UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the quarterly period ended June 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the transition period from __________ to ________
Commission File Number: 1-10646
CENTURA BANKS, INC.
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(Exact name of registrant as specified in its charter)
North Carolina 56-1688522
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(State of Incorporation) (IRS Employer Identification No.)
134 North Church Street, Rocky Mount, North Carolina 27804
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(Address of principal executive office) (Zip Code)
(252) 454-4400
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(Registrant's telephone number, including area code)
N/A
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(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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark has filed all documents and reports required to be filed
by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, NO PAR VALUE 26,540,702
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(Class of Stock) (Shares outstanding as of July 31, 1998)
Exhibit Index on sequential page number 32.
<PAGE>
CENTURA BANKS, INC.
FORM 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
June 30, 1998 and 1997, and December 31, 1997 4
Consolidated Statements of Income -
Three months and six months ended June 30, 1998 and 1997 5
Consolidated Statement of Shareholders' Equity -
Six months ended June 30, 1998 6
Consolidated Statements of Cash Flows -
Six months ended June 30, 1998 and 1997 7
Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-28
Item 3. Quantitative and Qualitative Disclosures about Market Risk 29
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Changes in Securities and Use of Proceeds 30
Item 3. Defaults upon Senior Securities 30
Item 4. Submission of Matters to a Vote of Securities Holders 30
Item 5. Other Information 30
Item 6. Exhibits and Reports on Form 8-K 30
SIGNATURES 31
<PAGE>
CENTURA BANKS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statement of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
CENTURA BANKS, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
------------------------------------ -----------------
(In thousands, except share data) 1998 1997 1997
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<S> <C> <C> <C>
Cash and due from banks $ 284,455 $ 243,199 $ 268,248
Due from banks, interest-bearing 15,241 12,188 13,873
Federal funds sold 10,197 30,017 29,552
Investment securities:
Available for sale (cost of $1,775,592, $1,564,869
and $1,623,330, respectively) 1,791,965 1,570,572 1,639,500
Held to maturity (market value of $124,598,
$236,269 and $191,689, respectively) 122,521 235,523 188,556
Loans 4,943,174 4,243,868 4,586,582
Less allowance for loan losses 66,991 59,206 64,279
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Net loans 4,876,183 4,184,662 4,522,303
Bank premises and equipment 115,634 111,631 115,464
Other assets 383,526 281,236 347,934
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Total assets $ 7,599,722 $ 6,669,028 $ 7,125,430
=================================================================================================================
LIABILITIES
Deposits:
Demand, noninterest-bearing $ 922,050 $ 764,390 $ 816,475
Interest-bearing 4,147,912 3,696,151 4,076,372
Time deposits over $100 480,221 360,495 472,078
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Total deposits 5,550,183 4,821,036 5,364,925
Borrowed funds 857,650 863,998 733,192
Long-term debt 488,613 396,702 382,129
Other liabilities 113,746 85,243 106,848
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Total liabilities 7,010,192 6,166,979 6,587,094
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 25,000,000 shares
authorized; none issued - - -
Common stock, no par value,
50,000,000 shares authorized; shares issued
and outstanding of 26,536,602, 25,804,633
and 25,862,375, respectively 192,836 188,602 187,435
Common stock acquired by ESOP (179) (323) (251)
Unrealized securities gains, net 10,181 3,609 9,970
Retained earnings 386,692 310,161 341,182
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Total shareholders' equity 589,530 502,049 538,336
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Total liabilities and shareholders' equity $ 7,599,722 $ 6,669,028 $ 7,125,430
=================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
CENTURA BANKS, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
(Dollars in thousands, except share and per share data) 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 113,773 $ 99,001 $ 221,091 $ 194,227
Investment securities:
Taxable 29,396 26,273 57,844 49,788
Tax-exempt 549 622 1,134 1,279
Short-term investments 324 370 694 815
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Total interest income 144,042 126,266 280,763 246,109
INTEREST EXPENSE
Deposits 49,696 44,630 98,766 87,815
Borrowed funds 12,236 10,691 22,750 18,674
Long-term debt 7,692 5,479 14,207 10,269
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Total interest expense 69,624 60,800 135,723 116,758
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NET INTEREST INCOME 74,418 65,466 145,040 129,351
Provision for loan losses 3,635 3,189 7,028 6,083
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Net interest income after provision for loan losses 70,783 62,277 138,012 123,268
NONINTEREST INCOME
Service charges on deposit accounts 11,537 9,632 22,123 18,844
Credit card and related fees 1,762 1,476 3,594 2,770
Other service charges, commissions and fees 7,439 5,399 15,021 10,342
Fees for trust services 2,400 1,950 4,500 3,900
Mortgage income 4,608 2,794 7,825 5,467
Other noninterest income 5,827 4,088 11,791 8,177
Securities gains (losses), net (73) (32) 229 (126)
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Total noninterest income 33,500 25,307 65,083 49,374
NONINTEREST EXPENSE
Personnel 33,285 27,156 64,519 54,913
Occupancy 3,888 3,443 7,710 6,781
Equipment 5,292 5,300 10,520 10,465
Foreclosed real estate losses and related
operating expense 166 398 594 722
Other operating 25,430 20,810 49,430 41,340
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Total noninterest expense 68,061 57,107 132,773 114,221
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Income before income taxes 36,222 30,477 70,322 58,421
Income taxes 12,168 10,497 23,791 20,567
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NET INCOME $ 24,054 $ 19,980 $ 46,531 $ 37,854
==========================================================================================================
NET INCOME PER COMMON SHARE
Basic $ 0.91 $ 0.78 $ 1.77 $ 1.47
Diluted 0.89 0.76 1.74 1.44
==========================================================================================================
AVERAGE COMMON SHARES OUTSTANDING
Basic 26,557,371 25,764,988 26,271,426 25,746,872
Diluted 27,066,440 26,254,773 26,794,923 26,247,782
==========================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Centura Banks, Inc. and Subsidiaries
Six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Common Unrealized
Stock Securities Total
Common Stock Acquired Gains, Retained Shareholders'
Shares Amount by ESOP Net Earnings Equity
----------- ---------- -------------------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 25,862,375 $ 187,435 $ (251) $ 9,970 $ 341,182 $ 538,336
Net income - - - - 46,531 46,531
Common stock issued:
Stock option plans and stock awards 93,243 1,782 - - - 1,782
Acquisitions 625,984 6,179 - - 6,713 12,892
Redemption of common stock (45,000) (3,041) - - - (3,041)
Unrealized securities gains, net - - - 211 - 211
Other - 481 72 - - 553
Cash dividends - - - - (7,734) (7,734)
----------- ---------- -------- ---------- ---------- ----------
Balance, June 30, 1998 26,536,602 $ 192,836 $ (179) $ 10,181 $ 386,692 $ 589,530
=========== ========== ======== ========== ========== ==========
See accompany notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Centura Banks, Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
(Dollars in thousands) 1998 1997
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 46,531 $ 37,854
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 7,028 6,083
Depreciation on assets under operating leases 5,682 3,807
Depreciation and amortization, excluding depreciation on assets under operating leases 17,522 15,019
Decrease in deferred income taxes 6,051 3,447
Loan fees deferred, net 242 40
Bond premium amortization and discount accretion, net 389 1,258
(Gain) loss on sales of investment securities (229) 126
Gain on sales of equipment under lease (2,340) (2,176)
Proceeds from sales of mortgage loans held for sale 338,209 180,003
Originations, net of principal repayments, of mortgage loans held for sale (378,185) (178,230)
Increase in accrued interest receivable (1,131) (4,333)
Increase (decrease) in accrued interest payable 5,245 (1,330)
Net increase in other assets and other liabilities (50,868) (9,539)
---------- ---------
Net cash used by operating activities (5,854) 52,029
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (231,636) (144,455)
Purchases of:
Securities available for sale (507,663) (529,660)
Securities held to maturity - (44,738)
Premises and equipment (6,047) (6,853)
Other - (50,000)
Proceeds from:
Sales of securities available for sale 105,143 201,631
Maturities and issuer calls of securities available for sale 278,896 80,495
Maturities and issuer calls of securities held to maturity 66,156 65,751
Sales of foreclosed real estate 2,455 2,259
Dispositions of premises and equipment 788 669
Disposition of equipment used in leasing activities 8,333 3,018
Cash acquired, net of cash paid, in acquisitions 15,447 -
---------- ---------
Net cash used by investing activities (268,128) (421,883)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 60,699 87,967
Net increase in short-term borrowings 124,261 178,707
Proceeds from issuance of long-term debt 192,978 119,312
Repayment of long-term debt (88,248) (33,412)
Cash dividends paid (14,716) (13,393)
Proceeds from issuance of common stock, net 846 1,655
Redemption of common stock (3,041) -
Other (577) (1,469)
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Net cash provided by financing activities 272,202 339,367
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Decrease in cash and cash equivalents (1,780) (30,487)
Cash and cash equivalents at January 1 311,673 315,891
---------- ---------
Cash and cash equivalents at June 30 $ 309,893 $ 285,404
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the six months for:
Interest $ 130,478 $ 118,088
Income taxes 12,180 16,049
Noncash transactions:
Stock issued in purchase acquisitions and other stock issuances, net 12,915 -
Unrealized securities gains, net 203 3,078
Dividends declared, but not yet paid - 6,961
Other 1,007 1,034
Loans transferred to foreclosed property 1,773 2,636
========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Centura Banks, Inc. and Subsidiaries
Note 1: Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of Centura Banks, Inc. ("Centura") and its wholly-owned subsidiaries
Centura Bank (the "Bank") and Centura Capital Trust I. The Bank also has various
wholly-owned subsidiaries. The interim financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements. All significant intercompany transactions are eliminated
in consolidation and all adjustments considered necessary for a fair
presentation of the results for the interim periods presented have been included
(such adjustments are normal and recurring in nature).
