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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-6136
CORUS BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0823592
(State of incorporation or organization) (I.R.S. Employer Identification No.)
3959 N. LINCOLN AVE., CHICAGO, ILLINOIS 60613-2431
(Address of principal executive offices) (Zip Code)
(773) 832-3088
(Registrant's telephone number)
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
As of July 30, 2004, the Registrant had 27,856,388 common shares, $0.05 par
value, outstanding.
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Corus Bankshares, Inc.
Index to Quarterly Report on Form 10-Q
JUNE 30, 2004
TABLE OF CONTENTS
PART I. -- FINANCIAL INFORMATION
ITEM 1. Financial Statements .............................................. 1
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................... 10
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk ........ 26
ITEM 4. Controls and Procedures ........................................... 27
PART II. -- OTHER INFORMATION
ITEM 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities ............................................... 27
ITEM 4. Submission of Matters to a Vote of Security Holders ............... 28
ITEM 6. Exhibits and Reports on Form 8-K .................................. 28
Signature ......................................................... 29
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CORUS BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (Unaudited)
JUNE 30 December 31 June 30
(dollars in thousands) 2004 2003 2003
---------- ---------- ----------
Assets
Cash and due from banks - non-interest bearing $ 66,037 $ 63,524 $ 57,079
Federal funds sold 1,262,000 682,000 489,925
Securities:
Available-for-sale, at fair value
Common stocks at the Bank Holding Company 208,081 188,844 160,031
(amortized cost $118,931, $95,661 and $92,902)
Other securities 45,589 244,062 121,980
(amortized cost $45,327, $242,308 and $118,599)
Held-to-maturity, at amortized cost 11,133 11,744 6,629
(fair value $11,155, $11,802 and $6,701)
---------- ---------- ----------
Total Securities 264,803 444,650 288,640
Loans, net of unearned income 2,229,448 2,433,771 2,032,640
Less: Allowance for loan losses 36,996 36,448 35,811
---------- ---------- ----------
Net Loans 2,192,452 2,397,323 1,996,829
Premises and equipment, net 26,011 26,313 27,295
Accrued interest receivable and other assets 20,658 25,497 22,885
Goodwill, net of accumulated amortization of $30,009 4,523 4,523 4,523
---------- ---------- ----------
Total Assets $3,836,484 $3,643,830 $2,887,176
========== ========== ==========
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 239,995 $ 227,960 $ 220,148
Interest-bearing 2,740,726 2,618,442 2,032,340
---------- ---------- ----------
Total Deposits 2,980,721 2,846,402 2,252,488
Other borrowings 33,956 36,403 42,190
Long-term debt - subordinated debentures 203,611 172,500 47,500
Accrued interest payable and other liabilities 57,018 42,345 36,475
---------- ---------- ----------
Total Liabilities 3,275,306 3,097,650 2,378,653
Shareholders' Equity
Common stock (par value $0.05 per share,
50,000,000 shares authorized: 27,853,848, 28,036,888
and 28,068,288 shares outstanding, respectively) 1,393 1,402 1,403
Surplus 17,300 16,942 13,696
Equity - options outstanding 6,193 5,670 4,963
Retained earnings 478,175 460,458 442,630
Accumulated other comprehensive income 58,117 61,708 45,831
---------- ---------- ----------
Total Shareholders' Equity 561,178 546,180 508,523
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $3,836,484 $3,643,830 $2,887,176
========== ========== ==========
June 30, 2003 data reflects a 100% stock dividend on 12/15/03 and has been
restated due to the impact of the adoption of Statement of Financial Accounting
Standards No. 123.
See accompanying notes.
