FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2000 Commission File Number 0-11172
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
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
---------------
NO CHANGE
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 2000
----- --------------------------------
VOTING COMMON STOCK, $5.00 PAR VALUE 899,731 SHARES
NON-VOTING COMMON STOCK, $5.00 PAR VALUE 36,409 SHARES
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED (DOLLARS IN THOUSANDS, EXCEPT PAR VALUES)
JUNE 30, December 31, June 30,
2000 1999 1999
----------- -------------- -----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 130,712 $ 151,897 $ 116,823
Federal funds sold 36,000 37,400 1,700
----------- -------------- -----------
Total cash and cash equivalents 166,712 189,297 118,523
----------- -------------- -----------
Investment securities:
Held-to-maturity, at amortized cost 30,317 40,666 23,299
Available-for-sale, at fair value 638,208 522,326 645,301
----------- -------------- -----------
Total investment securities 668,525 562,992 668,600
----------- -------------- -----------
Gross loans 1,991,812 1,854,520 1,669,124
Less: Allowance for loan losses (35,437) (32,972) (30,037)
----------- -------------- -----------
Net loans 1,956,375 1,821,548 1,639,087
----------- -------------- -----------
Premises and equipment 86,222 84,395 81,122
Interest receivable 18,426 15,135 14,863
Intangible assets 24,502 19,256 15,100
Other assets 34,788 33,962 24,772
----------- -------------- -----------
TOTAL ASSETS $2,955,550 $ 2,726,585 $2,562,067
=========== ============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 435,789 $ 396,781 $ 376,823
Time and savings 1,902,393 1,825,252 1,691,623
----------- -------------- -----------
Total deposits 2,338,182 2,222,033 2,068,446
Securities sold under agreements to repurchase and federal
funds purchased 326,506 230,904 243,518
Long-term debt 50,963 50,963 50,000
Other liabilities 29,400 22,612 16,672
----------- -------------- -----------
TOTAL LIABILITIES 2,745,051 2,526,512 2,378,636
----------- -------------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock 3,234 3,282 3,282
Non-voting common stock - $5.00 par value, authorized
1,000,000; issued and outstanding June 30, 2000,
December 31, 1999 and June 30, 1999 - 36,409 182 182 182
Voting common stock - $5.00 par value, authorized 2,000,000;
issued and outstanding June 30, 2000 - 899,830;
December 31, 1999 - 906,205; and June 30, 1999 - 882,766 4,499 4,531 4,414
Surplus 65,081 65,081 55,000
Undivided profits 134,944 123,328 113,402
Accumulated other comprehensive income, net of taxes 2,559 3,669 7,151
----------- -------------- -----------
TOTAL STOCKHOLDERS' EQUITY 210,499 200,073 183,431
----------- -------------- -----------
COMMITMENTS AND CONTINGENCIES -- -- --
----------- -------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,955,550 $ 2,726,585 $2,562,067
=========== ============== ===========
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(DOLLARS IN THOUSANDS-EXCEPT PER SHARE DATA)
FOR THE FOR THE
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 42,008 $ 33,821 $ 80,889 $ 66,447
Interest on investment securites:
Taxable 9,681 8,047 17,865 15,804
Non-taxable 366 324 756 666
Federal funds sold 177 625 1,087 1,784
-------- -------- -------- --------
Total interest income 52,232 42,817 100,597 84,701
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits 18,268 14,333 35,282 28,853
Securities sold under agreements to repurchase
and federal funds purchased 4,784 2,826 8,911 5,703
Long-term debt 1,074 1,031 2,124 2,062
-------- -------- -------- --------
Total interest expense 24,126 18,190 46,317 36,618
-------- -------- -------- --------
Net interest income 28,106 24,627 54,280 48,083
Provision for loan losses 1,994 1,817 3,553 2,480
-------- -------- -------- --------
Net interest income after
provision for loan losses 26,112 22,810 50,727 45,603
-------- -------- -------- --------
NONINTEREST INCOME:
Service charges on deposit accounts 5,505 4,624 10,585 8,724
Commissions and fees from fiduciary activities 650 388 1,260 783
Fees for other customer services 653 542 1,264 1,159
Mortgage servicing fees 560 542 1,109 1,091
Bankcard 1,184 1,016 2,188 1,830
Insurance premiums 652 494 1,010 896
Other 258 323 472 955
-------- -------- -------- --------
Total noninterest income 9,462 7,929 17,888 15,438
-------- -------- -------- --------
NONINTEREST EXPENSE:
Salaries and employee benefits 11,596 9,970 22,887 20,356
Net occupancy expense 1,618 1,508 3,289 3,082
Furniture and equipment expense 1,522 1,560 3,138 3,025
Amortization of intangibles 1,789 1,403 3,167 2,814
Bankcard processing expense 1,269 1,116 2,330 2,049
Data processing expense 2,019 1,653 3,892 3,375
Professional services 465 580 959 1,067
Other 4,437 3,672 8,384 7,607
-------- -------- -------- --------
Total noninterest expense 24,715 21,462 48,046 43,375
-------- -------- -------- --------