The information contained in the consolidated financial statements and
accompanying footnotes in Centura's annual report on Form 10-K should be
referenced when reading these unaudited interim financial statements. Operating
results for the three-month and six-month periods ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.
Note 2: Mergers and Acquisitions
Acquisition activity through June 30, 1998 and for 1997 is summarized below.
Data for the completed transactions is as of the date of acquisition.
<TABLE>
<CAPTION>
Institution Acquisition Banking Assets Loans Deposits Shares
Date Offices Issued
Completed Acquisitions
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Moore and Johnson, Inc. ("Moore and Johnson") (2) 1/30/98 ---- $3 ---- ---- 48,950
Pee Dee Bankshares, Inc. ("Pee Dee") (1) 3/27/98 6 $138 $93 $125 577,034
1997
Deposit assumption from Branch Banking and Trust 8/15/97 13 $313 $171 $313 ----
Company and United Carolina Bank ("BB&T") (2)
Betts & Company ("Betts") (2) 11/3/97 ---- $1 ---- ---- 44,443
Deposit assumption from NationsBank, N.A. 11/13/97 5 $88 $52 $86 ----
("NationsBank") (2)
Deposit assumption from First Union National Bank 12/5/97 --- $16 --- $16 ---
("First Union") (2)
(1) Acquisition accounted for as a pooling-of-interests
(2) Acquisition accounted for as a purchase
</TABLE>
On January 30, 1998, Centura completed its acquisition of Moore and Johnson
located in Raleigh, North Carolina. Under the terms of the acquisition, the
shareholders of Moore and Johnson received 48,950 shares of Centura common stock
for their interests in Moore and Johnson. The acquisition was accounted for as a
purchase with Centura recording $3.0 million of goodwill. Moore and Johnson
offers a full range of insurance products and will continue to operate through
Centura Insurance Services, Inc., a wholly-owned subsidiary of Centura Bank.
On March 27, 1998, Centura completed its acquisition of Pee Dee Bankshares, Inc.
and its wholly-owned subsidiary, Pee Dee State Bank (collectively, Pee Dee)
headquartered in Timmonsville, South Carolina. Pee Dee represents Centura's
entrance into the South Carolina banking market. Under the terms of the
agreement, the shareholders of Pee Dee received 577,034 shares of Centura common
stock for the issued
<PAGE>
and outstanding common shares of Pee Dee. Although the transaction was
accounted for as a pooling-of-interests, the merger was not material and,
accordingly, prior period financial statements have not been restated.
During 1997, Centura completed three deposit assumption acquisitions. In
aggregate, the acquisitions added approximately $415 million in deposits and
$223 million in loans in the second half of 1997. All locations acquired were
located in North Carolina. The combined purchase price exceeded the combined
fair value of the net assets acquired and accordingly, goodwill of approximately
$43.2 million was recorded. The unamortized balance of this goodwill is included
in other assets. In addition, Centura purchased Betts, an independent insurance
agency based in Rocky Mount, North Carolina. Betts offers all forms of property
and liability insurance, as well as medical malpractice and surety insurance.
Betts merged into and continues to offer its services through Centura Insurance
Services, Inc., a wholly-owned subsidiary of Centura Bank. Additional goodwill
of $2.6 million was recorded in connection with the Betts acquisition.
On July 24, 1998, Centura assumed $17 million of deposits from NBC Bank, FSB.
The transaction added approximately $1.6 million in goodwill. Located in the
Winston-Salem area of North Carolina, these supermarket locations complement
Centura's existing supermarket delivery channel. The financial position and
results of operations of these locations are appropriately not included in the
consolidated financial statements for the periods presented.
For the acquisitions accounted for under the purchase method of accounting, the
financial position and results of operations relative to each transaction are
included in the consolidated financial statements since date of consummation.
Note 3: Reclassifications
Certain items in the June 30, 1997 consolidated financial statements have been
reclassified to conform with the June 30, 1998 presentation. Such
reclassifications had no impact on net income or shareholders' equity.
Note 4: Adoption of Statements of Financial Accounting Standards ("SFAS")
On January 1, 1998, Centura adopted SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130") which establishes standards for the reporting and
display of comprehensive income and its components in a full set of financial
statements. Comprehensive income is defined as the change in equity during a
period for non-owner transactions and is divided into net income and other
comprehensive income. Other comprehensive income includes revenues, expenses,
gains, and losses that are excluded from earnings under current accounting
standards. This statement does not change or modify the reporting or display in
the income statement. SFAS No. 130 is effective for interim and annual periods
beginning after December 15, 1997. Comparative financial statements provided for
earlier periods are required to be reclassed to reflect the application of this
statement.
For the six months ended June 30, 1998 and 1997, total comprehensive income,
consisting of net income and unrealized securities gains and losses, net of
taxes, was $46.7 million and $39.9 million, respectively. For the three months
ended June 30, 1998 and 1997, total comprehensive income was $25.5 million and
$25.2 million, respectively.
For the year ended December 31, 1997, Centura adopted SFAS No. 128, "Earnings
Per Share" ("SFAS No. 128"). The standard provides guidance for computing and
presenting earnings per share. In accordance with this statement, primary net
income per common share is replaced with basic income per common share which is
calculated by dividing net income by the weighted-average number of common
shares
<PAGE>
outstanding for the period. Fully diluted net income per common share is
replaced with diluted net income per common share reflecting the maximum
dilutive effect of common stock issuable upon exercise of stock options. The
difference between the weighted average shares outstanding used in the basic net
income per share computation and the weighted average shares outstanding used in
the diluted net income per share calculation is attributable to shares which
arise from the assumed exercise of dilutive stock options. Prior period per
share data has been restated to reflect the adoption of SFAS No. 128.
<PAGE>
CENTURA BANKS, INC.
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations For the Six Months Ended June 30, 1998
The following discussion and analysis is presented to assist in the
understanding and evaluation of the financial condition and results of
operations of Centura Banks, Inc. ("Centura"). Centura is a bank holding company
operating in North Carolina, Virginia and South Carolina. Through Centura Bank
and its subsidiaries, Centura seeks to not only become the primary provider of
financial services for each of its customers but to also deliver the services
through convenient channels as evidenced by the Centura Highway telephone
banking center, supermarket locations, and home banking through Quicken,
QuickBooks, and Microsoft Money.
Much of the financial discussion that follows refers to the impact of Centura's
merger and acquisition activity. See Note 2 of the notes to consolidated
financial statements for detail on the acquisitions. Centura continually
evaluates acquisition opportunities and will continue seeking to acquire healthy
thrift and banking institutions as well as other financial services providers
allowed under current regulatory guidelines.
SUMMARY
Net income for the six months ended June 30, 1998 totaled $46.5 million, an
increase of $8.7 million or 22.9 percent over the $37.9 million earned during
the same period of 1997. Earnings per diluted share were $1.74 for the six
months ended June 30, 1998 compared to $1.44 for the same period of the prior
year. Operating results for the first six months of 1998 generated an annualized
return on assets of 1.28 percent and an annualized return on equity of 16.40
percent compared to 1.21 percent and 15.43 percent, respectively, for the
comparable period in 1997. Key factors responsible for these results were as
follows:
Taxable equivalent net interest income increased $15.6 million to $148.7
million for the first six months of 1998 compared to $133.0 million for the
same period in 1997. This increase was primarily attributable to an $879.4
million increase in average earning assets between the two periods.
