,954
------- ------- ------- ------- -------
Recoveries:
Commercial, financial and
agricultural......................... 170 728 384 259 190
Real estate--mortgage................. 538 621 920 498 294
Installment loans to individuals...... 675 388 398 353 391
All other loans....................... 7 -- -- -- --
------- ------- ------- ------- -------
Total recoveries..................... 1,390 1,737 1,702 1,110 875
------- ------- ------- ------- -------
Total net charge-offs.................. 1,993 2,132 1,589 2,244 1,079
Provision for loan losses.............. 5,546 4,303 4,241 4,574 2,686
Reserves related to acquisitions....... 1,113 -- -- -- 297
------- ------- ------- ------- -------
Ending allowance for loan losses....... $32,972 $28,306 $26,135 $23,483 $21,153
======= ======= ======= ======= =======
</TABLE>
Bancorporation manages credit risk through a variety of methods including
credit scoring, establishing loan type parameters and underwriting standards.
In addition, credit management is centralized using a standardized system of
controls which subjects the portfolio to detailed credit reviews by
individuals independent of the lending function.
In light of the improved conditions in the loan portfolio (decline in
delinquencies and charge-offs), the allowance for loan losses as a percent of
gross loans was reduced to 1.78% at December 31, 1999, from 1.80% at December
31, 1998.
Net charge-offs for the year ended December 31, 1999, totaled $1,993, or
.12% of average loans, a decrease of $139 from $2,132, or .14% of average
loans in 1998. Recoveries represented 41.09% of gross charge-offs for the year
ended December 31, 1999, versus 44.90% for the year ended December 31, 1998.
The increase in the provision for loan losses during 1999 was primarily
attributable to loan growth during the year. The provision for loan losses was
made to reflect potential losses inherent in the loan portfolio and was not
attributable to individual loans for which management believed specific
accruals were necessary at December 31, 1999. The increase in the provision
for loan losses in 1998 primarily due to loan growth. Loan growth in 1998 was
10.13% compared to 14.0% (adjusted for Exchange acquisition) in 1999.
In 1999, Bancorporation implemented an allowance analysis under which a
range of potential losses inherent in the loan portfolio was established. The
range was established by estimating the allowance for loan losses under
several different methods including peer analysis, historical loss analysis,
collateral stratification, industry stratification, industry standards and
geographic stratification. In determining the relevance of the range,
qualitative factors such as micro and macro economic conditions and trends in
portfolio composition were considered. At December 31, 1999, Bancorporation's
allowance for loan losses of $32,972 fell within the range indicated by the
methods listed above. The new analysis did not significantly effect the level
of the allowance for loan losses or the provision for loan losses.
15
<PAGE>
Table 10 presents an allocation of the allowance for loan losses by
different loan categories. As noted in the preceding paragraph, Bancorporation
adopted a new methodology for estimating the allowance for loan losses in
1999. As a result of this methodology, the allocation of the allowance to the
different loan categories was changed. The allocation is based on a number of
qualitative factors (e.g. perceived level of risk associated with the related
industry, collateral, geography and economic conditions), and the amounts
presented are not necessarily indicative of actual amounts which will be
charged to any particular category. The total allowance is available to absorb
potential losses in any category of loans. Prior year allocations were not
restated from prior years.
TABLE 10: ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------- --------------- --------------- --------------- ---------------
Percent Percent Percent Percent Percent
of of of of of
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate--
construction........... $ 837 2.66% $ 100 2.42% $ 100 1.67% $ 100 1.44% $ 100 1.47%
Real estate--mortgage... 14,222 62.76 8,426 64.77 8,402 62.28 7,255 62.37 7,508 59.18
Installment loans to
individuals............ 5,571 12.06 7,617 21.43 6,595 24.97 2,579 26.59 2,562 29.86
Commercial, financial
and agricultural....... 10,526 22.52 2,131 11.38 2,124 11.08 1,814 9.60 1,581 9.49
Unallocated............. 1,816 -- 10,032 -- 8,914 -- 11,735 -- 9,402 --
------- ------ ------- ------ ------- ------ ------- ------ ------- -------
Total.................. $32,972 100.00% $28,306 100.00% $26,135 100.00% $23,483 100.00% $21,153 100 .00%
======= ====== ======= ====== ======= ====== ======= ====== ======= =======
</TABLE>
TABLE 11: ANALYSIS OF ASSET QUALITY
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
--------------- --------------- ------------- ------------- -------------
% of % of % of % of % of
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ -------- ------ -------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nonperforming assets:
Nonaccrual loans........ $3,017 .16% $2,248 .14% $2,653 .18% $2,920 .23% $3,323 .30%
Restructured loans...... -- -- -- -- 78 .01 128 .01 569 .05
------ -------- ------ -------- ------ ------ ------ ------ ------ ------
Total nonperforming
loans................. 3,017 .16 2,248 .14 2,731 .19 3,048 .24 3,892 .35
Other real estate
owned.................. 151 .01 402 .03 572 .04 518 .04 473 .04
------ -------- ------ -------- ------ ------ ------ ------ ------ ------
Total nonperforming
assets................ $3,168 .17 $2,650 .17 $3,303 .23 $3,566 .28 $4,365 .39
====== ======== ====== ======== ====== ====== ====== ====== ====== ======
Accruing loans 90 days
past due............... $2,330 .13 $1,522 .10 $1,497 .10 $2,261 .18 $1,747 .16
====== ======== ====== ======== ====== ====== ====== ====== ====== ======
Nonperforming assets by
type:
Commercial, financial
and agricultural....... $ 982 .05 $ 391 .02 $ 463 .03 $ 559 .04 $ 951 .09
Consumer................ 19 .00 85 .01 26 .00 83 .01 38 .00
Real estate............. 2,016 .11 1,772 .11 2,242 .16 2,406 .19 2,903 .26
------ -------- ------ -------- ------ ------ ------ ------ ------ ------
Total nonperforming
loans................. 3,017 .16 2,248 .14 2,731 .19 3,048 .24 3,892 .35
Other real estate
owned.................. 151 .01 402 .03 572 .04 518 .04 473 .04
------ -------- ------ -------- ------ ------ ------ ------ ------ ------
Total.................. $3,168 .17% $2,650 .17% $3,303 .23% $3,566 .28% $4,365 .39%
====== ======== ====== ======== ====== ====== ====== ====== ====== ======
Asset quality ratios:
Allowance to year-end
loans.................. 1.78% 1.80% 1.83% 1.85% 1.90%
Net chargeoffs to
average loans.......... .12 .14 .12 .19 .11
Coverage ratio.......... 1,092.87 1,259.16 956.98 770.44 543.50
</TABLE>
16
<PAGE>
Any loans classified by the Bank or regulatory examiners as loss, doubtful,
substandard, or special mention that have not been disclosed hereunder or
under the "Loans" or "Asset Quality" narrative discussions do not (1)
represent or result from trends or uncertainties that management expects will
materially impact future operating results, liquidity, or capital resources,
or (2) represent material credits as to which management is aware of any
information that causes serious doubt as to the ability of such borrowers to
comply with the loan repayment terms.
Interest income related to nonaccrual and restructured loans that would have
been recognized if such loans were current in accordance with their original
contractual terms did not differ materially from the amounts actually
recognized.
Based upon an ongoing assessment of risk elements in the portfolio and
factors affecting credit quality, it is management's opinion that there are
currently no significant unidentified potential credit problems. However,
factors affecting a borrower's repayment ability may vary due to changing
economic conditions and other factors that may affect loan quality.
Intangible assets (Dollars in thousands)
As of December 31, 1999, intangible assets totaled $19,256, representing a
$2,089 net increase from $17,167 as of December 31, 1998. The primary reason
for the increase in 1999 was due to recording goodwill of $6,096 upon the
acquisition of Exchange. Amortization expense related to intangible assets was
$5,423 or 21.25% lower than $6,886 for the year ended December 31, 1998. The
decrease was due to the runoff of goodwill recorded in previous periods.
TABLE 12: INTANGIBLE ASSETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1999 1998 1997
-------------------- -------------------- --------------------
Balance Amortization Balance Amortization Balance Amortization
------- ------------ ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Goodwill................ $16,541 $4,698 $14,519 $5,808 $17,813 $6,181
Deposit based premium... -- -- -- 596 596 1,681
Mortgage servicing
rights................. 2,715 725 2,648 482 2,118 788
------- ------ ------- ------ ------- ------
Total.................. $19,256 $5,423 $17,167 $6,886 $20,527 $8,650
======= ====== ======= ====== ======= ======
</TABLE>
Funding sources (Dollars in thousands)
Bancorporation's primary source of funds is its deposit base. Average
deposits increased 9.87% to $2,097,678 as of December 31, 1999, from
$1,909,183 as of December 31, 1998. As of December 31, 1999, total deposits
increased $184,546 to $2,222,033, or 9.06%. Acquisitions during 1999 accounted
for $90,794 or 49.20% of deposit growth.
Core deposits financed loan and investment activity. Core deposits are
defined as demand deposits, savings, NOW, money market accounts and
certificates of deposit under $100 thousand. As of December 31, 1999,
$2,081,842 or 93.69% of total deposits of $2,222,033 were considered core
deposits. As of December 31, 1998, $1,898,545 or 93.18% of total deposits of
$2,037,487 were considered core deposits.
Purchased funds, which consist of large time deposits and short-term
borrowings, are another source of funds. As of December 31, 1999, large time
deposits increased $1,249 or .90% to $140,191 as compared to $138,942 as of
December 31, 1998. Short-term borrowings, which consist primarily of federal
funds purchased and securities sold under agreements to repurchase, averaged
$252,867 in 1999 compared to $192,654 in 1998, an increase of 31.25%.
On March 24, 1998, Bancorporation, through FCB/SC Capital Trust I, issued
$50,000 of 8.25% capital securities due on March 15, 2028. The balance of the
securities can be prepaid, subject to possible regulatory approval, in whole
or part at any time on or after March 15, 2008. The capital securities qualify
for inclusion in Tier I capital for regulatory capital adequacy purposes.
Tables 13, 14 and 15 provide additional information regarding major funding
sources.
17
<PAGE>
TABLE 13: TIME DEPOSITS OF $100 THOUSAND AND OVER
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
3 months or less.................................. $ 22,553 $ 57,792 $ 74,785
Over 3 months through 6 months.................... 55,326 41,244 22,330
Over 6 months through 12 months................... 52,181 27,979 22,628
Over 12 months.................................... 10,131 11,927 14,593
-------- -------- --------
Total............................................ $140,191 $138,942 $134,336
======== ======== ========
Percent of total deposits......................... 6.31% 6.82% 7.15%
</TABLE>
TABLE 14: DEPOSIT ANALYSIS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1999 1998 1997
------------------ ------------------ ------------------
Average Average Average Average Average Average
balance rate balance rate balance rate
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits......... $ 374,991 -- $ 331,466 -- $ 294,929 --
NOW accounts............ 555,479 1.72% 475,669 1.86% 412,241 1.90%
Market rate savings..... 318,980 3.16 297,847 3.35 281,386 3.28
Regular and premium
savings................ 15,395 2.42 16,240 2.88 17,438 2.54
Time deposits of $100
thousand and over...... 135,203 4.70 135,845 5.27 127,452 5.33
Other time deposits..... 697,630 4.80 652,116 5.18 618,345 5.26
---------- ---------- ----------
Total.................. $2,097,678 $1,909,183 $1,751,791
========== ========== ==========
</TABLE>
TABLE 15: FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE ANALYSIS
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
Amount Rate Amount Rate Amount Rate
-------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
At year-end*:
Securities sold under agreements
to repurchase................... $230,904 5.05% $204,702 4.39% $184,168 5.04%
======== ======== ========
Average for the year:
Federal funds purchased.......... $ 2,032 5.59 $ 2,934 5.97 $ 1,192 6.02
Securities sold under agreements
to repurchase................... 250,835 4.63 189,720 4.73 158,083 4.86
-------- -------- --------
Total........................... $252,867 4.64% $192,654 4.75% $159,275 4.87%
======== ======== ========
Federal funds purchased.......... $ 11,700 $ 4,400 $ 17,300
Securities sold under agreements
to repurchase................... 283,220 236,278 184,168
</TABLE>
- --------
* There were no federal funds purchased at year-end in any of the reported
years.