Income before income tax expense 10,859 9,277 20,569 17,666
Income tax expense 3,746 3,214 7,096 6,138
-------- -------- -------- --------
NET INCOME $ 7,113 $ 6,063 $ 13,473 $ 11,528
======== ======== ======== ========
NET INCOME PER COMMON SHARE -
BASIC AND DILUTED $ 7.54 $ 6.55 $ 14.27 $ 12.44
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING-BASIC AND DILUTED 936,877 919,175 937,865 919,520
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND ACCUMULATED COMPREHENSIVE INCOME - UNAUDITED
(DOLLARS IN THOUSANDS)
Non- Accumulated Total
Voting Voting Other Stock-
Preferred Common Common Undivided Comprehensive holders'
Stock Stock Stock Surplus Profits Income/(Loss) Equity
----------- ------- -------- -------- ----------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $ 3,282 $ 182 $ 4,426 $ 55,000 $ 102,888 $ 8,397 $ 174,175
Comprehensive income:
Net income 11,528 11,528
Change in unrealized losses
on investment securities
available-for-sale, net of
benefit of $671 (1,246) (1,246)
----------
Total comprehensive income 10,282
----------
Reacquired voting common stock (12) (930) (942)
Preferred stock dividends (84) (84)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at June 30, 1999 3,282 182 4,414 55,000 113,402 7,151 183,431
Comprehensive income:
Net income 13,118 13,118
Change in unrealized losses
on investment securities
available-for-sale, net of
benefit of $1,871 (3,482) (3,482)
----------
Total comprehensive income 9,636
----------
Reacquired voting common stock (54) (3,105) (3,159)
Stock issued in acquisition 171 10,081 10,252
Preferred stock dividends (87) (87)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at December 31, 1999 3,282 182 4,531 65,081 123,328 3,669 200,073
Comprehensive income:
Net income 13,473 13,473
Change in unrealized losses
on investment securities
available-for-sale, net of
benefit of $1,218 (1,110) (1,110)
----------
Total comprehensive income 12,363
----------
Reacquired preferred stock (48) 10 (38)
Reacquired voting common stock (32) (1,557) (1,589)
Common stock dividends (225) (225)
Preferred stock dividends (85) (85)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at June 30, 2000 $ 3,234 $ 182 $ 4,499 $ 65,081 $ 134,944 $ 2,559 $ 210,499
=========== ======= ======== ======== =========== =============== ==========
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (DOLLARS IN THOUSANDS)
For the
Six Months Ended
June 30,
----------------------
2000 1999
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 13,473 $ 11,528
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 3,553 2,480
Depreciation and amortization 7,105 6,114
(Accretion) amortization of investment securities (1,022) 313
Change in deferred taxes 820 (14,755)
Gain on sales of premises and equipment 0 (173)
Increase in accrued interest receivable (3,291) (9)
Increase/(decrease) in accrued interest payable 3,117 (535)
Origination of mortgage loans held-for-resale (49,841) (81,245)
Proceeds from sales of mortgage loans held-for-resale 51,532 86,254
Gain on sales of mortgage loans held-for-resale (164) (421)
(Increase)/decrease in other assets (1,039) 14,636
Increase/(decrease) in other liabilities 3,660 (197)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 27,903 23,990
========== ==========
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (106,485) (101,392)
Calls, maturities and prepayments of investment securities, available-for-sale 155,451 153,306
Purchases of investment securities, available-for-sale (273,040) (201,890)
Calls, maturities and prepayments of investment securities, held-to-maturity 11,601 2,642
Purchases of investment securities, held-to-maturity (205) (1,060)
Proceeds from sales of premises and equipment 0 3,068
Purchases of premises and equipment (4,234) (8,420)
(Increase)/decrease in other real estate owned (3) 269
Increase in intangible assets (498) (534)
Purchase of institutions, net of cash acquired 24,416 0
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (192,997) (154,011)
========== ==========
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 48,843 30,959
Increase in federal funds purchased and securities sold
under agreements to repurchase 95,603 38,816
Cash dividends paid (310) (84)
Cash paid to reacquire preferred stock (38) (942)
Cash paid to reacquire common stock (1,589) 0
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 142,509 68,749
========== ==========
NET DECREASE IN CASH AND CASH EQUIVALENTS (22,585) (61,272)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 189,297 179,795
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 166,712 $ 118,523
========== ==========
</TABLE>
Page 5
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies of First Citizens
Bancorporation of South Carolina, Inc. ("Bancorporation") is set forth in Note 1
to the Consolidated Financial Statements in Bancorporation's 1999 Annual Report
on Form 10-K. The significant accounting policies used during the current
quarter are unchanged from those disclosed in the 1999 Annual Report.