Average loans increased to $4.8 billion for the six months ended June 30,
1998 compared to $4.1 billion for the same period of 1997. Excluding
acquisitions, average loan growth was 8.8 percent between the two six-month
periods. Deposits averaged $5.4 billion for the six months ended June 30,
1998, an increase of $692.7 million over the prior year period. Excluding
acquisitions, deposit growth averaged 4.6 percent. Including acquisitions,
average loans and average deposits increased 15.3 percent and 14.8 percent,
respectively, over the prior year comparable period.
The efficiency ratio improved 49 basis points to 62.12 percent for the
first six months of 1998. Centura earned $65.1 million of noninterest
income which represented a 31.8 percent increase over the $49.4 million
earned for the comparable prior year period. Expenses grew $18.6 million or
16.2 percent over the $114.2 million recorded for the six months ended June
30, 1997.
Nonperforming assets of $33.4 million at June 30, 1998 increased $5.7
million from June 30, 1997, but represented only 0.44 percent and 0.42
percent of total assets, respectively. The majority of this increase was in
loans secured by real estate, leases, and other commercial loans.
The allowance for loan losses was $67.0 million, representing 1.36 percent
of total loans at June 30, 1998, compared to $59.2 million and 1.40 percent
at June 30, 1997. Gross charge-offs were $8.4
<PAGE>
million, up $1.1 million from the $7.3 million recorded for the prior year
period. Recoveries totaled $2.0 million and $1.7 million, respectively,
for the six months ended June 30, 1998 and 1997. The provision for loan
losses was $7.0 million for the six months ended June 30, 1998 versus $6.1
million for the same period of 1997.
INTEREST-EARNING ASSETS
Interest-earning assets averaged $6.7 billion for the six months ended June 30,
1998, an increase of $879.4 million or 15.1 percent over the average earning
assets of $5.8 billion for the six months ended June 30, 1997. The primary
components of the increase were loans and leases, which grew $634.9 million and
the investment portfolio, which increased $246.0 million. At June 30, 1998,
earning assets were $6.9 billion, representing a $790.9 million or 13.0 percent
increase over the level at June 30, 1997. For additional information on average
interest-earning assets, refer to Table 3, "Net Interest Income Analysis,
Taxable Equivalent Basis," and Table 8, "Net Interest Income and Volume/Rate
Analysis, Taxable Equivalent Basis."
Loans
Loans and leases (collectively referred to as "loans") averaged $4.8 billion for
the six months ended June 30, 1998, increasing 15.3 percent over the average
loan volume of $4.1 billion for the comparable prior year period. Loans of
approximately $93 million were added this year through the acquisition of Pee
Dee while $223 million of loans were acquired during 1997. Excluding the impact
of acquisition activity, average loan growth was approximately 8.8 percent
between the two periods.
Commercial loans, the largest segment of the loan portfolio, increased $387.1
million, on average, between the two six-month periods. Consumer loans (equity
lines, residential mortgages, installment loans, and other credit line loans)
increased, on average, $229.7 million or 16.7 percent over the prior year
period. Much of this growth was attributed to the acquisitions as well as a
fourth quarter 1997 consumer loan campaign which carried over into 1998. The
campaign involved direct marketing and utilized Centura's normal underwriting
guidelines. Average loans represented 71.50 percent of average earning assets
for the six months ended June 30, 1998, increasing 10 basis points from the
71.40 percent for the same prior year period.
Loans at June 30, 1998 were $4.9 billion, an increase of $699.3 million, or 16.5
percent over the $4.2 billion at June 30, 1997. Excluding the late 1997
acquisitions and the 1998 Pee Dee transaction, growth between the periods was
9.0 percent. Table 1 summarizes total loans outstanding and the mix of loans
being held. Loan growth was generally present for each category. The commercial
portfolio represented 51.1 percent and 50.4 percent, respectively, of total
loans at June 30, 1998 and 1997. Of these commercial loans, over 90 percent are
secured.
Credit is extended by Centura Bank almost exclusively to customers in its market
areas of North Carolina, the Hampton Roads area of Virginia, and now South
Carolina. Although not a significant part of Centura's lending activities,
foreign credit is extended on a case by case basis and is subject to the same
credit and approval process as other commercial loans including an assessment of
country risk. Management discourages loans to high technology start-up
companies, to highly speculative real estate development projects, and to
participation in highly leveraged transactions. The loan portfolio is reviewed
on an on-going basis to maintain diversification by industry, geography, type of
loan, collateral and borrower.
Loans generated $221.4 million of taxable equivalent interest income for the six
months ended June 30, 1998 compared to $194.4 million for the same period last
year. Given that the average loan yield declined 11 basis points to 9.25
percent, the increase in the average loan volume accounted for the majority of
the $27.0 million improvement in loan related interest income. Since over 50
percent of the loan portfolio is affected by changes in the prime rate and other
indices, loan interest income is impacted by changes in the rate environment.
Given the variable components of Centura's loan portfolio, a lower rate
environment for
<PAGE>
the first half of 1998 as compared to 1997 coupled with competitive
pricing pressures for quality credits have contributed to the loan yield
decline. See Table 3, "Net Interest Income Analysis-Taxable Equivalent
Basis," for further detail.
Investment Securities
Investment securities represent the second largest component of earning assets.
At June 30, 1998, investment securities totaled $1.9 billion, an increase of
$108.4 million or 6.0 percent over the $1.8 billion at June 30, 1997. On
average, the investment portfolio grew $246.0 million to $1.9 billion for the
six-month period ending June 30, 1998 as compared with the same prior year
period. With average deposit growth keeping pace with loan growth between the
two six-month periods, average investments represented 28.1 percent of average
earnings assets for the first half of 1998 and 1997.
The investment portfolio consists primarily of securities for which an active
market exists. Centura's policy is to invest primarily in securities of the U.S.
Government and its agencies and in other high grade fixed income securities so
as to balance liquidity risk, credit risk, and price risk with an acceptable
market return in the investment portfolio. Accordingly, at June 30, 1998,
approximately 97 percent of the total investment portfolio consisted of
obligations of the U.S. Government and its agencies and other investment grade
fixed income securities.
The classification of securities as held to maturity ("HTM") or as available for
sale ("AFS") is determined at the date of purchase. Centura intends and has the
ability to hold its HTM portfolio until maturity. The HTM investments declined
$113.0 million compared to the same prior year period to $122.5 million at June
30, 1998. The decrease was primarily due to the scheduled maturities within the
portfolio. HTM investments represented 6.4 percent of total investment
securities as of June 30, 1998 compared to 13.0 percent as of June 30, 1997. At
June 30, 1998, the fair value of the HTM portfolio was $124.6 million,
representing $2.1 million more than amortized cost.
The AFS portfolio, which comprises the remainder and majority of the investments
securities portfolio, is reported at estimated fair value. These securities are
used as a part of Centura's asset/liability management strategy and may be sold
in response to changes in interest rates, changes in prepayment risk, the need
to manage regulatory capital and other factors. At June 30, 1998, AFS
investments were $1.8 billion, up $221.4 million compared with $1.6 billion at
June 30, 1997. The recorded fair value of the AFS portfolio exceeded the
amortized cost by $16.4 million at June 30, 1998, which amount has been
recorded, net of tax, as a separate component of shareholders' equity. At June
30, 1997, the fair value of the AFS portfolio was $5.7 million greater than its
amortized cost resulting in a $3.6 million increase, after tax, to shareholders'
equity. Net realized gains of $229,000 were generated during the first six
months of 1998 from sales and issuer call activity compared to net losses of
$126,000 during the comparable 1997 period.
Investment securities contributed $62.3 million in taxable equivalent interest
income for the six months ended June 30, 1998, an increase of $7.7 million over
the $54.6 million earned in the comparable period of 1997. A $246.0 million
increase in the average investment securities portfolio between the two
six-month periods accounted for $7.6 million of the improvement in interest
income. The average investment yield for the six months ended June 30, 1998 was
6.69 percent, a 1 basis point improvement over the yield earned during the
comparable prior year period.
<PAGE>
FUNDING SOURCES
Total funding sources averaged $6.7 billion for the six month period ended June
30,1998, a $926.2 million or 16.1 percent increase from the average volume of
$5.7 billion in the comparable 1997 period. Funding sources include total
deposits, short-term borrowings and long-term debt. For additional information
on funding sources refer to Table 3, "Net Interest Income Analysis, Taxable
Equivalent Basis", and Table 8, "Net Interest Income and Volume/Rate Analysis,
Taxable Equivalent Basis".
Deposits
For the first six months of 1998, average deposits increased $692.7 million to
$5.4 billion, or 14.8 percent over the comparable 1997 period, with
approximately $478 million attributable to acquisition activity. Excluding these
acquisition transactions, total average deposits increased 4.6 percent over the
six months ended June 30, 1997.