18
<PAGE>
Capital resources (Dollars in thousands)
The Federal Reserve Board and the Federal Deposit Insurance Corporation have
issued risk-based capital guidelines for United States banking corporations.
The objective of these guidelines is to provide a uniform capital measurement
that is more sensitive to variations in risk profiles of banking corporations.
Regulatory agencies define capital as Tier I, consisting of stockholders'
equity less ineligible intangible assets, and Tier II, consisting of Tier I
capital plus the allowable portion of the allowance for loan losses and
certain long-term debt. Capital adequacy is measured by comparing both capital
levels to Bancorporation's risk-adjusted assets and off-balance sheet items.
Regulatory requirements presently specify that Tier I capital should exclude
the market appreciation or depreciation of securities available-for-sale
arising from valuation adjustments. In addition to these capital ratios,
regulatory agencies have established a Tier I leverage ratio which measures
Tier I capital to average assets less ineligible intangible assets.
Regulatory guidelines require a minimum of total capital to risk-adjusted
assets ratio of 8 percent, with at least 50 percent consisting of tangible
common stockholders' equity and a minimum Tier I leverage ratio of 3 percent.
Banks which meet or exceed a Tier I ratio of 6 percent, a total capital ratio
of 10 percent and a Tier I leverage ratio of 5 percent are considered well-
capitalized by regulatory standards.
Bancorporation maintains a strong level of capital as a margin of safety for
its depositors and stockholders, as well as to provide for future growth. At
December 31, 1999, stockholders' equity was $200,073 versus $174,175 at
December 31, 1998, an increase of 14.8%.
Bancorporation's Tier 1 capital ratio at December 31, 1999, was 12.47%,
compared to 13.01% at December 31, 1998. The total risk-based capital ratio
was 13.79% compared to 14.27%. Both of these measures exceed the regulatory
minimums of 4.00% for Tier 1 and 8.00% for total risk-based capital. Based on
the guidelines above, Bancorporation is well-capitalized. Refer to Note 18
"Capital Matters" in the Notes to the Consolidated Financial Statements for
further analysis of risk-based requirements.
19
<PAGE>
TABLE 16: CAPITAL ADEQUACY
(Dollars in thousands--except per share data)
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Stockholders' equity:
Year-end.................... $200,023 $174,175 $158,418 $132,641 $112,086
Average..................... 187,826 169,422 144,961 122,110 104,245
Book value per common
share...................... 208.77 185.41 166.95 139.21 115.32
Average stockholders' equity
to:
Average assets.............. 7.21% 7.26% 6.96% 6.67% 6.31%
Average deposits............ 8.95 8.87 8.28 7.78 7.25
Average loans............... 11.10 11.33 10.79 10.25 10.27
Risk-based capital ratios:
Tier 1 capital ratio........ 12.47% 13.01% 9.13% 8.90% 8.62%
Total risk-based capital
ratio...................... 13.79 14.27 10.49 10.39 10.35
Tier 1 leverage ratio....... 8.49 8.43 6.21 6.02 5.64
Internal capital generation:
Return on average equity.... 13.12% 13.94% 15.02% 15.52% 12.04%
Earnings retention rate..... 99.31 99.28 99.21 99.10 98.64
Dividend payout ratio....... .69 .72 .79 .90 1.36
Internal capital generation
rate*...................... 13.03 13.84 14.90 15.38 11.88
</TABLE>
- --------
*Return on average equity X Earnings retention rate
ASSET/LIABILITY MANAGEMENT
The role of Bancorporation's Asset/Liability Management Committee ("ALCO")
is to monitor Bancorporation's liquidity position and exposure to interest
rate risk and pricing policies. Asset/liability management is the process by
which Bancorporation monitors and attempts to control the mix and maturities
of its assets and liabilities in order to maximize net interest income. The
functions of asset/liability management are to ensure adequate liquidity and
to maintain an appropriate balance between interest-sensitive assets and
liabilities.
Liquidity (Dollars in thousands)
Liquidity involves the ability to meet cash flow requirements which arise
primarily from withdrawal of deposits, extensions of credit, payment of
operating expenses and repayment of purchased funds. Funds are provided
primarily through earnings from operations, expansion of the deposit base,
borrowing funds in the money market, the maturity of investment assets and
repayment of loans.
Bancorporation has historically maintained strong liquidity through
increases in core deposits and management of investment maturities. Core
deposits were $2,081,842, or 93.69% of total deposits as of December 31, 1999,
up from $1,898,545, or 93.18% of total deposits as of December 31, 1998. The
weighted average maturity of U.S. Government obligations, which make up 90.30%
of the investment portfolio as of December 31, 1999, was 12.4 months, compared
to 10.6 months at December 31, 1998.
Interest rate risk (Dollars in thousands)
Management of interest rate risk involves maintaining an appropriate balance
between interest-sensitive assets and interest-sensitive liabilities (interest
rate sensitivity gap) and reducing Bancorporation's risk of major changes in
net interest income in periods of rapidly changing interest rates. A negative
gap (interest-sensitive
20
<PAGE>
liabilities greater than interest-sensitive assets) in periods when interest
rates are declining will tend to increase net interest income. Conversely, a
negative gap in periods when interest rates are rising will tend to reduce net
interest income. The net cumulative gap position reflects Bancorporation's
sensitivity to interest rate changes over time. This calculation is a static
measure and is not a prediction of net interest income. Gap analysis is the
simplest representation of Bancorporation's interest rate sensitivity. It does
not reveal the impact of factors such as administered rates (e.g., the prime
lending rate), pricing strategies on its consumer and business deposits, and
changes in the balance sheet mix.
The objective of the asset/liability management process is to manage and
control the sensitivity of Bancorporation's income to changes in market
interest rates. This process is under the direction of the ALCO, which is
comprised of senior bank executives. The ALCO seeks to maximize earnings while
ensuring that the risks to those earnings from adverse movements in interest
rates are kept within specified limits deemed acceptable by Bancorporation.
Accordingly, the ALCO conducts comprehensive simulations of net interest
income under a variety of market interest rate scenarios. These simulations
provide the ALCO with an estimate of earnings at risk given changes in
interest rates. While the ALCO sees the opportunities and benefits of
utilizing derivative financial instruments such as interest rate swaps, caps
and floors to improve net interest income, the ALCO has elected not to use
such instruments given their inherent risk.
21
<PAGE>
As indicated in Table 17, the twelve-month cumulative gap, representing the
total net assets and liabilities that are projected to reprice over the next
twelve months, was liability sensitive in the amount of $229.7 million at
December 31, 1999. However, this negative position remained within the
acceptable parameters of plus or minus 20% at 360 days, as listed in
Bancorporation's Statement of Funds Policy. This Statement is guided by asset
quality, liquidity and earnings, and describes Bancorporation's policy with
respect to sources and uses of funds, dividends and limitations on interbank
liabilities. The responsibility for funds management resides with the Chief
Financial Officer, with overall guidance provided by the Chairman and
President. Management continues to seek ways to balance the gap position and
reduce exposure to interest rate fluctuations.
TABLE 17: INTEREST RATE-SENSITIVITY ANALYSIS AS OF DECEMBER 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
0-3 4-6 7-12 Total Over one
months months months within year or
sensitive sensitive sensitive one year non-sensitive Total
--------- --------- --------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans.................. $540,336 $ 70,556 $ 147,600 $ 758,492 $1,096,028 $1,854,520
Investment securities.. 75,366 64,471 155,043 294,880 268,112 562,992
-------- --------- --------- ---------- ---------- ----------
Total interest-earning
assets............... $615,702 $ 135,027 $ 302,643 $1,053,372 $1,364,140 $2,417,512
======== ========= ========= ========== ========== ==========
Interest-bearing
liabilities:
Savings and core time
deposits.............. $259,814 $ 262,008 $ 400,259 $ 922,081 $ 762,980 $1,685,061
Time deposits of $100
thousand and over..... 37,398 40,454 52,208 130,060 10,131 140,191
Short-term debt........ 230,903 -- -- 230,903 -- 230,903
Long-term debt......... -- -- -- -- 50,693 50,693
-------- --------- --------- ---------- ---------- ----------
Total interest-bearing
liabilities.......... 528,115 302,462 452,467 1,283,044 823,804 2,106,848
Other sources--net..... -- -- -- -- 310,664 310,664
-------- --------- --------- ---------- ---------- ----------
Total sources--net..... $528,115 $ 302,462 $ 452,467 $1,283,044 $1,134,468 $2,417,512
======== ========= ========= ========== ========== ==========
Percent of total
interest-earning
assets................ 3.62% (6.93)% (6.20)% (9.50)% 9.50%
Interest-sensitivity
gap................... 87,587 (167,435) (149,824) (229,672) $ 229,672 --
-------- --------- --------- ---------- ----------
Cumulative interest-
sensitive gap......... $ 87,587 $ (79,848) $(229,672) -- -- --
======== ========= =========
Percent of total
interest-earning
assets................ 3.62% (3.30)% (9.50)%
</TABLE>
MARKET RATE RISK
In January 1997, the Securities and Exchange Commission adopted new rules
that require more comprehensive disclosures of accounting policies for
derivatives as well as enhanced quantitative and qualitative disclosures of
market risk. The market risk disclosures must be presented for most financial
instruments, which must be classified into two portfolios: financial
instruments entered into for trading purposes and all other financial
instruments (non-trading purposes). Bancorporation holds no derivative
financial instruments and does not maintain a trading portfolio.
22
<PAGE>
Table 18 summarizes the expected maturities and weighted average effective
yields and interest rates associated with Bancorporation's financial
instruments. Cash and cash equivalents, federal funds sold, federal funds
purchased and securities sold under agreements to repurchase are excluded from
Table 18 as their respective carrying values approximate their fair values.
These financial instruments generally expose Bancorporation to insignificant
market risk as they have either no stated maturities, or an average maturity
of less than 30 days and carry interest rates that approximate market rates.
For further information on the fair value of financial instruments, see Note
17 to the consolidated financial statements.
TABLE 18: MARKET RISK DISCLOSURE
(Dollars in thousands)
<TABLE>
<CAPTION>
Expected Maturities Estimated
-------------------------------------------------------------- Fair Value
2000 2001 2002 2003 2004 Thereafter Year-end 1999
---------- -------- -------- -------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment securities:
Fixed rate amount....... $ 295,142 $234,739 $ 4,055 $ 9,617 $ 4,725 $ 14,714 $ 544,452
Weighted average yield.. 5.03% 5.55% 6.28% 6.75 6.57% 8.89% --
Loans:
Fixed rate amount....... $ 424,025 $251,093 $225,749 $261,367 $185,200 $119,938 $1,466,009
Weighted average yield.. 7.90% 7.86% 7.80% 7.67% 7.78% 7.72% --
Variable rate amount.... $ 99,222 $ 46,794 $ 37,608 $ 31,034 $ 29,672 $142,818 $ 378,681
Weighted average yield.. 8.55% 8.52% 8.38% 8.36% 8.38% 7.72% --
Deposits:
Fixed rate amount....... $1,050,825 $202,322 $195,492 $188,760 $186,537 $396,781 $2,220,560
Weighted average rate... 4.18% 2.72% 2.65% 2.56% 2.53% -- --
Long-term debt:
Fixed rate amount....... -- -- -- -- -- $ 50,963 $ 50,323
Weighted average rate... -- -- -- -- -- 8.24% --
</TABLE>
ACCOUNTING AND REGULATORY MATTERS (Dollars in thousands)
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", which requires that changes in the amounts of
comprehensive income items, currently reported as separate components of
equity, be shown in a financial statement, displayed as prominently as other
financial statements. The most common components of other comprehensive income
include foreign currency translation adjustments, minimum pension liability
adjustments, and/or unrealized gains and losses on available-for-sale
securities. SFAS No. 130 does not require a specific format for the financial
statement, but does require that an amount representing total comprehensive
income be reported. Bancorporation adopted SFAS No. 130 in 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which establishes new standards for
segment reporting. SFAS No. 131 requires reporting of certain information
about operating segments in complete sets of financial statements of the
enterprise and in condensed financials statements of interim periods issued to
shareholders. It also requires that public enterprises report certain
information about their products and services, including the geographic areas
in which they operate and their major customers. SFAS No. 131 was effective
for fiscal years beginning after December 15, 1997, and was adopted by
Bancorporation in 1998. Disclosures regarding business segments are included
in Note 1 in the "Notes to the Consolidated Financial Statements".