BASIS OF PRESENTATION
The preceding consolidated financial statements and the notes thereto are
unaudited; however, in the opinion of management, all adjustments comprising
normal recurring accruals necessary for a fair presentation of the consolidated
financial statements have been recorded. Certain amounts in prior periods have
been reclassified to conform to the 2000 presentation.
ACQUISITIONS (DOLLARS IN THOUSANDS)
On March 10, 2000, three branch locations were acquired from another South
Carolina financial institution. First Citizens Bank and Trust of South
Carolina, Inc. acquired deposits of $67,983, loans of $32,632, and goodwill of
$7,933 in connection with this acquisition. Goodwill amortization related to
this acquisition for the quarter and six months ended June 30, 2000 was $401.
On August 20, 1999, Bancorporation acquired The Exchange Bank of South Carolina,
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:
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
=======
Goodwill amortization related to this acquisition for the quarter and six months
ended June 30, 2000, was $56 and 109, respectively.
SUBSEQUENT EVENTS
During the month of July 2000, Bancorporation sold approximately $35 million of
mortgage loans to a third party investor. The effect on the consolidated
statements of income was not significant.
On July 26, 2000, Bancorporation's Board of Directors declared a $.25 dividend
on common stock to shareholders of record on August 4, 2000, payable on August
15, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
SUMMARY (DOLLARS IN THOUSANDS)
Net income for the quarter and six months ended June 30, 2000 totaled $7,113, or
$7.54 per common share and $13,473, or $14.27 per common share, respectively.
Net income for the quarter and six months ended June 30, 1999 totaled $6,063, or
$6.55 per common share and $11,528, or $12.44 per common share, respectively.
The primary factors affecting the increase in net income for the quarter ended
June 30, 2000 were a $3,302 or 14.48% increase in net interest income after
provision for loan losses, and a $1,533 or 19.33% increase in noninterest
income. These favorable changes were partially offset by a $3,253 or 15.16%
increase in noninterest expense, and a $532 or 16.55% increase in income tax
expense.
The primary factors affecting the increase in net income for the six months
ended June 30, 2000 were a $5,124 or 11.24% increase in net interest income
after provision for loan losses, and a $2,450 or 15.87% increase in noninterest
income. These favorable changes were partially offset by a $4,671 or 10.77%
increase in noninterest expense, and a $958 or 15.61% increase in income tax
expense.
Page 6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
--------------------------------------------------------------------------------
Return on average stockholders' equity and average assets are key measures of
earnings performance. Return on average stockholders' equity for the quarter
ended June 30, 2000 and June 30, 1999 was 13.83% and 13.36%, respectively. The
increase was primarily the result of an increase in return on assets from .95%
to .97% for the quarter ended June 30, 1999 and June 30, 2000, respectively.
Additionally, the equity multiplier (average assets to average shareholders'
equity) increased from 14.09X to 14.25X at June 30, 1999 and June 30, 2000,
respectively. The increase in return on assets for the comparable quarter was
primarily due to an increase in noninterest income to average assets of 5 basis
points. Net interest margin and noninterest expense remained relatively flat
when compared to the increase in average assets.
Return on average stockholders' equity for the six months ended June 30, 2000
and June 30, 1999 was 13.17% and 12.86%, respectively. The increase was
primarily the result of an increase in return on assets from .91% to .94% for
the six months ended June 30, 1999 and June 30, 2000, respectively. The
increase in return on assets was partially offset by a decline in the equity
multiplier from 14.16X to 14.05X at June 30, 1999 and June 30, 2000,
respectively. The increase in return on assets was primarily due to a decrease
in noninterest expense to average assets of 8 basis points. Additionally, there
was an increase in noninterest income to average assets of 2 basis points.
Net interest income is discussed further in the following section.
Table 1 provides summary information on selected average balances and ratios.