Centura's deposit mix trends continued to demonstrate a shift from passbook
savings and certificates of deposits to market sensitive money market accounts.
On average, money market accounts represented 18.4 percent of the average
deposit mix for the six months ended June 30, 1998 compared to only 15.4 percent
at June 30, 1997. This growth in money market deposits resulted in a $271.0
million increase over the $719.8 million average for the first six months of
1997. Time deposits increased, on average, $185.5 million to $2.6 billion for
the six months ended June 30, 1998 compared to $2.4 billion for the comparable
prior year period. However, time deposits represented 47.7 percent of total
average deposits for the six month period ended June 30, 1998 compared to 50.7
percent for the comparable 1997 period. Of the deposits assumed through the 1997
transactions and the Pee Dee merger, approximately $287 million were time
deposit accounts. Transaction accounts (interest checking and non-interest
bearing demand deposits) on average increased 17.5 percent between the two
six-month periods and represented 28.43 percent and 27.77 percent, respectively,
of average total deposits for the six months ended June 30, 1998 and 1997. For
additional information on deposits, see Table 2, "Average Deposit Mix for the
Six Months Ended."
The deposit base at June 30, 1998 of $5.6 billion was up $729.1 million, or 15.1
percent, from the $4.8 billion level held at June 30, 1997. Excluding the 1997
acquisitions and Pee Dee merger, period-end deposit growth was approximately 4.0
percent over the level at June 30, 1997.
Interest expense on deposits increased $11.0 million to $98.8 million for the
six months ending June 30, 1998 versus $87.8 million for the comparable period
of 1997. The average rate paid for deposits decreased 5 basis points as shown in
Table 3, "Net Interest Income Analysis-Taxable Equivalent Basis". The average
rate paid for all deposits types, excluding money market accounts, declined
between the two six-month periods. The 23 basis point increase in the cost of
money market accounts was primarily attributable to changes in product pricing.
As detailed further in Table 8, $11.7 million of the increase in deposit
interest expense was due to increased volume while the rates paid for deposits
resulted in a decrease of $742,000.
Other Funding Sources
The availability of alternative funding sources and slower deposit growth in
recent periods influenced management to increase the utilization of nondeposit
funding sources. The use of both short-term and long-term debt continues to be
in line with management asset/liability strategies. Consequently, borrowed
funds, predominantly Federal funds purchased, securities sold under repurchase
agreements and master notes, averaged $859.4 million for the six months ended
June 30, 1998, compared to the $729.7 million average volume for the period
ending June 30, 1997. At June 30, 1998 and 1997, borrowings totaled $857.7
million and $864.0 million, respectively. Interest expense on borrowings
increased by $4.1 million, primarily due to higher volume. The average rate paid
for these funds increased 18 basis points over the comparable 1997 period to
5.27 percent.
At June 30, 1998, long-term debt, consisting predominantly of FHLB advances,
Capital Securities and notes secured by lease rentals, totaled $488.6 million as
compared to $396.7 million at June 30, 1997. The majority of the growth resulted
from increased borrowings of $121.0 million from the Federal Home Loan
<PAGE>
Bank of Atlanta. The average amount of long-term debt increased $103.8 million
to $425.0 million for the first six months of 1998 compared to $321.1 million
for the comparable prior year period. Rates paid for long-term funding increased
to 6.65 percent, a 29 basis points increase over the prior year period. The
issuance of the 8.845 percent Capital Securities in June of 1997 influenced the
increase in the rates paid for long-term funding between the two periods.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income for the six months ended June 30, 1998 was $145.0 million,
up $15.7 million from the $129.4 million earned during the six months ended June
30, 1997. Net interest income on a fully taxable equivalent basis was $148.7
million for the first six months of 1998 compared to $133.0 million for the same
period in 1997, an increase of 11.7 percent. As indicated on Table 8, "Net
Interest Income and Volume/Rate Analysis-Taxable Equivalent Basis", the
distribution of balance sheet growth contributed $18.4 million to taxable
equivalent net interest income with the rate environment impacting taxable
equivalent net interest income unfavorably by $2.8 million.
The net interest margin declined 12 basis points between the two six-month
periods to 4.43 percent. The interest rate spread, the difference between the
average earning asset yield and the average rate paid on interest-bearing
liabilities, also decreased 10 basis points to 3.86 percent for the six months
ended June 30, 1998. The 8 basis point decline in the earning asset yield and
the 2 basis point increase in funding costs contributed to the margin
compression experienced during the first six months of 1998 compared to the same
prior year period. Loan yields have been impacted during 1998 by the lower rate
environment compared to 1997 with average loan yields declining faster than
corresponding funding sources.
ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses was $7.0 million for the six months ending June
30, 1998, up $945,000 compared to $6.1 million for the same period last year.
The increase in provision is in response to loan growth and increased charge-off
activity. Net charge-offs totaled $6.4 million for the first six months of 1998
while net charge-off activity for the same period in 1997 resulted in $5.6
million of net charge-offs. Segmented based on regulatory definitions, the most
significant increases in net losses were in credit cards and other consumer
lending which experienced a total net loss increase of $958,000 between the two
six-month periods. Net charge-offs as a percent of average loans and leases, on
an annualized basis were 0.27 percent for the six months ended June 30, 1998 and
1997. Recoveries totaled $2.0 million for the first half of 1998 compared to
$1.7 million for the same period in 1997.
The allowance for loan losses was $67.0 million at June 30, 1998, representing
1.36 percent of loans outstanding, compared to $59.2 million, or 1.40 percent of
loans outstanding at June 30, 1997, and compared to $64.3 million or 1.40
percent of loans outstanding at December 31, 1997. After taking into
consideration the growth of the loan portfolio and levels of current problem
assets and potential problem loans, management believes the allowance for loan
losses to be adequate. For additional information with respect to the activity
in the allowance for loan losses, see Table 4 "Analysis of Allowance for Loan
Losses." At June 30, 1998, the allowance for loan losses was 2.23 times
nonperforming loans, down from 2.47 times at June 30, 1997 and 2.71 times at
December 31, 1997.
Table 5, "Nonperforming Assets and Past Due Loans," discloses the components and
balances of nonperforming assets. Nonperforming assets increased $5.7 million to
$33.4 million at June 30, 1998 and represented 0.44 percent of total assets at
the end of the period. Nonperforming loans represented $6.0 million of the
increase while foreclosed properties declined $343,000. Nonperforming assets
were $27.7 million at June 30, 1997, or 0.42 percent of total assets. At
December 31, 1997, nonperforming assets were $27.9 million or 0.39 percent of
total assets. Real estate nonperforming loans increased by $2.0 million to $17.0
million at June 30, 1998 while leasing nonaccruals increased $2.1 million to
$3.9 million. The
<PAGE>
remaining increase in nonperforming assets was principally in the
commercial/industrial loan category which increased $2.7 million compared to
the same 1997 period, primarily the result of one commercial credit which was
classified as nonperforming in the first quarter of 1998. Foreclosed properties
totaled $3.4 million, $3.7 million, and $4.2 million at June 30, 1998, June 30,
1997, and December 31, 1997, respectively.
Accruing loans past due ninety or more days were $9.6 million, $9.1 million and
$7.0 million at June 30, 1998, June 30, 1997 and December 31, 1997,
respectively, which represented 0.19 percent, 0.21 percent and 0.15 percent of
outstanding loans, respectively.
While the loan portfolio is evaluated by sector and credit quality analysis, and
existing credit policies are reviewed in light of current economic conditions,
management recognizes that growth in the loan portfolio opens opportunity for
new credit problems to develop. The impact of ever-changing economic conditions
and changes to interest rates and/or inflation on the operations of Centura's
customers is unknown, but gives opportunity for increased nonperforming asset
levels. In addition to the nonperforming assets and past due loans shown in
Table 5, management believes that an estimated $10 to $15 million of additional
nonperforming and past due loans may exist which are currently "performing" in
accordance with their contractual terms.
NONINTEREST INCOME AND EXPENSE
While Centura generates most of its revenue from net interest income,
noninterest income has continued to increase, growing to represent 30.45 percent
of total revenues, compared to 27.07 percent for the six months ended June 30,
1997. Noninterest income ("NII") increased $15.7 million, or 31.8 percent, to
$65.1 million for the six months ended June 30, 1998. Excluding net realized
securities gains/losses, NII was up $15.4 million or 31.0 percent.