In February 1998, the FASB issued SFAS No. 132, "Employers Disclosures about
Pensions and Other Postretirement Benefits", an amendment of SFAS Nos. 87, 88
and 106. SFAS No. 132 revises employers'
23
<PAGE>
disclosures about pensions and other postretirement benefit plans. It does not
change the measurement or recognition of the amounts of those plans. SFAS No.
132 was effective for fiscal years beginning after December 15, 1997, and was
adopted by Bancorporation in 1998. Disclosures regarding employee benefits are
included in Note 14 in the "Notes to the Consolidated Financial Statements".
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage
Backed Securities Retained After the Securitization of Mortgages Held for Sale
by a Mortgage Banking Enterprise". SFAS No. 134 requires that after an entity
that is engaged in mortgage banking activities has securitized mortgage loans
that are held-for-sale, it must classify the resulting mortgage-backed
securities or other retained interests based on its ability and intent to sell
or hold those investments. The Statement was effective for fiscal years
beginning after December 15, 1998. Bancorporation adopted SFAS No. 134 in 1999
but has yet to see any effect, as Bancorporation did not retain interests in
mortgage loans sold in other than mortgage servicing rights.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133 an amendment of FASB Statement No. 133". SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", was issued in
June 1998. It establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at fair value. Changes
in the fair value of derivatives are recorded each period in current earnings,
or other comprehensive income depending on whether a derivative is designated
as part of a hedge transaction and, if it is, the type of hedge transaction.
SFAS No. 133, as issued, is effective for all fiscal quarters of all fiscal
years beginning after June 15, 1999, with early adoption encouraged. SFAS No.
137 amended SFAS No. 133 by delaying the effective date to all fiscal quarters
of all fiscal years beginning after June 15, 2000. The FASB continues to
encourage early adoption of SFAS No. 133.
Bancorporation adopted SFAS No. 133 effective January 1, 1999. Accordingly,
although Bancorporation does not have derivative instruments, management, as
of January 1, 1999, elected to transfer the U.S. Government obligation portion
of its held-to-maturity securities into the available-for-sale category, as
permitted by SFAS No. 133. The total transferred to the available-for-sale
category was $568,944, with an adjustment to stockholders' equity of $1,854,
net of tax effect of $998.
YEAR 2000 (Dollars in thousands)
The Year 2000 ("Y2K") issue which confronted Bancorporation and its
suppliers, customers, customers' suppliers and competitors centered on the
inability of computer systems to recognize the year 2000. Many existing
computer programs and systems originally were programmed with six digit dates
that provided only two digits to identify the calendar year in the date field.
The concern was that these programs and computers would recognize "00" as the
year 1900 rather than the year 2000.
During March 1997, Bancorporation developed its plan to address the Y2K
issue. Bancorporation hired consultants to direct Y2K compliance efforts. A
Y2K Project Management Office ("PMO") consisting of in-house personnel was
responsible for leading the overall Y2K process supported by the Executive
Steering Committee ("Committee"), a group of senior managers within the
organization that was chaired by the Chief Financial Officer. Both the PMO and
the Committee met monthly to review Y2K progress. A substantial portion of
Bancorporation's data processing functions are performed by First-Citizens
Bank & Trust Company, Raleigh, North Carolina ("FCBNC") on its mainframe
systems and/or systems supported by FCBNC. The PMO met bi-monthly with FCBNC
to monitor the status of its compliance efforts. Monthly progress reports were
made to the Executive Committee and quarterly progress reports were made to
Bancorporation's Board of Directors on the overall Y2K program progress.
For IT non-mainframe systems, Bancorporation's outside consultant was
responsible for coordinating remediation with Bancorporation's staff, which,
in most cases, entailed the installation of upgrades provided by
24
<PAGE>
outside vendors. Non-IT systems were more difficult to analyze for Y2K
compliance and were dependent on vendor feedback to determine what was
necessary to achieve Y2K compliance. To prove that the new, modified, or
updated systems were Y2K compliant, testing was performed in an isolated
environment to ensure that all date sensitive data was accurately processed.
The Y2K problems experienced by Bancorporation were minor and did not cause
major disruptions to its operations or its customers. Bancorporation will
continue to monitor potential Y2K problems.
Bancorporation's estimated aggregate expenses associated with Y2K matters
are $3,000 and expenses incurred through December 31, 1999, were $2,798. These
costs included expenses directly related to solving Y2K problems, such as
modifying software and hiring Y2K consultants. Bancorporation expensed all
costs associated with required system changes as those costs were incurred.
Costs were funded through operations.
SELECTED UNAUDITED QUARTERLY FINANCIAL DATA
(Dollars in thousands--except per share data)
<TABLE>
<CAPTION>
First Quarter Second Quarter
---------------------------- ----------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest income and
fees................... $ 41,884 $ 40,002 $ 35,292 $ 42,817 $ 41,463 $ 37,097
Interest expense........ (18,428) (17,529) (15,321) (18,190) (18,541) (15,998)
-------- -------- -------- -------- -------- --------
Net interest income..... 23,456 22,473 19,971 24,627 22,922 21,099
Provision for loan
losses................. (663) (281) (997) (1,817) (2,001) (1,403)
Noninterest income...... 7,509 6,642 5,601 7,929 7,275 5,909
Noninterest expense..... (21,913) (19,091) (17,097) (21,462) (19,567) (18,025)
-------- -------- -------- -------- -------- --------
Income before income
taxes.................. 8,389 9,743 7,478 9,277 8,629 7,580
Income tax expense...... (2,924) (3,424) (2,670) (3,214) (2,965) (2,686)
-------- -------- -------- -------- -------- --------
Net income.............. $ 5,465 $ 6,319 $ 4,808 $ 6,063 $ 5,664 $ 4,894
======== ======== ======== ======== ======== ========
Net income per common
share.................. $ 5.89 $ 6.80 $ 5.13 $ 6.55 $ 6.01 $ 5.22
======== ======== ======== ======== ======== ========
<CAPTION>
Third Quarter Fourth Quarter
---------------------------- ----------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest income and
fees................... $ 44,302 $ 41,806 $ 38,877 $ 46,411 $ 42,100 $ 39,871
Interest expense........ (18,888) (18,626) (16,829) (20,350) (18,336) (17,326)
-------- -------- -------- -------- -------- --------
Net interest income..... 25,414 23,180 22,048 26,061 23,764 22,545
Provision for loan
losses................. (1,630) (1,432) (448) (1,436) (589) (1,393)
Noninterest income...... 8,519 7,334 6,424 8,970 7,656 6,847
Noninterest expense..... (22,175) (20,297) (18,280) (23,798) (21,654) (19,256)
-------- -------- -------- -------- -------- --------
Income before income
taxes.................. 10,128 8,785 9,744 9,797 9,177 8,743
Income tax expense...... (3,505) (2,999) (3,409) (3,302) (3,328) (3,010)
-------- -------- -------- -------- -------- --------
Net income.............. $ 6,623 $ 5,786 $ 6,335 $ 6,495 $ 5,849 $ 5,733
======== ======== ======== ======== ======== ========
Net income per common
share.................. $ 7.07 $ 6.20 $ 6.77 $ 6.84 $ 6.29 $ 6.12
======== ======== ======== ======== ======== ========
</TABLE>
25
<PAGE>
Report of Management
The consolidated financial statements of First Citizens Bancorporation of
South Carolina, Inc. ("Bancorporation") and other financial information
presented in the annual report were prepared by management which is
responsible for the integrity of the information. The Consolidated Financial
Statements have been prepared in conformity with generally accepted accounting
principles and include amounts that are based on management's best estimates
and judgments.
Bancorporation's independent accountants, PricewaterhouseCoopers LLP, are
engaged to provide an objective, independent review as to the fairness of
reported operating results and financial condition. They have an understanding
of Bancorporation's accounting and financial controls and conduct such tests
and related procedures as they deem appropriate to arrive at an opinion on the
fairness of the consolidated financial statements. Their opinion is included
in this Annual Report. Management has made available to PricewaterhouseCoopers
LLP all of Bancorporation's financial records and related data, as well as the
minutes of stockholders' and directors' meetings. Management believes that its
representations made to PricewaterhouseCoopers LLP during the audit were valid
and appropriate.
Bancorporation maintains accounting and control systems which it believes
provide reasonable assurance that financial records are adequate and can be
relied upon to permit the preparation of consolidated financial statements in
conformity with generally accepted accounting principles and that assets are
protected from unauthorized use or disposition. Management recognizes the
limitations inherent in any system of internal control, as the cost of
controls should not exceed the benefits derived. Management believes
Bancorporation's system of internal control provides an appropriate balance
and is adequate to accomplish the objectives discussed herein.
In order to monitor compliance with its system of internal controls,
Bancorporation maintains an internal audit program that assesses the
effectiveness of internal controls and recommends possible improvements
thereto. Management has considered the internal auditors' and
PricewaterhouseCoopers LLP's recommendations concerning Bancorporation's
system of internal control and has taken actions that are believed to respond
appropriately to these recommendations.
The Audit Committee of the Board of Directors meets regularly with
management, the internal auditors, and the independent accountants to review
audit scopes, audit reports, and fee arrangements. Both the internal auditors
and independent accountants have access to the Audit Committee without any
management present in the discussions. Independent accountants are recommended
by the Audit Committee for selection by the Board of Directors.
Management of Bancorporation is committed to a philosophy of high ethical
standards in the conduct of its business. Written policies covering conflicts
of interest, community affairs, and other subjects are formulated in a Code of
Conduct, which is uniformly applicable to all officers and employees of
Bancorporation.
26
<PAGE>
Report of Independent Accountants
[LOGO]
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC.