<TABLE>
<CAPTION>
TABLE 1: SELECTED SUMMARY INFORMATION (DOLLARS IN THOUSANDS)
AS OF AND FOR THE AS OF AND FOR THE
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ -----------------------
AVERAGE BALANCES: 2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total assets $2,932,162 $2,558,365 $2,874,626 $2,538,408
Interest-earning assets 2,687,618 2,345,993 2,631,681 2,325,306
Investment securities 714,417 659,622 678,052 642,957
Loans 1,961,470 1,631,430 1,915,015 1,605,460
Deposits 2,316,614 2,056,125 2,276,482 2,036,218
Noninterest-bearing deposits 424,228 366,321 411,777 359,215
Interest-bearing deposits 1,892,386 1,689,804 1,864,705 1,677,003
Interest-bearing liabilities 2,276,842 1,996,108 2,233,996 1,984,568
Stockholders' equity 205,790 181,581 204,662 179,293
RATIOS:
Return on average assets .97% .95% .94% .91%
Return on average stockholders' equity 13.83% 13.36% 13.17% 12.86%
Return on average common stockholders' equity
14.05% 13.60% 13.38% 13.10%
Net yield on average interest-earning assets (tax equivalent)
4.24% 4.25% 4.18% 4.19%
Average loans to average deposits 84.67% 79.34% 84.12% 78.85%
Nonperforming assets to total loans .18% .16% .19% .16%
Allowance for loan losses to total loans 1.78% 1.80% 1.78% 1.80%
Allowance for loan losses to nonperforming assets N/A N/A 9.49x 11.71x
Average stockholders' equity to average total assets 7.02% 7.10% 7.12% 7.06%
Total risk-based capital ratio N/A N/A 13.63% 14.48%
Tier I risk-based capital ratio N/A N/A 12.37% 13.06%
Tier I leverage ratio N/A N/A 8.05% 8.41%
</TABLE>
NET INTEREST INCOME (DOLLARS IN THOUSANDS)
Net interest income represents the principal source of earnings for
Bancorporation. Tables 2 and 3 compare average balance sheet items and analyzes
net interest income on a tax equivalent basis for the quarters and six months
ended June 30, 2000 and 1999.
Page 7
<PAGE>
<TABLE>
<CAPTION>
TABLE 2: COMPARATIVE AVERAGE BALANCE SHEETS AND TAXABLE EQUIVALENT RATE/VOLUME VARIANCE (DOLLARS IN THOUSANDS)
AS OF AND FOR THE QUARTER ENDED JUNE 30,
----------------------------------------
Yield Change Due to(2)
Average Balance Interest Inc/Exp(1) /Rate ---------------- Net
---------------------- ------------------- ------------ Yield Increase
2000 1999 2000 1999 2000 1999 /Rate Volume (Decrease)
---------- ---------- -------- --------- ------ ---- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans (3) $1,961,470 $1,631,430 $ 42,172 $ 33,958 8.65 8.35 $ 1,077 $ 7,137 $ 8,214
Investment securities:
Taxable 687,028 636,586 9,636 8,047 5.64 5.07 878 711 1,589
Non-taxable 27,389 23,036 561 498 8.19 8.65 (26) 89 63
Federal funds sold 11,731 54,941 177 625 6.07 4.56 208 (656) (448)
---------- ---------- -------- --------- ------- -------- -----------
Total interest-earning assets 2,687,618 2,345,993 52,546 43,128 7.86 7.37 2,137 7,281 9,418
---------- ---------- -------- --------- ------- -------- -----------
NONINTEREST-EARNING ASSETS:
Cash and due from banks 114,363 106,208
Premises and equipment 86,510 81,252
Other, less allowance for loan
losses 43,671 24,912
---------- ----------
Total noninterest-earning assets
244,544 212,372
---------- ----------
TOTAL ASSETS $2,932,162 $2,558,365
---------- ----------
INTEREST-BEARING LIABILITIES:
Deposits $1,892,386 $1,689,804 $ 18,268 $ 14,333 3.88 3.40 $ 1,970 $ 1,965 $ 3,935
Federal funds purchased and
securities sold under
agreements to repurchase 333,493 256,304 4,739 2,826 5.72 4.42 809 1,104 1,913
Long-term debt 50,963 50,000 1,074 1,031 8.43 8.25 23 20 43
---------- ---------- -------- --------- ------- -------- -----------
Total interest-bearing
liabilities 2,276,842 1,996,108 24,081 18,190 4.25 3.65 2,802 3,089 5,891
---------- ---------- -------- --------- ------- -------- -----------
NONINTEREST-BEARING
LIABILITIES:
Demand deposits 424,228 366,321
Other liabilities 25,302 14,355
Total noninterest-bearing
liabilities 449,530 380,676
Stockholders' equity 205,790 181,581
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,932,162 $2,558,365
========== ==========
Interest rate spread 3.61 3.72
==== ====
Net interest margin: $ 28,465 $ 24,938 ($665) $ 4,192 $ 3,527
======== ========= ======= ======== ===========
to average assets 3.88 3.90
==== ====
to average interest-earning
assets 4.24 4.25
==== ====
<FN>
(1) Non-taxable interest income has been adjusted to a taxable equivalent rate, using the federal income tax rate of 35%.