Service charges on deposits, the largest component of NII at 34.0 percent,
increased $3.3 million between the two six-month periods. This increase was
principally the result of growth in new deposits, a late 1997 increase in
non-sufficient funds ("NSF") charges, and the reduction of waived service
charges. Mortgage income (composed of servicing revenues, origination fees,
servicing release premiums, and net gains or losses on the sales of mortgage
loans) increased $2.4 million, or 43.1 percent, between the comparable six-month
periods, particularly due to strong mortgage loan originations in 1998 and
subsequent secondary market activity. The continued emphasis on expanding
financial services resulted in a 51.4 percent improvement in insurance and
brokerage commissions over the comparable period last year. Insurance
commissions represented $2.7 million of the increase particularly due to the
timing of the Betts and Moore and Johnson agency acquisitions, while the
remaining increase of $815,000 came from growth in brokerage commissions. Net
operating lease income, credit card fees and trust fees were up $1.7 million,
$824,000 and $600,000, respectively, driven primarily by greater volumes. Other
NII, which includes such items as earnings from Centura's investment in First
Greensboro Home Equity, Inc. and bank-owned life insurance, increased $1.9
million compared to the same period in 1997.
Noninterest expense ("NIE") increased 16.2 percent, or $18.6 million to $132.8
million compared to the six-month period in 1997. Personnel expenses, the
largest component of noninterest expense, contributed $9.6 million to this
increase, influenced strongly by the timing of late 1997 and early 1998
acquisitions.
Occupancy and equipment expense of $18.2 million for year to date 1998 increased
$984,000 over the first half of 1997, principally in rent and depreciation
associated with the continued opening of retail in-store locations and the
depreciation for equipment upgrades and enhancements. Fees for outsourced
services, i.e. the outsourcing of various functions such as items processing,
property management, and call processing generated from Centura Highway, are
strongly volume based, and increased $2.4 million over the first half of 1997
due to greater volumes associated with growth in customers and locations since
first half 1997. The amortization of intangibles increased $1.6 million for the
first half of 1998 compared to the
<PAGE>
same period last year due to the increased goodwill recorded for the late
1997 and 1998 purchase acquisitions. Primary operating expenses, including
marketing, office supplies, postage, phone and employee education and
travel were, in the aggregate, up by $2.1 million in response to an expanded
customer base, and the support of new markets, new locations and new
employees.
The efficiency ratio for the six-month period ended June 30, 1998 was 62.12
percent, an improvement of 49 basis points as compared to the 62.61 percent
recorded for the same period in 1997. During the first half of 1998, total
revenues on a taxable equivalent basis increased by $31.3 million, or 17.2
percent, compared to the first half of 1997, while noninterest expenses
increased $18.6 million, or 16.2 percent, thus benefiting the efficiency ratio.
INCOME TAX EXPENSE
The amount of income tax expense for the six months ended June 30, 1998 was
$23.8 million compared to $20.6 million in the prior period. The current
effective tax rate is 33.83 percent, down from the 35.20 percent at June 30,
1997. The reduction in the effective tax rate is primarily due to the increase
in non-taxable income during the first half of 1998 versus the first half of
1997.
EQUITY AND CAPITAL RESOURCES
Shareholders' equity increased to $589.5 million at June 30, 1998 compared to
$502.0 million at June 30, 1997. The change in equity between the two periods
was influenced by the retention of earnings, the issuance of common stock in
connection with Centura's insurance agency acquisitions and the 1998 acquisition
of Pee Dee, the exercise of stock options, along with the payment of dividends
and the repurchase of common stock. During the six month period ending June 30,
1998, Centura repurchased 45,000 shares of common stock at an aggregate cost of
$3.0 million. Shareholder's equity also included unrealized gains, net of tax,
on securities available for sale of $10.2 million at June 30, 1998 compared to
$3.6 million of unrealized losses, net of tax, for the comparable period last
year. The ratio of shareholders' equity to period end assets was 7.76 percent at
June 30, 1998, up from 7.53 percent at period end June 30, 1997.
Centura's common stock is traded on the New York Stock Exchange under the symbol
CBC. At June 30, 1998, Centura had 26,536,602 shares outstanding. Cash dividends
of $14.7 million were paid for the first six months of 1998.
Centura's capital ratios are greater than minimums required by regulatory
guidelines. It is Centura's intent to maintain an optimal capital and leverage
mix within the regulatory framework while providing a basis for future growth.
At June 30, 1998, Centura had the required capital levels to qualify as well
capitalized. At June 30, 1998, Tier I capital was $572.0 million and total
capital was $605.2 million. For risk-based capital calculations, Centura's
Capital Securities are included as a component of Tier I capital. Centura's
capital ratios are outlined in Table 6 titled "Capital Ratios."
LIQUIDITY
Centura's liquidity management objective is to meet maturing debt obligations,
provide a reliable source of funding to borrowers, and fund operations on a cost
effective basis. Management believes that sufficient resources are available to
meet Centura's liquidity objective through its debt maturity structure, holdings
of liquid assets, and access to the capital markets through a variety of funding
vehicles.
Investment securities are an important tool to Centura's liquidity management
objective. Some AFS securities were sold during 1997 and the first six months of
1998 to reposition the investment portfolio in a
<PAGE>
fluctuating interest rate environment. Management may continue to reposition
the investment portfolio in order to enhance future results of operations
with no expected material impact on liquidity.
The Bank has multiple funding sources that could be used to increase liquidity
and provide additional financing flexibility. These sources consist primarily of
established federal fund lines with major banks, advances from the Federal Home
Loan Bank ("FHLB"), and an unsecured bank note facility for institutional
investors. There were no bank notes outstanding at June 30, 1998 and 1997. In
addition, Centura accepts Eurodeposits, has a master note commercial paper
facility, and offers brokered certificates of deposits.
Management is not aware of any events or uncertainties that are reasonably
likely to have a material effect on Centura's liquidity, capital resources, or
operations. In addition, management is not aware of any pending regulatory
developments or proposals, which, if implemented, would have a material effect
on Centura.
ASSET/LIABILITY AND INTEREST RATE RISK MANAGEMENT
Market risk is the risk of loss from adverse changes in market prices and rates.
Centura's market risk primarily stems from interest rate risk, the potential
economic loss due to future changes in interest rates, which is inherent in
lending and deposit gathering activities.
Centura's Asset/Liability Management Committee seeks to maintain a general
balance between interest-sensitive assets and liabilities to insulate net
interest income and shareholders' equity from significant adverse changes in
market interest rates. Mismatches in interest rate repricings of assets and
liabilities arise from the interaction of customer business needs and Centura's
discretionary asset and liability management activities. Exposure to changes in
the level and direction of interest rates is managed by adjusting the
asset/liability mix through the use of various interest rate risk management
products, including derivative financial instruments.
Off-balance sheet derivative financial instruments, such as interest rate swaps,
interest rate floor and cap arrangements and interest rate futures and option
contracts ("swaps, floors, caps, futures and options," respectively), are an
integral part of Centura's interest rate risk management activities. Centura has
principally utilized interest rate swaps. Swaps are used to manage interest rate
risk, reduce funding costs, and diversify sources of funding. Floors are used to
protect certain financial instruments which market value or earnings stream
would be adversely affected in a decreasing rate environment. Caps
are used to protect certain financial instruments which market value or earnings
stream would be adversely affected in an increasing rate environment. Table 7,
"Off-Balance Sheet Derivative Financial Instruments", summarizes Centura's
off-balance sheet derivative financial positions at June 30, 1998. On-balance
sheet and off-balance sheet financial instruments are managed on an integrated
basis as part of Centura's overall asset/liability management function. The
value of any single component of the balance sheet or off-balance sheet position
should not be viewed independently.
<PAGE>
SECOND QUARTER RESULTS
Net income for the second quarter of 1998 was $24.1 million or 20.4 percent
increase over the prior year quarter. Earnings per diluted share of $0.89
represented a 13 cent increase over the $0.76 for the second quarter of 1997.
Return on average assets improved 4 basis points to 1.28 percent while the
return on average equity of 16.50 percent was up 50 basis points over the prior
year quarter.
The net interest margin of 4.43 percent declined 9 basis points between the
quarters and the interest rate spread decreased 6 basis points to 3.87 percent.