In our opinion, the accompanying consolidated statements of condition and
the related consolidated statements of income, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the
financial position of First Citizens Bancorporation of South Carolina, Inc.
and its subsidiaries ("Bancorporation") at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of Bancorporation's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
[SIGNATURE]
Columbia, South Carolina
January 25, 2000
27
<PAGE>
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands--except par value)
<TABLE>
<CAPTION>
December 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Cash and due from banks............................... $ 151,897 $ 115,795
Federal funds sold.................................... 37,400 64,000
Investment securities:
Held-to-maturity, at amortized cost (fair value of
$40,455 in 1999 and $594,469 in 1998)............... 40,666 591,286
Available-for-sale, at fair value.................... 522,326 32,542
---------- ----------
Total investment securities.......................... 562,992 623,828
---------- ----------
Gross loans........................................... 1,854,520 1,573,069
Less: Allowance for loan losses...................... (32,972) (28,306)
---------- ----------
Net loans............................................. 1,821,548 1,544,763
---------- ----------
Premises and equipment................................ 84,395 79,146
Interest receivable................................... 15,135 14,854
Intangible assets..................................... 19,256 17,167
Other assets.......................................... 33,962 24,215
---------- ----------
Total assets.......................................... $2,726,585 $2,483,768
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
</TABLE>
Liabilities
<TABLE>
<S> <C> <C>
Deposits:
Demand................................................. $ 396,781 $ 354,239
Time and savings....................................... 1,825,252 1,683,248
---------- ----------
Total deposits.......................................... 2,222,033 2,037,487
Securities sold under agreements to repurchase.......... 230,904 204,702
Long-term debt.......................................... 50,963 50,000
Other liabilities....................................... 22,612 17,404
---------- ----------
Total liabilities....................................... 2,526,512 2,309,593
---------- ----------
</TABLE>
Stockholders' Equity
<TABLE>
<S> <C> <C>
Preferred stock......................................... 3,282 3,282
Non-voting common stock--$5.00 par value, authorized
1,000,000; issued and outstanding in 1999 and 1998--
36,409................................................. 182 182
Voting common stock--$5.00 par value, authorized
2,000,000; issued and outstanding in 1999--906,205 and
1998--885,275.......................................... 4,531 4,426
Surplus................................................. 65,081 55,000
Undivided profits....................................... 123,328 102,888
Accumulated other comprehensive income, net of taxes.... 3,669 8,397
---------- ----------
Total stockholders' equity.............................. 200,073 174,175
---------- ----------
Commitments and contingencies (Note 15)
Total liabilities and stockholders' equity.............. $2,726,585 $2,483,768
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands--except per share data)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans........................ $140,120 $129,415 $118,427
Interest on investment securities:
Taxable.......................................... 30,918 31,583 28,575
Non-taxable...................................... 1,423 1,567 1,990
Interest-bearing deposits in financial
institutions..................................... -- 255 642
Federal funds sold................................ 2,953 2,551 1,503
-------- -------- --------
Total interest income.............................. 175,414 165,371 151,137
-------- -------- --------
Interest expense:
Interest on deposits.............................. 59,825 60,257 56,844
Interest on short-term borrowings................. 11,882 9,199 7,762
Interest on long-term debt........................ 4,149 3,576 868
-------- -------- --------
Total interest expense............................. 75,856 73,032 65,474
-------- -------- --------
Net interest income................................ 99,558 92,339 85,663
Provision for loan losses.......................... 5,546 4,303 4,241
-------- -------- --------
Net interest income after provision for loan
losses............................................ 94,012 88,036 81,422
-------- -------- --------
Noninterest income:
Service charges on deposits....................... 18,998 16,371 14,426
Commissions and fees from fiduciary activities.... 2,022 1,531 1,298
Fees for other customer services.................. 2,301 2,219 2,149
Mortgage servicing................................ 2,193 2,211 2,186
Bankcard discount and fees........................ 4,052 3,240 2,789
Insurance premiums earned......................... 1,815 1,879 1,474
Gain on sale of investment securities............. 8 36 51
Other............................................. 1,538 1,420 408
-------- -------- --------
Total noninterest income........................... 32,927 28,907 24,781
-------- -------- --------
Noninterest expense:
Salaries and employee benefits.................... 41,396 36,674 32,752
Net occupancy expense............................. 6,074 5,443 4,684
Furniture and equipment expense................... 6,884 5,594 4,580
Amortization of intangibles....................... 5,423 6,886 8,650
Bankcard processing fees.......................... 4,374 3,698 2,823
Data processing fees.............................. 7,084 6,540 5,690
Professional services............................. 2,263 1,650 941
Other............................................. 15,850 14,124 12,538
-------- -------- --------
Total noninterest expense.......................... 89,348 80,609 72,658
-------- -------- --------
Income before income taxes......................... 37,591 36,334 33,545
Income tax expense................................. 12,945 12,716 11,775
-------- -------- --------
Net income......................................... $ 24,646 $ 23,618 $ 21,770
======== ======== ========
Net income per common share--basic and diluted..... $ 26.35 $ 25.30 $ 23.24
======== ======== ========
Weighted average common shares outstanding--basic
and diluted....................................... 928,792 926,744 929,222
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Non- Accumulated
Voting Voting Other Total
Preferred Common Common Undivided Comprehensive Stockholders'
Stock Stock Stock Surplus Profits Income (Loss) Equity
--------- ------ ------ ------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... $3,282 $182 $4,464 $55,000 $ 60,688 $9,025 $132,641
Comprehensive income:
Net income.............. 21,770
Change in unrealized
gain on investment
securities available-
for-sale, net of taxes
of $2,250.............. 4,178
Total comprehensive
income................. 25,948
Preferred stock
dividends.............. (171) (171)
------ ---- ------ ------- -------- ------ --------
Balance at December 31,
1997................... 3,282 182 4,464 55,000 82,287 13,203 158,418
Comprehensive income:
Net income.............. 23,618
Change in unrealized
gain on investment
securities available-
for-sale, net of
benefit of $2,588...... (4,806)
Total comprehensive
income................. 18,812
Reacquired voting common
stock.................. (38) (2,846) (2,884)
Preferred stock
dividends.............. (171) (171)
------ ---- ------ ------- -------- ------ --------
Balance at December 31,
1998................... 3,282 182 4,426 55,000 102,888 8,397 174,175
Comprehensive income:
Net income.............. 24,646
Change in unrealized
gain on investment
securities available-
for-sale, net of
benefit of $2,542...... (4,728)
Total comprehensive
income................. 19,918
Stock issued in
acquisition............ 171 10,081 10,252
Reacquired voting common
stock.................. (66) (4,035) (4,101)
Preferred stock
dividends.............. (171) (171)
------ ---- ------ ------- -------- ------ --------
Balance at December 31,
1999................... $3,282 $182 $4,531 $65,081 $123,328 $3,669 $200,073
====== ==== ====== ======= ======== ====== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 24,646 $ 23,618 $ 21,770
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses.................... 5,546 4,303 4,241
Depreciation and amortization................ 13,159 12,853 13,289
Amortization (accretion) of investment
securities.................................. 662 241 (94)
Deferred income tax benefit.................. (2,435) (3,107) (1,706)
Gains on sales of premises and equipment..... (261) (19) --
Decrease (increase) in interest receivable... 649 (1,868) 36
Increase (decrease) in interest payable...... 1,606 (164) (69)
Origination of mortgage loans held-for-sale.. (141,118) (158,710) (74,178)
Proceeds from sales of mortgage loans held-
for-sale.................................... 149,860 151,082 79,142
Gains on sales of mortgage loans held-for-
sale........................................ (667) (448) (219)
Gain on call or sale of investment
securities.................................. (8) (36) (51)
(Increase) decrease in other assets.......... (4,247) 2,250 (3,195)
Increase in other liabilities................ 2,973 3,580 1,385
--------- --------- ---------
Net cash provided by operating activities..... 50,365 33,575 40,351
Cash flows from investing activities:
Net increase in loans........................ (228,276) (138,646) (153,256)
Calls, maturities and prepayments of
investment securities held-to-maturity...... 400,946 120,501 248,963
Purchases of investment securities held-to-
maturity.................................... (332,083) (155,496) (337,516)
Calls, maturities and prepayments of
investment securities available-for-sale.... 7,684 -- --
Purchases of securities available-for-sale... (1,060) (8,066) (7,863)
Net decrease in bank balances................ -- 7,700 3,600
Decrease (increase) in federal funds sold.... 29,900 (52,100) (11,900)
Proceeds from sales of premises and
equipment................................... 4,373 2,382 1,135
Purchases of premises and equipment.......... (15,685) (27,350) (14,011)
Decrease (increase) in other real estate
owned....................................... 327 170 (54)
Increase in intangible assets................ (1,098) (1,089) (663)
Purchase of institutions, net of cash
acquired.................................... 5,045 20,675 82,788
--------- --------- ---------
Net cash used in investing activities......... (129,927) (231,319) (188,777)
Cash flows from financing activities:
Net increase in deposits..................... 93,734 134,267 115,269
Increase in federal funds purchased and
securities sold under agreements to
repurchase.................................. 26,202 20,534 51,277
Net increase in short-term borrowing......... -- 2,000 --
Net increase in long-term borrowing.......... -- 50,000 6,983
Principal repayments on long-term borrowing.. -- (16,483) (2,500)
Cash dividends paid.......................... (171) (171) (171)
Cash paid to reacquire common stock.......... (4,101) (2,884) --
--------- --------- ---------
Net cash provided by financing activities..... 115,664 187,263 170,858
Net increase (decrease) in cash and due from
banks........................................ 36,102 (10,481) 22,432
Cash at beginning of year..................... 115,795 126,276 103,844
--------- --------- ---------
Cash at end of year........................... $ 151,897 $ 115,795 $ 126,276
========= ========= =========
Supplemental disclosures of cash flow
information:
Interest paid................................ $ 77,251 $ 72,868 $ 64,090
========= ========= =========
Income taxes paid............................ $ 17,316 $ 16,042 $ 13,599
========= ========= =========
</TABLE>
Supplemental disclosure of non-cash financing activities:
Additional stock and subordinated notes were issued for the stock of Exchange
for $10,252 and $963, respectively.
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE>
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
("Bancorporation")
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. ("Parent")
FIRST-CITIZENS BANK AND TRUST COMPANY OF SOUTH CAROLINA AND SUBSIDIARIES
("Bank")
THE EXCHANGE BANK OF SOUTH CAROLINA ("Exchange")
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Nature of Operations:
First Citizens Bancorporation of South Carolina, Inc. ("Bancorporation") is
a two-bank holding company whose principal subsidiaries are First-Citizens
Bank and Trust Company of South Carolina ("First Citizens" or the "Bank") and
The Exchange Bank of South Carolina ("Exchange"). First Citizens is chartered
under the laws of South Carolina to engage in general banking business.
Founded in 1964, First Citizens offers a complete array of services in
commercial banking through its 133 offices in 90 communities in South
Carolina. The Bank provides a full range of financial services including
accepting deposits, corporate cash management, discount brokerage, IRA plans,
trust services and secured and unsecured loans. Trust services provide estate
planning, estate and trust administration, IRA trust and personal investment
and pension and profit sharing administration. The Bank originates and
services mortgage loans and provides financing for small businesses.
Founded in 1932, Exchange is a community-oriented financial institution
which offers a variety of financial services through its four branches in
Williamsburg and Georgetown counties in South Carolina. Exchange provides many
traditional commercial and consumer banking services with its principal
activities in taking demand and time deposits and making secured and unsecured
loans.
The accounting and reporting policies of Bancorporation conform to generally
accepted accounting principles in all material respects.
Note 1--Summary of significant accounting policies (Dollars in thousands)
Principles of consolidation and basis of presentation:
The consolidated financial statements include the accounts of First Citizens
Bancorporation of South Carolina, Inc., its wholly-owned subsidiaries, First-
Citizens Bank and Trust Company of South Carolina (and its wholly-owned
subsidiary, Wateree Enterprises, Inc.), Exchange and FCB/SC Capital Trust I,
(collectively "Bancorporation"). On August 20, 1999, Bancorporation acquired
Exchange. The transaction was accounted for as a purchase. The consolidated
financial statements include the results of operations of Exchange from
August 20, 1999 to December 31, 1999. All significant intercompany accounts
and transactions have been eliminated.
Assets held by the Bank in trust or in other fiduciary capacities are not
assets of the Bank and are not included in the accompanying consolidated
financial statements. Certain amounts in prior years have been reclassified to
conform to the 1999 presentation.
Use of estimates:
In preparing the consolidated financial statements, management is required
to make estimates based on available information which can affect the reported
amounts of assets and liabilities as of the balance sheet date and revenues
and expenses for the related periods. Due to the inherent uncertainties
associated with any estimation process and due to possible future changes in
market and economic conditions, it is possible that actual future results
could differ from the amounts reflected in the consolidated financial
statements.
32
<PAGE>
Acquisitions:
Accounting Principles Board ("APB") Opinion 16 requires that business
combinations be accounted for either as a purchase or a pooling of interests.
Bancorporation accounts for its acquisitions using the purchase method of
accounting. The purchase method accounts for a business combination as the
acquisition of one company by another. When applying purchase accounting to
its acquisitions, Bancorporation records at its cost the acquired assets less
the liabilities assumed. The difference between the cost of the acquired
company and the sum of the fair values of the tangible and identifiable
intangible assets less liabilities assumed is recorded as goodwill. The
reported income of Bancorporation includes the operations of the acquired
company after acquisition.