(2) Yield/rate-volume changes have been allocated to each category based on the percentage of each to the total change.
(3) Nonaccrual loans are included in the average loan balances. Interest income on nonaccrual loans is generally
recognized on a cash basis.
</TABLE>
Page 8
<PAGE>
<TABLE>
<CAPTION>
TABLE 3: COMPARATIVE AVERAGE BALANCE SHEETS AND TAXABLE EQUIVALENT RATE/VOLUME VARIANCE (DOLLARS IN THOUSANDS)
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
-------------------------------------------
Yield Change Due to(2)
Average Balance Interest Inc/Exp(1) /Rate ---------------- Net
---------------------- ------------------- ------------ Yield Increase
2000 1999 2000 1999 2000 1999 /Rate Volume (Decrease)
----------- ---------- -------- --------- ------ ---- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans (3) $1,915,015 $1,605,460 $ 81,234 $ 66,731 8.53 8.38 $ 1,300 $ 13,203 $ 14,503
Investment securities:
Taxable 649,790 619,304 17,865 15,804 5.53 5.15 1,218 843 2,061
Non-taxable 28,262 23,653 1,162 1,024 8.22 8.66 (51) 189 138
Federal funds sold 38,614 76,889 1,087 1,784 5.66 4.68 386 (1,083) (697)
---------- ---------- -------- --------- ------- -------- -----------
Total interest-earning assets 2,631,681 2,325,306 101,348 85,343 7.74 7.40 2,853 13,152 16,005
---------- ---------- -------- --------- ------- -------- -----------
NONINTEREST-EARNING ASSETS:
Cash and due from banks 115,593 106,812
Premises and equipment 85,822 80,763
Other, less allowance for loan
losses 41,530 25,527
---------- ----------
Total noninterest-earning assets 242,945 213,102
---------- ----------
TOTAL ASSETS $2,874,626 $2,538,408
---------- ----------
INTEREST-BEARING LIABILITIES:
Deposits $1,864,705 $1,677,003 $ 35,282 $ 28,853 3.80 3.47 $ 2,863 $ 3,566 $ 6,429
Federal funds purchased and
securities sold under
agreements to repurchase 318,328 257,565 8,911 5,703 5.63 4.47 1,498 1,710 3,208
Long-term debt 50,963 50,000 2,124 2,062 8.34 8.25 22 40 62
---------- ---------- -------- --------- ------- -------- -----------
Total interest-bearing
Liabilities 2,233,996 1,984,568 46,317 36,618 4.17 3.72 4,383 5,316 9,699
---------- ---------- -------- --------- ------- -------- -----------
NONINTEREST-BEARING LIABILITIES:
Demand deposits 411,777 359,215
Other liabilities 24,191 15,332
Total noninterest-bearing
liabilities 435,968 374,547
Stockholders' equity 204,662 179,293
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,874,626 $2,538,408
========== ==========
Interest rate spread 3.57 3.68
====== ====
Net interest margin: $ 55,031 $ 48,725 ($1,530) $ 7,836 $ 6,306
========= ========= ======= ======== ===========
to average assets 3.83 3.84
====== ====
to average interest-earning
assets 4.18 4.19
====== ====
<FN>
(1) Non-taxable interest income has been adjusted to a taxable equivalent rate, using the federal income tax rate of
35%.
(2) Yield/rate-volume changes have been allocated to each category based on the percentage of each to the total change.
(3) Nonaccrual loans are included in the average loan balances. Interest income on nonaccrual loans is generally
recognized on a cash basis.
</TABLE>
Page 9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
--------------------------------------------------------------------------------
NET INTEREST INCOME (CONTINUED)
Current Quarter compared to Prior Year Quarter
----------------------------------------------------
Net interest income on a tax equivalent basis increased $3,527 or 14.14% for the
quarter ended June 30, 2000, over the comparable period in 1999. Net interest
margin to average assets was relatively consistent for the quarters ended June
30, 2000 and June 30, 1999 at 3.88% and 3.90%, respectively. This is
attributable to net interest margin to average earning assets (4.24% compared to
4.25% for the same comparable periods) and the mix of earning assets to average
assets remaining relatively stable.