Interest income, taxable equivalent, for the quarter ending June 30, 1998 was
$146.0 million, up $17.6 million or 13.7 percent over the second quarter of
1997. Growth in average earning assets was responsible for $19.6 million of the
increase while product mix, spread compression, and the rate environment
negatively impacted net interest income by $2.0 million. Average earning
assets increased $913.2 million to $6.8 billion for the second quarter 1998,
with average loans increasing $716.2 million and average investments rising
$198.1 million. The average yield on earning assets declined 11 basis points to
8.51 percent with yields generally decreasing for all categories. Total
interest expense of $69.6 million for the three months ending June 30, 1998,
increased $8.8 million or 14.5 percent over the prior year quarter. The rates
paid for these funds decreased to 4.64 percent down from the 4.69 percent
experienced in the second quarter 1997. The $814.6 million average growth in
interest-bearing funding sources was responsible for significantly all of the
increase in interest expense between the two quarters. Average deposits
for the quarter ending June 30, 1998 and 1997 were $5.4 billion and $4.7
billion, respectively. Short-term funding sources, consisting primarily of
federal funds purchased, master notes, and repurchase agreements increased, on
average, $110.5 million to $922.0 million for the second quarter of 1998 while
long-term debt of $467.8 million exceeded the prior year quarter by $134.7
million.
Net charge-offs for the second quarter of 1998 were $3.5 million, up $727,000
from the prior year quarter and represented 0.28 percent of average loans. Net
charge-offs of $2.7 million represented 0.26 percent of average loans for the
second quarter 1997. Gross charge-offs and recoveries rose $915,000 and
$188,000, respectively. Provision for loan losses increased $446,000 to $3.6
million for the three months ended June 30, 1998.
Noninterest income ("NII") increased $8.2 million to $33.5 million. As expected,
the majority of the increase occurred in service charges on deposit accounts,
insurance and brokerage commissions, mortgage income, and operating lease fees.
The increased customer base, reduction of waived fees, and a late 1997 increase
in non-sufficient funds ("NSF") charges stimulated the $1.9 million increase in
service charge revenue. Other service charges and insurance and brokerage
commissions increased $728,000 and $1.3 million, respectively over the second
quarter of 1997. Rental income associated with operating lease activities
increased $1.2 million from the second quarter 1997 primarily due to volume.
Noninterest expenses ("NIE") for the quarter ending June 30, 1998 were $68.1
million, up 19.2 percent from the $57.1 million recorded for the quarter ending
June 30, 1997. Increase in personnel expenses was responsible for $6.1 million
of the increase primarily attributable to the timing of the 1997 and 1998
acquisitions. Timing of expenditures for consulting services and the charges
related to the outsourcing of various functions accounted for the $1.0 million
increase in outsourced services. The increase in the number of financial stores
and in the customer base influenced the $1.2 million increase in supplies,
postage, and telephone expenses.
CURRENT ACCOUNTING ISSUES
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). The statement requires
management to report selected financial and descriptive information about
reportable operating segments. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Generally, disclosures are required for segments internally identified to
evaluate performance and resource allocation. SFAS No. 131
<PAGE>
is effective for financial statements for periods beginning after December
15, 1997. In the initial year of application, comparative information for
earlier periods is to be restated, if it is practical to do so. SFAS No.
131 does not have to be applied to interim financial statements in the initial
year of application, but comparative information must be provided for interim
periods in the second year of application. Centura, as required, will adopt
this statement for the year ending December 31, 1998.
In February 1998, the FASB issued SFAS No. 132 "Employer's Disclosures about
Pensions and Other Postretirement Benefits" ("SFAS No. 132"). The statement
revises the required disclosures for pensions and other postretirement plans but
does not change the measurement or recognition of such plans. SFAS No. 132 is
effective for fiscal years beginning after December 31, 1997. Centura, as
required, will adopt this statement for the year ending December 31, 1998.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). The statement addresses
accounting and reporting requirements for derivative instruments and for hedging
activities. SFAS No. 133 requires that all derivatives be recognized as either
assets or liabilities in the consolidated balance sheet and that those
instruments be measured at fair value. If certain conditions are met, a
derivative may be designated as a hedge of exposure to changes in fair value of
an asset or liability, exposure to variable cashflows of a forecasted
transaction or exposure of foreign currency denominated forecasted transactions.
The accounting for changes in the fair value of a derivative depends on the
intended use of the derivatives and its resulting designation. SFAS No. 133 is
effective for all quarters of fiscal years beginning after June 15, 1999. This
statement should not be applied retroactively to financial statements of prior
periods.
The FASB also issues exposure drafts for proposed statements of financial
accounting standards. Such exposure drafts are subject to comment from the
public, to revisions by the FASB and to final issuance by the FASB as statements
of financial accounting standards. Management considers the effect of the
proposed statements on the consolidated financial statements of Centura and
monitors the status of changes to issued exposure drafts and to proposed
effective dates.
YEAR 2000
The Year 2000 issue confronting Centura and its suppliers, customers, customers'
suppliers, and competitors centers on the inability of computer systems to
recognize the Year 2000. Many existing computer programs and systems were
originally programmed with six digit dates that provided only two digits to
identify the calendar year, without considering the upcoming change in the
century. Monitoring and managing the Year 2000 project will result in additional
direct costs. Direct costs include potential charges by third party software
vendors for product enhancements, costs involved in testing software products
for Year 2000 compliance, and any resulting costs for developing and
implementing contingency plans for critical software products which are not
enhanced. The Emerging Issues Task Force provided guidance concerning the
accounting for these costs related to Year 2000 modification. The costs of the
modifications should be treated as regular maintenance and repair and be charged
to expense as incurred. Management currently estimates that the aggregate direct
costs for 1998 and 1999 will be approximately $1.7 million and $1.0 million,
respectively. In addition to the direct costs, indirect costs will also be
incurred. These indirect costs will consist principally of the time devoted by
existing employees in monitoring software vendor progress, testing enhanced
software products and implementing any necessary contingency plans. These direct
and indirect costs are not expected to have a material effect on results of
operations. However, the distribution of Year 2000 expenses between direct and
indirect may change due to the allocation of internal resources. Centura has
expensed approximately $1.9 million in direct costs related to Year 2000, with
approximately $600,000 being incurred in the first half of 1998. Expenditures
for the Year 2000 compliance project including direct and indirect costs are
estimated to total $6-$8 million.
Management presently believes that with modifications to existing software and
conversions to new software, the Year 2000 matter will be mitigated without
causing a material adverse impact on the
<PAGE>
operations of Centura. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 issue could have a material
impact on the operations of Centura.
Relations with third parties in which electronic data is exchanged exposes
Centura to some risk of loss in the event the other party makes a mistake or is
unable to perform. In the Year 2000 context, Centura is working to identify
where such exposure may exist and is in the process of developing contingency
plans in order to minimize risk of loss due to third parties' Year 2000
vulnerabilities.
In addition, Centura has initiated formal communications with all of its
significant suppliers and large customers to determine the extent to which it is
vulnerable to those third parties' failure to remediate their own Year 2000
issues. The Year 2000 project cost estimates include the estimated costs and
time associated with the assessment and monitoring of a third party's Year 2000
risk, and are based on presently available information. However, there can be no
guarantee that the systems of other companies on which Centura's systems rely
will be timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with Centura's systems, would not have a
material adverse effect on Centura in future periods.