Investment securities:
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", requires that debt and
equity securities with readily determinable market values be carried at fair
value unless they are intended to be held-to-maturity. Bancorporation defines
held-to-maturity securities as debt securities, which management has the
positive intent and ability to hold to maturity. Held-to-maturity securities
are stated at cost, adjusted for amortization of premiums and accretion of
discounts. Available-for-sale securities are defined as equity securities and
debt securities not classified as trading or held-to-maturity. Available-for-
sale securities are recorded at fair value with unrealized holding gains and
losses, net of deferred taxes reported as a separate component of
stockholders' equity as accumulated other comprehensive income. Bancorporation
determines the appropriate classification of debt securities at the time of
purchase. The cost of securities is based on the specific identification
method.
Loans and allowance for loan losses:
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," requires
loans to be measured for impairment when it is probable that all amounts,
including principal and interest, will not be collected in accordance with the
contractual terms of the loan agreement. It generally requires impairment to
be measured on the basis of discounted expected cash flows. It is
Bancorporation's policy to apply the provisions of SFAS No. 114 to all
nonaccrual loans on a loan by loan basis.
Loans are recorded at their principal amount outstanding. Interest is
accrued and recognized in operating income based upon the principal amount
outstanding. Loan origination fees and direct loan origination costs are
deferred and amortized over the estimated lives of the related loans as an
adjustment to yield.
In many lending transactions, collateral is obtained to provide an
additional measure of security. Generally, the cash flow and earning power of
the borrower represent the primary source of repayment and collateral is
considered as an additional safeguard on an acceptable risk. The need for
collateral is determined on a case-by-case basis after considering the current
and prospective credit-worthiness of the borrower, terms of the lending
transaction and economic conditions.
The accrual of interest is generally discontinued, except for installment
and credit card loans, when substantial doubt exists as to the collectibility
of principal and interest or when a loan is 90 days past due as to interest or
principal. Generally, accrual of income on installment and credit card loans
is discontinued and the loans are charged-off after a delinquency of 120 days
for unsecured loans and 180 days for secured loans and credit card loans.
Loans, or the portion thereof considered uncollectible, are charged to the
allowance for loan losses. The allowance for loan losses is maintained at a
level which is considered adequate to provide for losses inherent in the loan
portfolio based upon management's evaluation of known and inherent risk
characteristics, the fair value of underlying collateral, recent loan loss
experience, current economic conditions and other pertinent factors. A
provision for loan losses is charged to operations based on management's
periodic evaluation of these risks.
33
<PAGE>
Mortgage banking activities:
Mortgage loans held-for-sale are stated at the lower of aggregate cost or
market, net of discounts and deferred loan fees, and are included in net loans
in the Consolidated Statements of Condition. Nonrefundable deferred
origination fees and costs and discount points collected at loan closing, net
of commitment fees paid, are deferred and recognized at the time of sale of
the mortgage loans. Gain or loss on sales of mortgage loans is recognized
based upon the difference between the selling price and the carrying amount of
the mortgage loans sold. Other fees earned during the loan origination process
are also included in net gain or loss on sales of mortgage loans.
Mortgage servicing rights ("MSRs") are included in intangible assets in the
Consolidated Balance Sheets and are amortized based on a method which
approximates the proportion of current net servicing income to the total
estimated net servicing income expected to be recognized over the average
estimated remaining lives of the underlying loans. Capitalized MSRs are
assessed for impairment based on their fair values.
SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", requires an entity, after a transfer of
financial assets, to recognize the financial and servicing assets it controls
and the liabilities it has incurred, derecognize financial assets when control
has been surrendered, and derecognize liabilities when control has been
extinguished. The Statement provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. MSRs are recorded in accordance with SFAS. No. 125.
Premises and equipment:
Bank premises and equipment are reported at cost less accumulated
depreciation. Depreciation is included in noninterest expense over the
estimated useful lives of the assets (generally five to thirty-nine years for
buildings and improvements, and three to ten years for furniture and
equipment). Leasehold improvements are capitalized and amortized to
noninterest expense over the terms of the leases or the estimated useful lives
of the improvements, whichever is shorter. Depreciation and amortization are
calculated using straight-line and accelerated methods. Maintenance, repairs
and minor improvements are included in noninterest expense as incurred. Major
improvements are capitalized. Gains or losses upon retirement or other
dispositions are included in the results of operations.
Other real estate owned:
Other real estate owned consists of real property acquired through
foreclosure and is carried at the lower of (1) the recorded amount of the loan
for which the foreclosed property previously served as collateral, or (2) the
current fair value of the property, minus estimated selling costs. Subsequent
to foreclosure, gains or losses on the sales or the periodic revaluation of
other real estate owned are credited or charged to expense. Net costs of
maintaining and operating foreclosed properties are expensed as incurred.
Intangible assets:
Goodwill is recorded when Bancorporation consummates branch acquisitions,
based on the difference between the purchase price and the fair value of the
assets acquired and liabilities assumed. Goodwill is generally amortized over
a five to fifteen year life using the straight-line method of amortization.
Securities sold under agreements to repurchase:
Securities sold under agreements to repurchase represent overnight
borrowings with the Bank's customers and are secured by investment securities.
Income taxes:
Bancorporation recognizes deferred tax assets and liabilities for the
expected future tax consequences of the temporary differences between the
carrying amounts and tax basis of assets and liabilities. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be realized or settled.
34
<PAGE>
Statement of cash flows:
For purposes of the Consolidated Statements of Cash Flows, Bancorporation
has defined cash on hand and amounts due from banks as cash and cash
equivalents.
Earnings per share:
Earnings per share are computed by dividing net income less preferred
dividends by the weighted average number of voting and non-voting common
shares outstanding. Bancorporation adopted SFAS No. 128, "Earnings Per Share",
which establishes standards for computing and presenting earnings per share
("EPS") by replacing the presentation of primary EPS with a presentation of
basic EPS. As Bancorporation has no dilutive securities, there is no
difference between basic and diluted EPS.
Segment information:
During the year ended December 31, 1998, Bancorporation adopted SFAS No. 131
"Disclosure About Segments of an Enterprise and Related Information". SFAS No.
131 requires that public entities report certain information about operating
segments in their annual financial statements and in condensed financial
statements of interim periods issued to shareholders. It also requires that
public entities disclose information about products and services provided by
significant segments, geographic areas and major customers, differences
between the measurements used in reporting segment information and those used
in the entity's general-purpose financial statements, and changes in the
measurement of segment amounts from period to period.
Operating segments are components of an entity about which separate
financial information is available and is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and
performance. Bancorporation has determined that its one operating segment is
providing general commercial and retail financial services to customers
located in South Carolina. The various products are those generally offered by
community banks and the allocation of resources is based on the overall
performance of the institution, versus the individual branches or products.
There are no differences between the measurements used in reporting segment
information and those used in the Bancorporation's general-purpose financial
statements. The measurement of segment amounts did not change during 1999.
Note 2--Acquisitions (Dollars in thousands)
A branch location was acquired during 1999 from another South Carolina
financial institution. Bancorporation acquired deposits of $6,043, loans of
$1,120 and goodwill of $506 in connection with this acquisition. In 1998, two
branch locations were acquired from other financial institutions. Deposits of
$23,774, loans of $42 and goodwill of $2,519 were recorded by Bancorporation
in connection with the acquisitions.
On August 20, 1999, Bancorporation acquired The Exchange Bank of South
Carolina ("Exchange"), a banking corporation located in Kingstree, South
Carolina. The total cost of the acquisition, recorded as a purchase, was
$15,750. The breakdown of the purchase price is as follows:
<TABLE>
<S> <C>
Cash............................................................. $ 4,535
5 year Bancorporation notes @ 7.50%.............................. 90
10 year Bancorporation notes @ 7.75%............................. 873
Bancorporation stock--34,174 shares.............................. 10,252
-------
Total consideration............................................ $15,750
=======
</TABLE>
Goodwill associated with this acquisition of $6,096 will be amortized on a
straight-line basis over 15 years. There are no contingent payments, options
or commitments specified in the acquisition agreement.
35
<PAGE>
The following pro forma consolidated financial data gives effect to the
August 20, 1999 acquisition of Exchange Bank as if it had been consummated on
January 1, 1998.
<TABLE>
<CAPTION>
Unaudited
For the Year Ended
December 31,
-------------------
1999 1998
--------- ---------
<S> <C> <C>
Net interest income.................................... 101,346 96,367
Other income........................................... 33,462 29,451
Net income............................................. 25,311 24,444
Basic and diluted earnings per share................... 26.46 25.26
</TABLE>
Note 3--Cash and due from banks (Dollars in thousands)
The Bank is required to maintain reserve balances with the Federal Reserve,
or in vault cash. As of December 31, 1999, the average required reserve
balance was $35,825, compared to $32,471 as of December 31, 1998. Of this
amount, $32,507 and $30,016 was met by vault cash and $3,318 and $2,455 was
held with the Federal Reserve at December 31, 1999 and 1998, respectively. As
of December 31, 1999 and 1998 approximately $7,795 and $7,995, respectively,
in cash and due from bank balances was restricted in use as a compensating
balance with other financial institutions.
Note 4--Investment securities (Dollars in thousands)
The amortized cost and the estimated fair value of investment securities
held-to-maturity and available-for-sale and their respective contractual
maturities at December 31, 1999 and 1998 are presented below. Actual
maturities may differ from contractual maturities or maturities shown below
because borrowers have the right to prepay obligations with or without
prepayment penalties.
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Held-to-Maturity at December 31,
1999:
U. S. Government obligations:
Within 1 year...................... $ 1,750 $ 1 $-- $ 1,751
After 1 year, but within 5 years... 8,497 -- 186 8,311
After 5 years, but within 10
years............................. 500 -- 32 468
------- ---- ---- -------
Total............................ 10,747 1 218 10,530
State and political subdivisions:
Within 1 year...................... 2,513 6 -- 2,519
After 1 year, but within 5 years... 13,048 56 15 13,089
After 5 years, but within 10
years............................. 8,925 59 109 8,875
After 10 years..................... 5,022 1 -- 5,023
------- ---- ---- -------
Total............................ 29,508 122 124 29,506
Other securities:
Within 1 year...................... 120 1 -- 121
After 1 year, but within 5 years... 29 -- 5 24
After 5 years, but within 10
years............................. 50 -- 5 45
After 10 years..................... 212 17 -- 229
------- ---- ---- -------
Total............................ 411 18 10 419
------- ---- ---- -------
Total Held-to-Maturity at
December 31, 1999............... $40,666 $141 $352 $40,455
======= ==== ==== =======
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Available-for-Sale at December 31,
1999:
U. S. Government obligations:
Within 1 year...................... $267,388 $ 20 $1,563 $265,845
After 1 year, but within 5 years... 233,441 2 1,881 231,562
-------- ------- ------ --------
Total............................ 500,829 22 3,444 497,407
State and political subdivisions:
After 5 years, but within 10
years............................. 5 -- -- 5
Marketable equity securities....... $ 15,844 $11,532 $2,462 $ 24,914
-------- ------- ------ --------
Total Available-for-Sale At
December 31, 1999............... $516,678 $11,554 $5,906 $522,326
======== ======= ====== ========
Held-to-Maturity at December 31,
1998:
U. S. Government obligations:
Within 1 year...................... $298,688 $ 1,797 $ -- $300,485
After 1 year, but within 5 years... 267,404 1,093 38 268,459
-------- ------- ------ --------
Total............................ 566,092 2,890 38 568,944
State and political subdivisions:
Within 1 year...................... 1,793 6 1 1,798
After 1 year, but within 5 years... 10,173 79 -- 10,252
After 5 years, but within 10
years............................. 5,474 205 -- 5,679
After 10 years..................... 7,123 22 -- 7,145
-------- ------- ------ --------
Total............................ 24,563 312 1 24,874
Other securities:
Within 1 year...................... -- -- -- --
After 1 year, but within 5 years... 260 3 4 259
After 5 years, but within 10
years............................. 50 -- -- 50
After 10 years..................... 321 21 -- 342
-------- ------- ------ --------
Total............................ 631 24 4 651
-------- ------- ------ --------
Total Held-to-Maturity at
December 31, 1998............... $591,286 $ 3,226 $ 43 $594,469
======== ======= ====== ========
Available-for-Sale at December 31,
1998:
Marketable equity securities........ $ 19,624 $15,019 $2,101 $ 32,542
-------- ------- ------ --------
Total Available-for-Sale at
December 31, 1998............... $ 19,624 $15,019 $2,101 $ 32,542
======== ======= ====== ========
</TABLE>
Investment securities with an amortized cost of $481,765 and $406,221 at
December 31, 1999 and 1998, respectively, were pledged to secure public
deposits as collateral for securities sold under agreements to repurchase, and
for other purposes as required by law.