Net interest margin to average earning assets was relatively stable despite a
decline in the net interest spread from 3.72% at June 30, 1999 to 3.61% at June
30, 2000. This is attributable to improvement in the net interest position from
14.91% at June 30, 1999 to 15.28% at June 30, 2000. The decline in the net
interest spread was due to the increase in the cost of interest-bearing
liabilities exceeding the increase in interest earned on earning assets. The
cost of interest-bearing liabilities increased from 3.65% at June 30, 1999 to
4.25% at June 30, 2000, or 60 basis points, while the yield on earning assets
increased from 7.37% to 7.86%, or 49 basis points. The increase in the cost of
interest-bearing liabilities was due to an increase in the rates paid on
deposits (primarily CDs) and repurchase agreements. The increase in the yield
on interest-earning assets was due to an increase in the yields on loans,
investment securities and federal funds sold.
Current year-to-date period compared to Prior year-to-date period
------------------------------------------------------------------------
Net interest income on a tax equivalent basis increased $6,306 or 12.94% for the
six months ended June 30, 2000, over the comparable period in 1999. Net
interest margin to average assets was relatively consistent for the six months
ended June 30, 2000 and June 30, 1999 at 3.83% and 3.84%, respectively. This is
attributable to net interest margin to earning assets (4.18% compared to 4.19%
for the same comparable periods) and the mix of earning assets to average assets
remaining relatively stable.
Net interest margin to average earning assets was relatively stable despite a
decline in the net interest spread from 3.68% at June 30, 1999 to 3.57% at June
30,2000. This was attributable to improvement in the net interest position from
14.65% at June 30, 1999 to 15.11% at June 30, 2000. The decline in the net
interest spread was due to the increase in the cost of interest-bearing
liabilities exceeding the increase in interest earned on earning assets. The
cost of interest-bearing liabilities increased from 3.72% at June 30, 1999 to
4.17% at June 30, 2000, or 45 basis points, while the yield on interest earning
assets increased from 7.40% at June 30, 1999 to 7.74% at June 30, 2000, or 34
basis points. The increase in the cost of interest-bearing liabilities was due
to an increase in the rates paid on deposits (primarily CDs) and repurchase
agreements. The increase in the yield on interest-earning assets was due to an
increase in the yield on loans, investment securities and federal funds sold.
NONINTEREST INCOME AND EXPENSE (DOLLARS IN THOUSANDS)
Current Quarter compared to Prior Year Quarter
----------------------------------------------------
Noninterest income increased by $1,533 or 19.33% for the quarter ended June 30,
2000, over the comparable period in 1999 due to increases in service charges on
deposits, commissions and fees from fiduciary activities and bankcard fees.
Service charges on deposits increased by $881 or 19.05% over the comparable
period primarily due to overall deposit growth. Additionally, commissions and
fees from fiduciary and bankcard activities increased by $262 or 67.53% and $168
or 16.54%, respectively. These favorable changes were partially offset by a $51
or 16.19% decline in other income. Other income declined due to a decline in
premiums earned on the sale of mortgage loans.
Noninterest expense increased by $3,253 or 15.16% for the quarter ended June 30,
2000 over the comparable period in 1999 due to increases in salaries and
employee benefits, amortization of intangibles, data processing expense and
bankcard processing expense. Salaries and employee benefits increased $1,626 or
16.31% over the comparable period primarily due to an increase in the number of
employees, the addition of Exchange Bank employees and merit increases.
Amortization of intangibles increased by $386 or 27.51% over the comparable
period due to the goodwill related to the acquisition of Exchange Bank and other
branches. Data processing expense increased $366 or 22.14% over the comparable
period due to the on-going growth realized by Bancorporation. Bankcard
processing expense increased by $153 or 13.71% over the comparable period due to
increased bankcard activity.
Overall, the noninterest margin (noninterest income less noninterest expense) to
average assets improved from a negative 2.12% for the quarter ended June 30,
1999 to a negative 2.08% for the quarter ended June 30, 2000. This was due to a
1 basis point increase in non-interest expense to average assets and a 5 basis
point increase in noninterest income to average assets. This factor had the
most measurable impact on the improvement in return on assets for the comparable
periods.