<PAGE>
TABLE 1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
LOANS
June 30, 1998 June 30, 1997 December 31, 1997
------------- ------------- ----------------
(Dollars in thousands) Balance % of Total Balance % of Total Balance % of Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 964,077 19.5% $ 782,962 18.4% $ 846,074 18.4%
Commercial mortgage 967,762 19.6 809,192 19.1 894,014 19.5
Real estate construction 592,509 12.0 545,810 12.9 578,304 12.6
--------------------------------------------------------------------------------------------
Commercial loan portfolio 2,524,348 51.1 2,137,964 50.4 2,318,392 50.5
Consumer 366,852 7.4 272,878 6.4 321,513 7.0
Residential mortgage 1,520,169 30.8 1,320,128 31.1 1,426,306 31.1
Leases 455,884 9.2 472,031 11.1 470,376 10.3
Other 75,921 1.5 40,867 1.0 49,995 1.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans $ 4,943,174 100.0% $ 4,243,868 100.0% $ 4,586,582 100.0%
====================================================================================================================================
Residential mortgage servicing
portfolio for others $ 2,731,000 $ 2,425,000 $ 2,812,000
====================================================================================================================================
TABLE 2
- ---------------------------------------------------------------------------------------------------------------
AVERAGE DEPOSIT MIX FOR THE SIX MONTHS ENDED
June 30, 1998 June 30, 1997
----------------------------- ----------------------------------
(Dollars in thousands) Balance % of Total Balance % of Total
- ---------------------------------------------------------------------------------------------------------------
Demand, noninterest-bearing $ 802,722 14.9% $ 671,295 14.3%
Interest checking 727,875 13.5 631,584 13.5
Money market 990,817 18.4 719,839 15.4
Savings 296,338 5.5 287,868 6.1
- ---------------------------------------------------------------------------------------------------------------
Time deposits:
Certificates of deposit < $100,000 1,757,098 32.6 1,732,188 36.9
Certificates of deposit > $100,000 488,864 9.1 353,952 7.5
IRA 320,646 6.0 294,920 6.3
- ---------------------------------------------------------------------------------------------------------------
Total time deposits 2,566,608 47.7 2,381,060 50.7
- ---------------------------------------------------------------------------------------------------------------
Total average deposits $ 5,384,360 100.0% $ 4,691,646 100.0%
===============================================================================================================
</TABLE>
<PAGE>
TABLE 3
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME ANALYSIS - TAXABLE EQUIVALENT BASIS
Centura Banks, Inc. and Subsidiaries
Six months ended Six months ended
June 30, 1998 June 30, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans $ 4,783,111 $ 221,416 9.25% $ 4,148,198 $ 194,428 9.36%
Taxable securities 1,825,538 60,536 6.64 1,588,788 52,616 6.62
Tax-exempt securities 38,834 1,734 8.93 43,958 1,947 8.86
Short-term investments 28,113 694 5.23 29,601 814 5.47
------------- ----------- ------------- ----------
Interest-earning assets, gross 6,675,596 284,380 8.51 5,810,545 249,805 8.59
Net unrealized gain (loss) on available
for sale securities 13,864 (492)
Other assets, net 662,383 510,040
------------- -------------
Total assets $ 7,351,843 $ 6,320,093
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking $ 727,875 $ 5,385 1.49% $ 631,584 $ 5,436 1.74%
Money market 990,817 21,452 4.37 719,839 14,784 4.14
Savings 296,338 2,636 1.79 287,868 2,836 1.99
Time 2,566,608 69,292 5.44 2,381,060 64,759 5.48
------------ ----------- ------------- ----------
Total interest-bearing deposits 4,581,638 98,765 4.35 4,020,351 87,815 4.40
Borrowed funds 859,351 22,750 5.27 729,707 18,674 5.09
Long-term debt 424,966 14,208 6.65 321,129 10,269 6.36
------------- ----------- ------------- ----------
Interest-bearing liabilities 5,865,955 135,723 4.65 5,071,187 116,758 4.63
Demand, noninterest-bearing 802,722 671,295
Other liabilities 110,924 82,759
Shareholders' equity 572,242 494,852
------------- -------------
Total liabilities and
shareholders' equity $ 7,351,843 $ 6,320,093
============= =============
Interest rate spread 3.86% 3.96%
Net yield on interest-
earning assets $ 6,675,596 $ 148,657 4.43% $ 5,810,545 $ 133,047 4.55%
============= =========== ============= ==========
Taxable equivalent adjustment $ 3,617 $ 3,696
=========== ==========
</TABLE>
<PAGE>
TABLE 3, continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME ANALYSIS - TAXABLE EQUIVALENT BASIS
Centura Banks, Inc. and Subsidiaries
Three months ended Three months ended
June 30, 1998 June 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans $ 4,905,005 $ 113,968 9.24% $ 4,188,811 $ 99,102 9.41%
Taxable securities 1,858,811 30,728 6.61 1,671,405 27,851 6.67
Tax-exempt securities 37,394 839 8.97 42,576 948 8.91
Short-term investments 25,112 324 5.43 26,264 369 5.56
------------- ----------- ----------- ----------
Interest-earning assets, gross 6,826,322 145,859 8.51 5,929,056 128,270 8.62
Net unrealized gain (loss) on available
for sale securities 12,900 (3,021)
Other assets, net 691,281 527,946
------------- -----------
Total assets $ 7,530,503 $ 6,453,981
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest checking $ 730,152 $ 2,570 1.41% $ 623,208 $ 2,626 1.69%
Money market 1,025,149 11,159 4.37 746,488 7,832 4.21
Savings 299,155 1,338 1.79 286,222 1,419 1.99
Time 2,555,948 34,628 5.43 2,385,121 32,753 5.51
------------- ----------- ----------- ----------
Total interest-bearing deposits 4,610,404 49,695 4.32 4,041,039 44,630 4.43
Borrowed funds 922,005 12,236 5.25 811,510 10,691 5.21
Long-term debt 467,760 7,693 6.51 333,013 5,479 6.51
------------- ----------- ----------- ----------
Interest-bearing liabilities 6,000,169 69,624 4.64 5,185,562 60,800 4.69
Demand, noninterest-bearing 829,482 684,472
Other liabilities 116,074 82,920
Shareholders' equity 584,778 501,027
------------- -----------
Total liabilities and
shareholders' equity $ 7,530,503 $ 6,453,981
============= ===========
Interest rate spread 3.87% 3.93%
Net yield on interest-
earning assets $ 6,826,322 $ 76,235 4.43% $ 5,929,056 $ 67,470 4.52%
============= =========== =========== ==========
Taxable equivalent adjustment $ 1,817 $ 2,004
=========== ==========
</TABLE>
<PAGE>
TABLE 4
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
At and for the six months At and for the year
ended June 30, ended December 31,
------------------------------- -------------------
(Dollars in thousands) 1998 1997 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Allowance for loan losses at beginning of period $ 64,279 $ 58,715 $ 58,715
Allowance for acquired loans 2,068 - 3,133
Provision for loan losses 7,028 6,083 13,418
Loans charged off (8,398) (7,256) (14,425)
Recoveries on loans previously charged off 2,014 1,664 3,438
- ------------------------------------------------------------------------------------------------------------------------
Net charge-offs (6,384) (5,592) (10,987)
- ------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses at end of period $ 66,991 $ 59,206 $ 64,279
========================================================================================================================
Loans at period-end $ 4,943,174 $ 4,243,868 $ 4,586,582
Average loans 4,783,111 4,148,198 4,309,064
Nonperforming loans 30,022 24,001 23,722
Allowance for loan losses to loans at period-end 1.36% 1.40% 1.40%
Net charge-offs to average loans 0.27% 0.27% 0.25%
Allowance for loan losses to nonperforming loans 2.23x 2.47x 2.71x
========================================================================================================================
TABLE 5
- ------------------------------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS AND PAST DUE LOANS
June 30, December 31,
------------------------------- -----------------
(Dollars in thousands) 1998 1997 1997
- ------------------------------------------------------------------------------------------------------------------------
Nonaccrual loans $ 30,022 $ 24,001 $ 23,722
Foreclosed property 3,396 3,739 4,155
- ------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 33,418 $ 27,740 $ 27,877
========================================================================================================================
Nonperforming assets to:
Loans and foreclosed property 0.68% 0.65% 0.61%
Total assets 0.44% 0.42% 0.39%
========================================================================================================================
Accruing loans past due ninety days or greater $ 9,583 $ 9,060 $ 6,985
========================================================================================================================
</TABLE>
<PAGE>
TABLE 6
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS
Tier I Capital Total Capital Tier I Leverage
<S> <C> <C> <C>
June 30, 1998 10.48% 11.09% 7.71%
December 31, 1997 10.60 11.19 7.51
June 30, 1997 11.98 12.55 8.31
Minimum requirement 4.00 8.00 3.00-5.00
TABLE 7
- ------------------------------------------------------------------------------------------------------------------------------
OFF-BALANCE SHEET DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swap agreements at June 30, 1998 are summarized below:
Weighted Average
Weighted Average Rate Remaining Estimated
Notional During the Quarter Contractual Fair Value
(Dollars in thousands) Amount Received Paid Term (Years) Gain (Loss)
- -------------------------------------------------------------------------------------------------------------------
INTEREST RATE SWAPS
Corporation pays fixed/receives variable $ 394,442 5.72% 6.10% 2.7 $ (1,883)
Corporation pays variable/receives fixed 296,000 6.36% 5.70% 6.4 4,296
Corporation pays variable/receives variable 250,000 5.66% 5.70% 0.7 (202)
----------- -----------
Total interest rate swaps $ 940,442 $ 2,211
=========== ===========
Interest rate cap and floor agreements at June 30, 1998 are summarized below:
Weighted Average
Remaining
Notional Average Current Index Contractual Carrying Estimated
Amount Rate * Rate Term (Years) Value Fair Value
- ----------------------------------------------------------------------------------------------------------------- ----------
Interest Rate Floors $ 180,000 5.73% 5.72% 2.4 $ 766 $ 1,310
=========== =========== ==========
Interest Rate Caps $ 22,000 7.00% 5.72% 5.3 $ 513 $ 160
=========== =========== ==========
* Average rate represents the average of the strike rates above or below which
Centura will receive payments on the outstanding cap or floor agreements.