In 1999, Bancorporation transferred held-to-maturity securities with an
amortized cost of $568,944, to available-for-sale with an adjustment to
stockholders' equity of $1,854, net of tax effect of $998 in accordance with
SFAS No. 133.
Note 5--Loans (Dollars in thousands)
Gross loans are composed of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1999 1998
---------- ----------
<S> <C> <C>
Real estate--construction.......................... $ 49,254 $ 38,138
Real estate--mortgage.............................. 1,163,923 1,018,805
Installment loans to individuals................... 417,603 337,051
Commercial, financial and agricultural............. 223,740 179,075
---------- ----------
Total............................................ $1,854,520 $1,573,069
========== ==========
</TABLE>
37
<PAGE>
Note 6--Allowance for loan losses (Dollars in thousands)
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year.................. $28,306 $26,135 $23,483
Loans charged-off............................. (3,383) (3,869) (3,291)
Recoveries on loans previously charged-off.... 1,390 1,737 1,702
Provision for loan losses..................... 5,546 4,303 4,241
Addition related to acquisition............... 1,113 -- --
------- ------- -------
Balance at end of year........................ $32,972 $28,306 $26,135
======= ======= =======
</TABLE>
Impaired loans are loans for which it is probable that all amounts,
including principal and interest, will not be collected in accordance with the
contractual terms of the loan agreement. Loans that were considered impaired
under SFAS No. 114 at December 31, 1999 and 1998 held by Bancorporation, are
summarized below:
<TABLE>
<CAPTION>
December 31,
-------------
1999 1998
------ ------
<S> <C> <C>
Nonaccrual loans........................................... $3,017 $2,248
Other real estate owned.................................... 151 402
------ ------
Total nonperforming assets................................. $3,168 $2,650
====== ======
Loans past due 90 days or more............................. $2,330 $1,522
Average investment in impaired loans....................... $2,938 $3,001
</TABLE>
At December 31, 1999 and 1998, Bancorporation did not have any loans for
which terms had been modified in troubled debt restructurings. Interest
income, which would have been recorded pursuant to the original terms of
nonaccrual loans, was minimal.
Note 7--Premises and equipment (Dollars in thousands)
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Land.................................................. $ 24,987 $ 18,879
Buildings and improvements............................ 58,884 45,884
Furniture and equipment............................... 44,161 36,670
Leasehold improvements................................ 1,105 1,127
Construction in progress.............................. 8,453 20,773
-------- --------
Total............................................... 137,590 123,333
Less: Accumulated depreciation and amortization....... (53,195) (44,187)
-------- --------
Net premises and equipment.......................... $ 84,395 $ 79,146
======== ========
</TABLE>
Provisions for depreciation and amortization included in noninterest expense
were $7,736, $5,967 and $4,577 for the years ended December 31, 1999, 1998 and
1997, respectively.
38
<PAGE>
Bancorporation has entered into various noncancellable operating leases for
land and buildings used in its operations. The leases expire over the next 25
years, and most contain renewal options from 1 to 25 years. Certain leases
provide for periodic rate negotiation or escalation. The leases generally
provide for payment of property taxes, insurance and maintenance costs by
Bancorporation. Rental expense, including month-to-month leases, reported in
noninterest expense was $697, $654 and $528 for the years ended December 31,
1999, 1998 and 1997, respectively. There are no contingent rentals, and the
expense was offset by sublease rental income of $1,138, $1,050 and $850 for
the years ended December 31, 1999, 1998 and 1997, respectively.
At December 31, 1999, future minimum rental commitments under noncancellable
operating leases that have a remaining life in excess of one year are
summarized as follows:
<TABLE>
<S> <C>
2000.............................................................. $ 556
2001.............................................................. 439
2002.............................................................. 351
2003.............................................................. 251
2004.............................................................. 91
2005 and thereafter............................................... 58
------
Total minimum obligation........................................ $1,746
======
</TABLE>
Note 8--Intangible assets (Dollars in thousands)
Intangible assets are comprised of the following:
<TABLE>
<CAPTION>
Deposit- Mortgage
Based Servicing
Goodwill Premiums Rights Total
-------- -------- --------- -------
<S> <C> <C> <C> <C>
Balance at December 31, 1996....... $14,926 $2,277 $2,243 $19,446
------- ------ ------ -------
Additions......................... 9,068 -- 663 9,731
Amortizations..................... (6,181) (1,681) (788) (8,650)
------- ------ ------ -------
Balance at December 31, 1997....... $17,813 $ 596 $2,118 $20,527
------- ------ ------ -------
Additions......................... 2,514 -- 1,012 3,526
Amortization...................... (5,808) (596) (482) (6,886)
------- ------ ------ -------
Balance at December 31, 1998....... $14,519 $ -- $2,648 $17,167
------- ------ ------ -------
Additions......................... 6,720 -- 792 7,512
Amortization...................... (4,698) -- (725) (5,423)
------- ------ ------ -------
Balance at December 31, 1999....... $16,541 $ -- $2,715 $19,256
======= ====== ====== =======
</TABLE>
Note 9--Deposits (Dollars in thousands)
Deposits and related interest expense are summarized as follows:
<TABLE>
<CAPTION>
Deposits Interest Expense
December 31, Year Ended December 31,
--------------------- -----------------------
1999 1998 1999 1998 1997
---------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Demand........................... $ 396,781 $ 354,239 -- -- --
Savings:
NOW accounts.................... 581,026 551,122 $ 9,536 $ 8,871 $ 7,847
Market Rate accounts............ 303,178 302,145 10,076 9,981 9,234
Other........................... 14,114 15,855 372 467 443
Time:
Certificates of deposit of $100
thousand or greater............ 140,191 138,942 6,353 7,154 6,791
Other certificates of deposit... 786,743 675,184 33,488 33,784 32,529
---------- ---------- ------- ------- -------
Total.......................... $2,222,033 $2,037,487 $59,825 $60,257 $56,844
========== ========== ======= ======= =======
</TABLE>
39
<PAGE>
Note 10--Income taxes (Dollars in thousands)
The components of consolidated income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Taxes currently payable:
Federal............................................ $ 14,311 $14,685 $12,570
State.............................................. 1,069 1,138 911
-------- ------- -------
15,380 15,823 13,481
-------- ------- -------
Deferred income taxes:
Federal............................................ (2,435) (3,137) (1,835)
State.............................................. -- 30 129
-------- ------- -------
(2,435) (3,107) (1,706)
-------- ------- -------
Total income tax expense............................ $ 12,945 $12,716 $11,775
======== ======= =======
</TABLE>
The significant components of Bancorporation's deferred tax liabilities and
assets recorded pursuant to SFAS No. 109 and included in "Other Assets" in the
Consolidated Balance Sheets are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>
Deferred tax liabilities:
Tax depreciation over book.............................. $ -- $ -- $ 534
Deferred loan fees and costs............................ 929 700 568
Accretion............................................... 293 280 202
Pension costs........................................... 2,055 1,790 1,460
Mark-to-market of available-for-sale securities......... 1,870 4,521 7,109
Other, net.............................................. 200 70 48
------- ------- ------
Total deferred tax liabilities......................... 5,347 7,361 9,921
------- ------- ------
Deferred tax assets:
Book depreciation over tax.............................. 1,107 571 --
Allowance for loan losses............................... 11,380 9,907 9,124
Net operating loss carryforwards........................ 275 353 431
Employee benefits....................................... 921 348 195
Amortization............................................ 6,047 5,580 4,101
Other, net.............................................. 833 732 504
------- ------- ------
Total deferred tax assets............................... 20,563 17,491 14,355
------- ------- ------
Net deferred tax asset.................................. $15,216 $10,130 $4,434
======= ======= ======
</TABLE>
Bancorporation has no valuation allowance for deferred tax assets based on
management's belief that it is more likely than not that the deferred tax
assets will be realized. Total income tax expense differs from the amount of
income tax determined by applying the U. S. statutory federal income tax rate
of 35% to pretax income as a result of the following differences:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Tax expense at statutory rate....................... $13,157 $12,717 $11,741
Increase (decrease) in taxes resulting from:
Non-taxable interest on investments................ (894) (783) (819)
State income taxes, net of federal income tax
benefit........................................... 695 759 676
Other, net......................................... (13) 23 177
------- ------- -------
$12,945 $12,716 $11,775
======= ======= =======
</TABLE>
40
<PAGE>
Note 11--Mortgage servicing activity (Dollars in thousands)
Bancorporation's mortgage servicing portfolio approximated $663,682 and
$644,894 at December 31, 1999 and 1998, respectively. Loans serviced for
unrelated third parties are not included in the accompanying consolidated
financial statements.
Bancorporation has issued mortgage-backed securities guaranteed by GNMA
under the provisions of the National Housing Act. The issuance of these
securities, and the simultaneous placement of the related mortgages in trust,
have been accounted for as sales of the related mortgages. The outstanding
balances of the securities and the related mortgages held in trust of, $7,906
and $9,700 at December 31, 1999 and 1998, respectively, are not considered to
be assets or liabilities of the Bancorporation and, accordingly, are not
included in the consolidated financial statements.
Note 12--Long-term debt (Dollars in thousands, except par value)
Components of long-term debt as of December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Guaranteed Preferred Beneficial Interest in Bancorporation's
Junior Subordinated Deferrable Interest Debenture 8.25%,
due March 15, 2028......................................... $50,000 $50,000
Subordinated notes payable:
7.50% maturing August 20, 2004............................. 90 --
7.75% maturing August 20, 2009............................. 873 --
</TABLE>
A committed unsecured revolving line of credit was established in 1997 with
an unrelated financial institution which provides an interest rate indexed to
the London Interbank Offered Rate ("LIBOR") plus 70 basis points. This line of
credit contains certain restrictive covenants including limits on
indebtedness, encumbrances, dividends and minimum net worth. Bancorporation
was in compliance with the covenants at December 31, 1999. The line of credit
was not in use as of December 31, 1999 and 1998, respectively. The line of
credit expires on August 14, 2000.
FCB/SC Capital Trust I, a statutory business trust (the "Trust") created by
Bancorporation, had outstanding at December 31, 1999, $50,000 (par value
$50,000) of 8.25% Capital Securities which will mature on March 15, 2028 (the
"Capital Securities"). The principal assets of the Trust are $51,547 of
Bancorporation's 8.25% Junior Subordinated Deferrable Interest Debentures
which will mature on March 15, 2028. The balance of the securities can be
prepaid, subject to possible regulatory approval, in whole or part at any time
on or after March 15, 2008. Additionally, the Trust has issued $1,547 of
Common Securities to Bancorporation.
The Capital Securities and the Common Securities may be included in Tier 1
capital for regulatory capital adequacy purposes. The obligations of
Bancorporation with respect to the issuance of the Capital Securities and the
Common Securities constitute a full and unconditional guarantee by
Bancorporation of the Trust's obligations with respect to the Capital
Securities and Common Securities. Subject to certain exceptions and
limitations, Bancorporation may elect from time to time to defer subordinated
debenture interest payments, which would result in a deferral of distribution
payments on the related Capital Securities or Common Securities.