Page 10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
--------------------------------------------------------------------------------
NONINTEREST INCOME AND EXPENSE (CONTINUED)
Current year-to-date period compared to Prior year-to-date period
------------------------------------------------------------------------
Noninterest income increased by $2,450 or 15.87% for the six months ended June
30, 2000, over the comparable period in 1999 due to increases in service charges
on deposits, commissions and fees from fiduciary activities and bankcard
fees. Service charges on deposits increased by $1,861 or 21.33% over the
comparable period primarily due to overall deposit growth. Additionally,
commissions and fees from fiduciary and bankcard activities increased by $477 or
60.92% and $358 or 19.56%, respectively. These favorable changes were partially
offset by a $500 or 52.80% decline in other income. Other income declined due
to a decline in non-recurring gains on the sale of fixed assets and premiums
earned on the sale of mortgage loans.
Noninterest expense increased by $4,671 or 10.77% for the six months ended June
30, 2000 over the comparable period in 1999 due to increases in salaries and
employee benefits, amortization of intangibles, data processing expense and
bankcard processing expense. Salaries and employee benefits increased $2,531 or
12.43% over the comparable period primarily due to an increase in the number of
employees, the addition of Exchange Bank employees and merit increases.
Amortization of intangibles increased by $353 or 12.54% over the comparable
period due to the goodwill related to the acquisition of Exchange Bank and other
branches recorded since June 30, 1999. Data processing expense increased $517
or 15.32% over the comparable period due to the on-going growth realized by
Bancorporation. Bankcard processing expense increased by $281 or 13.71% over
the comparable period due to increased bankcard activity.
Overall, the noninterest margin (noninterest income less noninterest expense) to
average assets improved from a negative 2.20% for the six months ended June 30,
1999 to a negative 2.10% for the six months ended June 30, 2000. This was due
to a 8 basis point decrease in non-interest expense to average assets and a 2
basis point increase in noninterest income to average assets. This factor had
the most measurable impact on the improvement in return on assets for the
comparable periods.
INCOME TAXES (DOLLARS IN THOUSANDS)
Total income tax expense increased by $532 or 16.55% for the quarter ended June
30, 2000 over the comparable period in 1999 due to the increase in net income.
Total income tax expense increased by $958 or 15.61% for the six months ended
June 30, 2000 over the comparable period in 1999 due to the increase in net
income. The effective tax rate was 34.5% and 34.8% at June 30, 2000 and June
30, 1999, respectively.
FINANCIAL CONDITION
INVESTMENT SECURITIES (DOLLARS IN THOUSANDS)
As of June 30, 2000, the investment portfolio totaled $668,525, compared to
$668,600 at June 30, 1999. The investment portfolio has both increased and
decreased since June 30, 1999, but has experienced insignificant overall growth.
Between June 30, 1999 and December 31, 1999, approximately $22,000 of investment
securities were purchased in the Exchange Bank acquisition. As bonds matured
during the latter part of 1999, they were invested in federal funds sold to
provide liquidity for potential issues related to Y2K. Since December 31, 1999,
Bancorporation invested the excess federal funds sold in investment securities.
Bancorporation continues to invest primarily in short-term U.S. government
obligations to minimize credit, interest rate and liquidity risk. During the
six months ended June 30, 2000, Bancorporation purchased $60,000 of Federal Home
Loan Bank ("FHLB") bonds. The FHLB is a Aaa-rated government sponsored agency.
The investment portfolio consisted of 92.63% and 92.13% U.S. government and
government agency securities as of June 30, 2000 and June 30, 1999,
respectively. The remainder of the investment portfolio consists of municipal
bonds and equity securities.
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (DOLLARS IN THOUSANDS)
As of June 30, 2000, loans totaled $1,991,812, compared to $1,669,124 at June
30, 1999, an increase of $322,688, or 19.33%, which is the result of normal loan
growth and acquisitions. Between June 30, 1999 and June 30, 2000, approximately
$61,000 and $34,567 of loans were acquired from Exchange Bank and other
financial institutions, respectively. The composition of the loan portfolio has
not shifted significantly since June 30, 1999. Loan growth was primarily funded
through core deposits and short-term borrowed funds.
Page 11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
--------------------------------------------------------------------------------
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (CONTINUED)
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 during the six months ended June
30, 2000 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.
An analysis of activity in the allowance for loan losses as of June 30, 2000 and
1999 is presented below. The allowance for loan losses is 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. During the first
quarter of 2000, Bancorporation recorded provision expense of approximately $586
related to loans purchased in three branch acquisitions based on management's
estimate of losses inherent in those loans.