</TABLE>
<PAGE>
TABLE 8
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AND VOLUME/RATE ANALYSIS - TAXABLE EQUIVALENT BASIS
Six months ended
June 30, 1998 and 1997
- ------------------------------------------------------------------------------------------------------------
Income/ Variance
Expense Attributable To
(In thousands) Variance Volume Rate
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans $ 26,988 $ 29,418 $ (2,430)
Taxable securities 7,920 7,851 69
Tax-exempt securities (213) (229) 16
Short-term investments (120) (40) (80)
--------------- --------------- --------------
Total interest income 34,575 37,000 (2,425)
INTEREST EXPENSE
Interest-bearing deposits:
Interest checking (51) 768 (819)
Money market 6,668 5,829 839
Savings (200) 82 (282)
Time 4,533 5,013 (480)
--------------- --------------- --------------
Total interest-bearing deposits 10,950 11,692 (742)
Borrowed funds 4,076 3,414 662
Long-term debt 3,939 3,453 486
--------------- --------------- --------------
Total interest expense 18,965 18,559 406
--------------- --------------- --------------
Net interest income $ 15,610 $ 18,441 $ (2,831)
=============== =============== ==============
The change in interest due to both rate and volume has been allocated
proportionately to volume variance and rate variance based on the relationship
of the absolute dollar change in each.
</TABLE>
<PAGE>
TABLE 8, continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AND VOLUME/RATE ANALYSIS - TAXABLE EQUIVALENT BASIS
Three months ended
June 30, 1998 and 1997
- ------------------------------------------------------------------------------------------------------------
Income/ Variance
Expense Attributable To
(In thousands) Variance Volume Rate
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans $ 14,866 $ 16,670 $ (1,804)
Taxable securities 2,877 3,100 (223)
Tax-exempt securities (109) (116) 7
Short-term investments (45) (16) (29)
--------------- --------------- --------------
Total interest income 17,589 19,638 (2,049)
INTEREST EXPENSE
Interest-bearing deposits:
Interest checking (56) 413 (469)
Money market 3,327 3,023 304
Savings (81) 62 (143)
Time 1,875 2,319 (444)
--------------- --------------- --------------
Total interest-bearing deposits 5,065 5,817 (752)
Borrowed funds 1,545 1,466 79
Long-term debt 2,214 2,216 (2)
--------------- --------------- --------------
Total interest expense 8,824 9,499 (675)
--------------- --------------- --------------
Net interest income $ 8,765 $ 10,139 $ (1,374)
=============== =============== ==============
The change in interest due to both rate and volume has been allocated
proportionately to volume variance and rate variance based on the relationship
of the absolute dollar change in each.
</TABLE>
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There has been no material change in Centura's market risk since December 31,
1997 as described in Item 7A of Centura's Annual Report on Form 10-K for the
year ended December 31, 1997.
<PAGE>
CENTURA BANKS, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Securities Holders Registrant's
Annual Meeting of Shareholders was April 15, 1998:
1) All of the nominees for Director listed under the caption "Election
of Directors" in the Registrant's Proxy Statement dated March 11,
1998 were duly elected Directors of the Registrant. Eighty-four
percent of the outstanding shares were voted. Of the 21,891,356
shares voted, each director received at least 21,517,398 shares or
98.3% in favor.
2) An Amendment to the Centura Banks, Inc. Omnibus Equity Compensation
Plan (the "Plan") to increase the aggregate number of shares of
common stock of Centura Banks, Inc. available for awards under the
Plan was voted on. Of the 21,891,356 shares voted, 68.9% voted in
favor.
Item 5. Other Information
Not applicable
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
<S> <C> <C> <C>
Exhibit Exhibit
No. Description of Exhibit Reference
4.1 Excerpts from Centura's Articles of Incorporation and
Bylaws relating to rights of holders of Registrant's capital
stock 4.1 (1)
4.2 Specimen certificate of Centura common stock 4.2 (2)
27.1 Financial Data Schedule - (Restated due to the adoption of
SFAS No. 128) included in the electronically filed document as
required.
27.2 Financial Data Schedule included in the electronically
filed document as required.
(1)Included as the identified exhibit in Centura Banks, Inc. Form S-4
dated March 8, 1990, as amended by amendment No. 1 dated May 14, 1990,
and incorporated herein by reference.
(2)Included as the identified exhibit in Centura Banks, Inc. Annual
Report on Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference.
(b) Reports on Form 8-K -
1)A report on Form 8-K dated April 6, 1998 was filed under Item 5, Other
Events, indicating the Registrant's announcement on April 6, 1998 of
earnings for the three months ended March 31, 1998.
</TABLE>
<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:
CENTURA BANKS, INC.
Registrant
Date: August 14, 1998 By: /s/Steven J. Goldstein
----------------------
Steven J. Goldstein
Chief Financial Officer
<PAGE>
CENTURA BANKS, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Description of Exhibit Page No.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
4.1 Excerpts from Centura's Articles of Incorporation and Bylaws
relating to rights of holders of Registrant's capital stock *(1)
4.2 Specimen certificate of Centura common stock *(2)
27.1 Financial Data Schedule Restated **
27.2 Financial Data Schedule **
*Incorporated by reference from the following documents as noted:
(1)Included as the identified exhibit in Centura Banks, Inc. Form S-4
dated March 8, 1990, as amended by amendment No. 1 dated May 14, 1990,
and incorporated herein by reference.
(2)Included as the identified exhibit in Centura Banks, Inc. Annual
Report on Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference.
** Included in the electronically-filed document as required
COPIES OF EXHIBITS ARE AVAILABLE UPON WRITTEN REQUEST TO STEVEN GOLDSTEIN, CHIEF
FINANCIAL OFFICER OF CENTURA BANKS, INC.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 243,199
<INT-BEARING-DEPOSITS> 12,188
<FED-FUNDS-SOLD> 30,017
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,570,572
<INVESTMENTS-CARRYING> 235,523
<INVESTMENTS-MARKET> 236,269
<LOANS> 4,243,868
<ALLOWANCE> 59,206
<TOTAL-ASSETS> 6,669,028
<DEPOSITS> 4,821,036
<SHORT-TERM> 863,998
<LIABILITIES-OTHER> 85,243
<LONG-TERM> 396,702
0
0
<COMMON> 188,602
<OTHER-SE> 313,447
<TOTAL-LIABILITIES-AND-EQUITY> 6,669,028
<INTEREST-LOAN> 194,227
<INTEREST-INVEST> 51,067
<INTEREST-OTHER> 815
<INTEREST-TOTAL> 246,109
<INTEREST-DEPOSIT> 87,815
<INTEREST-EXPENSE> 116,758
<INTEREST-INCOME-NET> 129,351
<LOAN-LOSSES> 6,083
<SECURITIES-GAINS> (126)
<EXPENSE-OTHER> 114,221
<INCOME-PRETAX> 58,421
<INCOME-PRE-EXTRAORDINARY> 58,421
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,854
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.44
<YIELD-ACTUAL> 0
<LOANS-NON> 24,001
<LOANS-PAST> 9,060
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 12,500
<ALLOWANCE-OPEN> 58,715
<CHARGE-OFFS> 7,256
<RECOVERIES> 1,664
<ALLOWANCE-CLOSE> 59,206
<ALLOWANCE-DOMESTIC> 59,206
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 11,615
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 284,455
<INT-BEARING-DEPOSITS> 15,241
<FED-FUNDS-SOLD> 10,197
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,791,965
<INVESTMENTS-CARRYING> 122,521
<INVESTMENTS-MARKET> 124,598
<LOANS> 4,943,174
<ALLOWANCE> 66,991
<TOTAL-ASSETS> 7,599,722
<DEPOSITS> 5,550,183
<SHORT-TERM> 857,650
<LIABILITIES-OTHER> 113,746
<LONG-TERM> 488,613
0
0
<COMMON> 192,836
<OTHER-SE> 396,694
<TOTAL-LIABILITIES-AND-EQUITY> 7,599,722
<INTEREST-LOAN> 221,091
<INTEREST-INVEST> 58,978
<INTEREST-OTHER> 694
<INTEREST-TOTAL> 280,763
<INTEREST-DEPOSIT> 98,766
<INTEREST-EXPENSE> 135,723
<INTEREST-INCOME-NET> 145,040
<LOAN-LOSSES> 7,028
<SECURITIES-GAINS> 229
<EXPENSE-OTHER> 132,773
<INCOME-PRETAX> 70,322
<INCOME-PRE-EXTRAORDINARY> 70,322
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,531
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.74
<YIELD-ACTUAL> 4.43
<LOANS-NON> 30,022
<LOANS-PAST> 9,583
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 12,500
<ALLOWANCE-OPEN> 64,279
<CHARGE-OFFS> 8,398
<RECOVERIES> 2,014
<ALLOWANCE-CLOSE> 66,991
<ALLOWANCE-DOMESTIC> 66,991
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 11,389
</TABLE>