Note 13--Stockholders' equity (Dollars in thousands, except par value and per
share data)
Each share of voting common and preferred stock is entitled to one vote on
all matters on which stockholders vote. In certain cases, South Carolina law
provides for class voting of shares and for voting rights for non-voting
shares. Dividend rights of each series of preferred stock are cumulative, and
upon liquidation, each preferred stockholder is entitled to payment of par
value for each share owned before any distribution to holders of common stock.
41
<PAGE>
Each series of preferred stock may be redeemed by Bancorporation (all or any
part thereof), at its option, at par or stated value. Par value, number of
shares authorized and outstanding and dividends paid for each series of
redeemable preferred stock at December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Authorized Cash
Per and Dividend
Series Share Outstanding Amount Per Share
------ ----- ----------- ------ ---------
<S> <C> <C> <C> <C>
A $ 50 8,305 $ 415 $ 2.50
B 50 11,810 590 2.50
C 20 6,794 136 2.00
E 200 525 105 10.00
F 50 32,221 1,612 2.50
G 50 8,477 424 2.50
------
$3,282
======
</TABLE>
The Bank must obtain written approval from the South Carolina State Board of
Financial Institutions prior to payment of dividends. Bancorporation's
dividends may be restricted by the requirements of the term loan agreement
described in Note 12 which requires that the Bank maintain a regulatory
leverage capital ratio of 4.00%. At December 31, 1999, the Bank's leverage
capital ratio was 8.49%.
42
<PAGE>
Note 14--Employee benefits (Dollars in thousands)
The Bank has a noncontributory defined benefit pension plan ("the plan")
which covers substantially all of its employees. Retirement benefits under the
plan are based on an employee's length of service and highest average annual
compensation for five consecutive years during the last ten years of
employment. Contributions to the plan are based upon the projected unit credit
actuarial funding method and are limited to the amounts that are currently
deductible for tax reporting purposes.
The following table sets forth the plan's status:
<TABLE>
<CAPTION>
At and for the
Year Ended December 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year............... $ 30,298 $ 23,298
Service cost.......................................... 1,595 1,270
Interest cost......................................... 2,074 1,823
Actuarial (gain) loss................................. (4,982) 5,104
Acquisition........................................... 2,133 --
Benefits paid......................................... (893) (1,197)
----------- -----------
Benefit obligation at end of year..................... 30,225 30,298
Change in plan assets:
Fair value of plan assets at beginning of year........ 30,742 27,575
Actual return on plan assets.......................... 414 2,557
Employer contribution................................. 2,828 1,807
Acquisition........................................... 2,012 --
Benefits paid......................................... (893) (1,197)
----------- -----------
Fair value of plan assets at end of year.............. 35,103 30,742
----------- -----------
Funded status......................................... 4,878 444
Unrecognized prior service cost....................... 632 817
Unrecognized loss..................................... 361 2,949
----------- -----------
Net amount recognized................................. $ 5,871 $ 4,210
=========== ===========
Weighted-average assumptions as of December 31:
Discount rate......................................... 7.75% 6.75%
Expected return on plan assets........................ 8.50% 8.50%
Rate of compensation increase......................... 4.00% 5.00%
</TABLE>
The following table details the components of pension expense recognized in
Bancorporation's Consolidated Statements of Income:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Service costs........................................ 1,595 $ 1,270 $ 1,038
Interest costs....................................... 2,074 1,823 1,651
Expected return on plan assets....................... (2,808) (2,426) (3,873)
Amortization of prior service cost................... 185 201 201
Recognized net actuarial loss........................ -- -- 1,849
------- ------- -------
Net pension expense.................................. $ 1,046 $ 868 $ 866
======= ======= =======
</TABLE>
43
<PAGE>
The Bank has a contributory savings plan covering full-time employees who
elect to participate. The Bank matches 100% of the employees' contribution of
up to 3% of compensation and 50% of the employees' contribution of 4% to 6% of
compensation. The matching funds contributed by the Bank are 100% vested
immediately. Matching contributions provided by the Bank were $1,035 in 1999,
$904 in 1998, and $900 in 1997, and are included in salaries and employee
benefits expense in the Consolidated Statements of Income.
Exchange has a contributory savings plan covering full-time employees who
can elect to participate, after 31 days of employment. After the employee has
met 1,000 hours and one year of employment, Exchange matches 100% of the
employees' contribution of up to 3% of compensation and 50% of the employees'
contribution of 4% to 6% of compensation. The matching funds contributed by
Exchange are 100% vested immediately. Matching contributions provided by
Exchange since acquisition by Bancorporation were $19 in 1999, and are
included in salaries and employee benefits expense in the Consolidated
Statements of Income.
Effective January 1, 1998, Bancorporation approved a supplemental retirement
plan (the "Plan") for certain members of management. Benefits under the Plan
are based on a percentage of the participants' 1998 salary and will be paid
evenly over a ten-year period after retirement. The present value of the
payments at retirement was determined using a discount rate of 7%, and the
present value of the obligation at retirement totaled $3,044 at December 31,
1999.
According to the Plan, if a participant dies before retirement, death
benefits will be paid to the participant's estate for a ten-year period. In
the event of death following retirement, but before the ten-year period payout
is complete, the beneficiary will receive the remaining payments due at the
same monthly rate. If employment is terminated, Bancorporation has no
obligation under the Plan. Bancorporation has the right to terminate the plan
at any time.
Costs recognized under the Plan during the year ended December 31, 1999 and
December 31, 1998 totaled $300 and $410, respectively, and are included in
salaries and employee benefits in the Consolidated Statements of Income.
Note 15--Commitments, contingencies and financial instruments with off-balance
sheet risk (Dollars in thousands)
Bancorporation does not hold any derivative financial instruments. Financial
instruments with off-balance sheet risk include commitments to extend credit,
standby letters of credit and commitments on mortgage loans held-for-sale (See
Note 17). Generally, Bancorporation charges a fee to the customer to extend
these commitments as part of its normal banking activities. These fees are
initially deferred and included in loans in the Consolidated Statements of
Condition. Ultimately, such fees are recorded as an adjustment to yield over
the related life of the loan or, if the commitment expires unexercised,
recognized in income upon expiration of the commitment.
A summary of the significant financial instruments with off-balance sheet risk
is as follows:
<TABLE>
<CAPTION>
Contract Amount
at December 31,
-----------------
1999 1998
-------- --------
<S> <C> <C>
Commitments to extend credit........................... $417,853 $349,472
Letters of credit and financial guarantees............. 4,032 2,252
-------- --------
Total................................................. $421,885 $351,724
======== ========
</TABLE>
Commitments to extend credit are agreements to lend to a borrower as long as
there are no violations of any conditions established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire
44
<PAGE>
without being drawn upon, the total commitments do not necessarily represent
future cash requirements. Bancorporation evaluates each borrower's credit
worthiness on a case-by-case basis using the same credit policies used for on-
balance sheet financial instruments. The amount of collateral obtained, if
deemed necessary upon extension of credit, is based on management's credit
evaluation of the borrower. The type of collateral held varies, but may
include accounts receivable, inventory, property, plant and equipment, and
income producing property.
Letters of credit and financial guarantees are conditional commitments
issued by Bancorporation to guarantee the performance of a borrower to a third
party. The evaluations of credit worthiness, consideration of need for
collateral, and credit risk involved in issuing letters of credit are
essentially the same as that involved in extending loans to borrowers.
Most of Bancorporation's business activity is with customers located in
South Carolina. A significant economic downturn in South Carolina could have a
material adverse impact on the operations of Bancorporation. As of December
31, 1999, Bancorporation had no significant concentrations of credit risk in
the loan portfolio.
Bancorporation is a defendant in litigation arising out of normal banking
activities. In the opinion of management and Bancorporation's counsel, the
ultimate resolution of these matters will not have a material effect on
Bancorporation's financial condition or results of operations.
Note 16--Related party transactions (Dollars in thousands)
Bancorporation has, and expects to have in the future, transactions in the
ordinary course of business with its directors, officers, principal
stockholders and their associates on substantially the same terms (including
interest rates and collateral on loans) as those prevailing for comparable
transactions with others. However, subject to the completion of length of
service requirements and credit approval, all employees (except executive
officers) are eligible to receive reduced interest rates on extensions of
credit. The transactions do not involve more than the normal risk of
collectibility.
Aggregate balances and activity related to extensions of credit to officers,
directors and their associates were as follows:
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Balance at beginning of year................................. $ 5,787
New loans and additions...................................... 598
Payments and other deductions................................ (2,821)
-------
Balance at end of year....................................... $ 3,564
=======
</TABLE>
During 1996, Bancorporation renewed a contract with First-Citizens Bank &
Trust Company, Raleigh, North Carolina ("FCBNC") for the purpose of
outsourcing data processing and other services to include item processing,
deposits, loans, general ledger and statement rendering functions. Total
expenses incurred under this contract totaled $6,174, $5,775 and $4,959 for
the years ended December 31, 1999, 1998 and 1997, respectively. The current
contract expired December 31, 1999 and another contract will be negotiated in
early 2000. Bancorporation also has a correspondent banking relationship with
FCBNC, which also acts as investment custodian. Fees paid for this service
were minimal for 1999, 1998 and 1997.
Note 17--Disclosure of fair value of financial instruments (Dollars in
thousands)
SFAS No. 107, "Disclosure About Fair Value of Financial Instruments" extends
existing fair value disclosure practices for some instruments by requiring
entities to disclose the fair value of financial instruments, both assets and
liabilities, recognized and not recognized in the Statement of Condition.
45
<PAGE>
For Bancorporation, approximately 95% of its assets and liabilities are
considered financial instruments, as defined by SFAS No. 107. Many of
Bancorporation's financial instruments, however, lack an available trading
market as characterized by a willing buyer and willing seller engaging in an
exchange transaction. It is not the intent of Bancorporation to liquidate, and
therefore realize the difference between market value and carrying value, and
even if it were, there is no assurance that the estimated market values could
be realized. Therefore, significant estimates and present value calculations
were used by Bancorporation for the purpose of this disclosure. Such estimates
involve judgments as to economic conditions, risk characteristics, and future
expected loss experience of various financial instruments and other factors
that cannot be determined with precision. Thus, the information presented is
not particularly relevant to predicting Bancorporation's future earnings or
cash flow.
Following is a description of the methods and assumptions used to estimate
the fair value for each class of Bancorporation's financial instruments:
Cash and short-term investments:
The carrying value is a reasonable estimate of fair value.
Investment securities:
Fair value is based upon quoted market prices, if available. If a quoted
market price is not available, fair value is estimated using quoted market
prices for similar securities.
Loans:
For certain homogenous categories of loans such as residential mortgages,
fair value is estimated using the quoted market prices for securities backed
by similar loans, adjusted for differences in loan characteristics. The fair
value for other types of loans is estimated by discounting the expected future
cash flows using Bancorporation's current interest rates at which loans would
be made to borrowers with similar credit risk. The fair value of nonaccrual
loans was estimated by discounting expected future cash flows utilizing rates
of returns, adjusted for credit risk and servicing cost commensurate with a
portfolio of nonaccrual loans.
Deposits:
The fair value of demand deposits, savings accounts and certain money market
deposits is the amount payable on demand at the reporting date. The fair value
of fixed-maturity certificates of deposit is estimated using the rates
currently offered for deposits of similar remaining maturities.
Federal funds purchased and securities sold under agreements to repurchase:
The carrying value is a reasonable estimation of fair value.
Long-term debt:
Rates currently available to Bancorporation for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.
Commitments to extend credit and standby letters of credit:
The fair value of commitments and letters of credit is based on fees
currently charged for similar agreements or on the estimated cost to terminate
them with the counterparties at the reporting date.
SFAS No. 107 requires entities to disclose the fair value of off-balance-
sheet financial instruments for which it is practical to estimate fair value.
The fair values of commitments to extend credit and standby letters of credit
are generally based upon fees charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the counterparties'
credit standing. The estimated fair value of Bancorporation's off-balance
sheet commitments is nominal since the committed rates approximate current
rates offered for commitments with similar rate and maturity characteristics
and since the estimated credit risk associated with such commitments is not
significant.