<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
ALLOWANCE FOR LOAN LOSSES: 2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at beginning of period $34,265 $28,760 $32,972 $28,306
Provision for loan losses 1,994 1,817 3,553 2,480
-------- -------- -------- --------
Charge-offs (1,140) (924) (1,840) (1,509)
Recoveries 318 384 752 760
-------- -------- -------- --------
Net charge-offs (822) (540) (1,088) (749)
-------- -------- -------- --------
Balance at end of period $35,437 $30,037 $35,437 $30,037
-------- -------- -------- --------
Nonperforming assets $ 3,566 $ 2,566 $ 3,566 $ 2,566
Annualized net charge-offs to:
Average loans .17% .13% .11% .09%
Loans at end of period .17% .13% .11% .09%
Allowance for loan losses 9.28% 7.19% 6.14% 4.99%
</TABLE>
FUNDING SOURCES (DOLLARS IN THOUSANDS)
Bancorporation's primary source of funds is its deposit base. Total deposits
increased $269,736 or 13.04% from June 30, 1999 to June 30, 2000. Between June
30, 1999 and June 30, 2000, approximately $85,228 and $72,890 of deposits were
acquired from Exchange Bank and other financial institutions, respectively.
Average deposits were $2,316,614 and $2,056,125 at June 30, 2000 and June 30,
1999, respectively.
Short-term borrowings in the form of repurchase agreements are another source of
funds. Short-term borrowings increased $82,988 or 34.08% from June 30, 1999 to
June 30, 2000. Average short-term borrowings were $318,328 and $257,565 at June
30, 2000 and June 30, 1999, respectively.
CAPITAL RESOURCES
Regulatory agencies define capital as Tier I, consisting of stockholders' equity
less ineligible intangible assets, and Total Capital, consisting of Tier I
capital plus the allowable portion of the allowance for loan losses and certain
long-term debt.
Regulatory guidelines require a minimum ratio of total capital to risk-adjusted
assets 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. The following table details
Bancorporation's capital ratios at June 30, 2000 and 1999.
Page 12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
--------------------------------------------------------------------------------
CAPITAL RESOURCES (CONTINUED)
CAPITAL RATIOS June 30,
-----------------
2000 1999
------ ------
Tier I leverage ratio 8.10% 8.41%
Total risk-based capital ratio 13.2% 14.48%
Tier I 11.92% 13.06%
Tier II 1.28% 1.42%
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk exposures that affect the
quantitative and qualitative disclosures presented as part of Bancorporation's
Annual Report on Form 10-K for the year ended December 31, 1999.
Page 13
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Bancorporation and its subsidiaries, are not parties 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 2. Changes in Securities
Not Applicable.
Item 3. Defaults upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of Registrant was held on April 26, 2000. At
the meeting, Shareholders voted to change the number of Directors to 18 for 2000
with 823,992 votes for, 548 votes against, and 2,127 votes abstaining, and the
18 Nominees named in Registrant's Proxy Statement, dated March 24, 2000, were
elected as Directors for a term of 1 year.
The number of votes for the election of directors is as follows:
<TABLE>
<CAPTION>
Nominees For Withheld Against Abstained
-------------------- ------- -------- ------- ---------
<S> <C> <C> <C> <C>
J.B. Apple 825,584 1,083 - -
R.W. Blackmon 825,559 1,108 - -
P.M. Bristow 825,584 1,083 - -
G.H. Broadrick 825,584 1,083 - -
W.C. Cottingham 825,473 1,194 - -
J.M. Edwards 825,559 1,108 - -
W.E. Hancock, III 825,584 1,083 - -
R.B. Haynes 825,584 1,083 - -
W.E. Haynes 825,584 1,083 - -
L.M. Henderson 825,584 1,083 - -
C.P. Holding 825,584 1,083 - -
F.B. Holding 825,584 1,083 - -
D.H. Jordan 825,559 1,108 - -
E.H. Miller, Jr. 825,559 1,108 - -
N.W. Morrisette, Jr. 825,559 1,108 - -
E.P. Palmer 825,584 1,083 - -
W.E. Sellers 825,559 1,108 - -
H.F. Sherrill 825,559 1,108 - -
</TABLE>
No other matters were voted on at the meeting, and there was no solicitation in
opposition to management's Nominees listed in the Proxy Statement.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - 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 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).
11 Statement re computation of per share earnings (filed herewith).
27 Financial Data Schedule (filed herwith).
(b) No reports on Form 8-K were filed during the quarter ended June 30, 2000
Page 14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST CITIZENS BANCORPORATION
OF SOUTH CAROLINA, INC.
(Registrant)
Dated: August 14, 2000 By: /S/ Jay C. Case
--------------- --------------------------------
Jay C. Case, Executive Vice President
(Chief Financial Officer)
Page 15
<PAGE>