46
<PAGE>
The carrying amounts and estimated fair values of Bancorporation's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
--------------------- ---------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and federal funds sold....... $ 189,297 $ 189,297 $ 179,795 $ 179,795
Investment securities............. 562,992 562,781 623,828 627,011
Loans............................. 1,854,520 1,844,690 1,573,069 1,704,482
Financial liabilities:
Deposits.......................... 2,222,033 2,220,560 2,037,487 2,078,293
Federal funds purchased and
securities sold under agreements
to repurchase.................... 230,904 230,499 204,702 204,702
Long-term debt.................... 50,963 50,323 50,000 73,210
</TABLE>
47
<PAGE>
Note 18--Capital matters (Dollars in thousands)
Bancorporation is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on Bancorporation's consolidated financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, Bancorporation must meet specific capital guidelines that involve
quantitative measures of Bancorporation's assets, liabilities and certain off-
balance sheet items as calculated under regulatory accounting practices.
Bancorporation's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require Bancorporation to maintain minimum amounts and ratios of Total and
Tier I capital to risk-weighted assets, and of Tier I capital to average
assets. Management believes, as of December 31, 1999, that Bancorporation
meets all capital adequacy requirements to which it is subject.
To be categorized as well-capitalized, Bancorporation must maintain minimum
Total risk-based and Tier I risk-based ratios as set forth in the table below.
There are no conditions or events subsequent to December 31, 1999 that
management believes have changed either Bancorporations', the Bank's or
Exchange's capital classification amounts.
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under Prompt
Corrective
For Capital Action
Actual Adequacy Purposes Provisions
-------------- ------------------- --------------
Amount Ratio Amount Ratio Amount Ratio
-------- ----- ---------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total capital to risk-
weighted assets:
Bancorporation........... $254,676 13.79% $ 147,450 8.00% $184,312 10.00%
Bank..................... 212,292 12.07 140,748 8.00 175,934 10.00
Exchange................. 10,330 16.64 4,967 8.00 6,209 10.00
Tier I capital to risk-
weighted assets:
Bancorporation........... 229,863 12.47 73,725 4.00 110,587 6.00
Bank..................... 190,178 10.81 70,374 4.00 105,561 6.00
Exchange................. 9,550 15.38 2,484 4.00 3,725 6.00
Tier I capital to average
assets:
Bancorporation........... 229,863 8.49 108,352 4.00 135,440 5.00
Bank..................... 190,178 7.33 103,766 4.00 129,707 5.00
Exchange................. 9,550 9.89 3,863 4.00 4,829 5.00
As of December 31, 1998:
Total capital to risk-
weighted assets:
Bancorporation........... $220,709 14.27% $ 123,769 8.00% $154,711 10.00%
Bank..................... 179,172 11.76 121,891 8.00 152,364 10.00
Tier I capital to risk-
weighted assets:
Bancorporation........... 201,259 13.01 61,884 4.00 92,826 6.00
Bank..................... 160,012 10.50 60,945 4.00 91,418 6.00
Tier I capital to average
assets:
Bancorporation........... 201,259 8.71 95,517 4.00 119,396 5.00
Bank..................... 160,012 7.00 94,340 4.00 117,925 5.00
</TABLE>
48
<PAGE>
Note 19--Bancorporation (Parent Company only) information (Dollars in
thousands)
Bancorporation's principal asset is its investment in its wholly-owned
subsidiaries, the Bank and Exchange, and its principal source of income is
dividends from the Bank. The approval of the South Carolina State Board of
Financial Institutions is required for any dividends declared by a state bank.
Bancorporation's condensed balance sheets and the related condensed
statements of income and of cash flows are presented below:
BALANCE SHEET DATA
<TABLE>
<CAPTION>
December 31,
-----------------
1999 1998
-------- --------
<S> <C> <C>
Assets:
Cash........................................................ $ 15,558 $ 21,747
Investment in the Bank...................................... 215,737 176,142
Other assets................................................ 25,827 33,567
-------- --------
Total assets................................................. $257,122 $231,456
======== ========
Liabilities and stockholders' equity:
Long term debt.............................................. $ 51,547 $ 51,547
Other liabilities........................................... 5,502 5,734
Stockholders' equity........................................ 200,073 174,175
-------- --------
Total liabilities and stockholders' equity................... $257,122 $231,456
======== ========
</TABLE>
INCOME STATEMENT DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Income:
Dividend income from the Bank...................... $ -- $ 2,594 $ 3,963
Other.............................................. 1,339 1,332 341
------- ------- -------
Total income........................................ 1,339 3,926 4,304
------- ------- -------
Expenses:
Interest........................................... 4,278 3,673 868
Other.............................................. 170 169 79
------- ------- -------
Total expense....................................... 4,448 3,842 947
------- ------- -------
(Loss) income before equity in undistributed
earnings subsidiaries and income taxes............ (3,109) 84 3,357
Equity in undistributed earnings of the
subsidiaries and associated companies............. 26,535 22,567 18,120
------- ------- -------
Income before income taxes.......................... 23,426 22,651 21,477
Applicable income tax benefit....................... (1,218) (967) (293)
------- ------- -------
Net income.......................................... $24,644 $23,618 $21,770
======= ======= =======
</TABLE>
49
<PAGE>
CASH FLOWS DATA
<TABLE>
<CAPTION>
For the Year Ended
December 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income...................................... $ 24,644 $ 23,618 $ 21,770
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of the Bank... (26,535) (22,567) (18,120)
Decrease (increase) in other assets............ 96 (846) (7,815)
Increase (decrease) in other liabilities....... 154 1,023 (261)
Other, net..................................... 8,133 -- --
-------- -------- --------
Net cash provided by (used in) operating
activities.................................... 6,492 1,228 (4,426)
Cash Flows From Investing Activities:
Purchases of held-to-maturity and available-for-
sale securities................................ -- (8,007) --
Sales and maturities held-to-maturity and
available-for-sale securities.................. 3,794 -- --
Payments for investments in and advances to
subsidiaries................................... (12,203) (6,547) --
-------- -------- --------
Net cash (used in) provided by Investing
Activities..................................... (8,409) (14,554) --
Cash Flows From Financing Activities:
Proceeds from advances from subsidiaries........ -- 51,547 --
Repayments of term loan......................... -- (14,483) (2,500)
Purchase of stock............................... (4,101) (2,883) --
Cash dividends paid............................. (171) (171) (171)
Net increase in long-term borrowing............. -- -- 6,983
-------- -------- --------
Net cash (used in) provided by financing
activities..................................... (4,272) 34,010 4,312
-------- -------- --------
Net (decrease) increase in cash.................. (6,189) 20,684 (114)
Cash at beginning of year........................ 21,747 1,063 1,177
-------- -------- --------
Cash at end of year.............................. $ 15,558 $ 21,747 $ 1,063
======== ======== ========
Supplemental disclosure of cash flow information:
Interest paid................................... $ 4,125 $ 2,510 $ 851
</TABLE>
Supplemental disclosure of non-cash financing activities:
Additional stock and subordinated notes were issued for the stock of Exchange
for $10,252 and $963, respectively.
50
<PAGE>
FIRST CITIZENS BANCORPORATION BOARD OF DIRECTORS
(Directors of First Citizens Bank are identical to those of First Citizens
Bancorporation)
Jim B. Apple* **
President and Chief Executive Officer
First Citizens Bancorporation of South Carolina, Inc.
First-Citizens Bank and Trust Company of South Carolina, Columbia
Richard W. Blackmon* **
Owner
Richard Blackmon Construction Company, Lancaster
Peter M. Bristow*
Executive Vice President and Chief Operating Officer
First Citizens Bancorporation of South Carolina, Inc.
First-Citizens Bank and Trust Company of South Carolina, Columbia
George H. Broadrick***
Retired, Charlotte, NC
Walter C. Cottingham, DVM
Cottingham Veterinary Hospital
Jack M. Edwards
President & Treasurer
Edwards Insurance Agency, Inc.
William E. Hancock, III
President
Hancock Buick Company, Columbia
Robert B. Haynes
Vice President and Secretary
C. W. Haynes and Company, Inc., Columbia
Wycliffe E. Haynes
Vice President and Treasurer
C. W. Haynes and Company, Inc., Columbia
Lewis M. Henderson***
Henderson and Associates, Columbia
Carmen P. Holding
Raleigh, NC
Frank B. Holding* **
Vice Chairman
First Citizens Bancorporation of South Carolina, Inc.
First-Citizens Bank and Trust Company of South Carolina
Executive Vice Chairman
First Citizens BancShares, Inc.
First Citizens Bank and Trust Company, Smithfield, NC
Dan H. Jordan
Farmer, Nichols
E. Hite Miller, Sr.* **
Chairman
First Citizens Bancorporation of South Carolina, Inc.
First-Citizens Bank and Trust Company of South Carolina, Columbia
N. Welch Morrisette, Jr.
Retired, Columbia
E. Perry Palmer
President
E. P. Palmer Corporation
Palmer Memorial Chapel, Columbia
William E. Sellars*
President
C. W. Haynes and Company, Inc., Columbia
Henry F. Sherrill*
Attorney-at-Law, Columbia
* Member of the Executive Committee, First Citizens Bancorporation and First
Citizens Bank
** Member of the Investment Committee, First Citizens Bank
*** Member of the Audit Committee, First Citizens Bancorporation and First
Citizens Bank
FIRST CITIZENS BANCORPORATION EXECUTIVE OFFICERS
E. Hite Miller, Sr.
Chairman
Frank B. Holding
Vice Chairman
Jim B. Apple
President/Chief Executive Officer
Peter M. Bristow
Executive Vice President/Chief Operating Officer
Jay C. Case
Executive Vice President/Chief Financial Officer
Craig L. Nix
Senior Vice President/Treasurer
E. W. Wells
Secretary
<PAGE>
EXHIBIT 21
Subsidiaries of the Registrant
Name State of Incorporation
- ---- ----------------------
First-Citizens Bank and Trust Company of South Carolina South Carolina
Exchange Bank of South Carolina, Inc. South Carolina
FCB/SC Capital Trust I Delaware
Subsidiaries of First-Citizens Bank & Trust of South Carolina
Name State of Incorporation
- ---- ----------------------
First Citizens Mortgage Corporation (Inactive) South Carolina
Wateree Enterprises, Inc. South Carolina
Congaree Investor Services South Carolina
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000708848
<NAME> FIRST CITIZENS BANCORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 151,897
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 37,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 519,573
<INVESTMENTS-CARRYING> 43,419
<INVESTMENTS-MARKET> 28,428
<LOANS> 1,854,520
<ALLOWANCE> (32,972)
<TOTAL-ASSETS> 2,726,585
<DEPOSITS> 2,222,033
<SHORT-TERM> 230,904
<LIABILITIES-OTHER> 22,612
<LONG-TERM> 50,963
3,282
4,713
<COMMON> 0
<OTHER-SE> 192,078
<TOTAL-LIABILITIES-AND-EQUITY> 2,726,585
<INTEREST-LOAN> 140,120
<INTEREST-INVEST> 32,341
<INTEREST-OTHER> 2,953
<INTEREST-TOTAL> 175,414
<INTEREST-DEPOSIT> 59,825
<INTEREST-EXPENSE> 75,856
<INTEREST-INCOME-NET> 99,558
<LOAN-LOSSES> 5,546
<SECURITIES-GAINS> 8
<EXPENSE-OTHER> 89,348
<INCOME-PRETAX> 37,591
<INCOME-PRE-EXTRAORDINARY> 37,591
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,646
<EPS-BASIC> 26.35
<EPS-DILUTED> 26.35
<YIELD-ACTUAL> 7.41
<LOANS-NON> 3,017
<LOANS-PAST> 2,330
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 24,477
<ALLOWANCE-OPEN> 28,306
<CHARGE-OFFS> 3,383
<RECOVERIES> 1,390
<ALLOWANCE-CLOSE> 32,972
<ALLOWANCE-DOMESTIC> 32,972
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,816
</TABLE>