1
CORUS BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
(in thousands, except per share data) 2004 2003 2004 2003
-------- -------- -------- --------
Interest, Loan Fees, and Dividend Income
Interest and fees on loans:
Taxable $ 44,347 $ 34,440 $ 90,197 $ 67,827
Tax-advantaged 28 42 59 85
Federal funds sold 2,606 929 4,091 1,895
Securities:
Taxable 1,126 1,936 3,056 4,321
Tax-advantaged 10 16 26 32
Dividends 1,561 1,306 3,135 2,557
Trading account 650 261 496 460
-------- -------- -------- --------
Total Interest, Loan Fees, and Dividend Income 50,328 38,930 101,060 77,177
Interest Expense
Deposits 12,413 10,459 24,256 21,592
Other borrowings 293 32 544 32
Long-term debt -- subordinated debentures 1,979 285 3,836 627
-------- -------- -------- --------
Total Interest Expense 14,685 10,776 28,636 22,251
Net Interest Income 35,643 28,154 72,424 54,926
Provision for Loan Losses - - - -
-------- -------- -------- --------
Net Interest Income After Provision for Loan Losses 35,643 28,154 72,424 54,926
Noninterest Income
Service charges on deposit accounts 2,920 2,927 5,852 5,922
Securities gains/(losses), net 12,636 766 13,890 665
Other income 578 665 1,129 1,392
-------- -------- -------- --------
Total Noninterest Income 16,134 4,358 20,871 7,979
Noninterest Expense
Salaries and employee benefits 9,666 8,223 19,293 16,473
Net occupancy 930 1,056 1,923 2,019
Data processing 970 681 1,700 1,320
Depreciation -- furniture & equipment 393 394 711 771
Other expenses 2,355 2,230 4,923 4,703
-------- -------- -------- --------
Total Noninterest Expense 14,314 12,584 28,550 25,286
-------- -------- -------- --------
Income Before Income Taxes 37,463 19,928 64,745 37,619
Income Tax Expense 12,887 6,636 22,234 12,534
-------- -------- -------- --------
Net Income $ 24,576 $ 13,292 $ 42,511 $ 25,085
======== ======== ======== ========
Net income per share:
Basic $ 0.88 $ 0.47 $ 1.52 $ 0.89
Diluted $ 0.85 $ 0.46 $ 1.47 $ 0.87
Cash dividends declared per common share $ 0.313 $ 0.250 $ 0.625 $ 0.330
Average common shares outstanding:
Basic 27,876 28,061 27,943 28,138
Diluted 28,772 28,607 28,831 28,673
2003 data reflects a 100% stock dividend on 12/15/03 and has been restated due
to the impact of the adoption of Statement of Financial Accounting Standards No.
123.
See accompanying notes.
2
CORUS BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2004
(Unaudited)
Accumulated
Equity - Other
Common Options Retained Comprehensive
(in thousands, except common share data) Stock Surplus Outstanding Earnings Income Total
-------- --------- ----------- ---------- ------------- ----------
Balance at December 31, 2003 $ 1,402 $16,942 $ 5,670 $ 460,458 $ 61,708 $ 546,180
Net income - - - 42,511 - 42,511
Other comprehensive income (net of income taxes):
Net change in unrealized gains on available-
for-sale securities - - - - (3,591) (3,591)
-----------
Comprehensive income 38,920
-----------
Stock options vested - - 716 - - 716
Retirement of 193,500 common shares (10) (55) - (7,371) - (7,436)
Shares issued under stock option plan,
10,460 common shares 1 322 (74) - - 249
Stock option settlements - (49) (35) - - (84)
Stock option expirations - 38 (58) - - (20)
Cash dividends declared on common stock,
$0.625 per common share - - - (17,423) - (17,423)
Other - 102 (26) - - 76
----------- ------------ ---------- ------------ ------------ -----------
Balance at June 30, 2004 $ 1,393 $17,300 $ 6,193 $ 478,175 $ 58,117 $ 561,178
=========== ============ ========== ============ ============ ===========
See accompanying notes.
SIX MONTHS ENDED JUNE 30, 2003
(Unaudited)
Accumulated
Equity - Other
Common Options Retained Comprehensive
(in thousands, except common share data) Stock Surplus Outstanding Earnings Income Total
-------- --------- ----------- ---------- ------------- ----------
Balance at December 31, 2002 $ 1,412 $16,668 $ - $ 430,482 $ 33,479 $ 482,041
Adoption of SFAS No. 123 - (3,115) 4,256 - - 1,141
Net income - - - 25,085 - 25,085
Other comprehensive income (net of income taxes):
Net change in unrealized gains on available-
for-sale securities - - - - 12,352 12,352
-----------
Comprehensive income 37,437
-----------
Stock options vested - - 855 - - 855
Retirement of 180,000 common shares (9) (61) (3,668) - (3,738)
Stock option exercises - 254 (84) - - 170
Stock option settlements - (50) (64) - - (114)
Cash dividends declared on common stock,
$0.330 per common share - - - (9,269) - (9,269)
----------- ------------ ---------- ------------ ------------ -----------
Balance at June 30, 2003 $ 1,403 $13,696 $ 4,963 $ 442,630 $ 45,831 $ 508,523
=========== ============ ========== ============ ============ ===========
2003 data reflects a 100% stock dividend on 12/15/03 and has been restated due
to the impact of the adoption of Statement of Financial Accounting Standards No.
123.
See accompanying notes.
3
CORUS BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
-------------------------------
(in thousands) 2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 42,511 $ 25,085
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,092 1,401
Amortization of investment and loan premiums, net 1,061 396
Deferred income tax expense (benefit) 115 (2,730)
Securities gains, net (13,890) (665)
Deferred compensation expense 2,585 1,466
Stock option expense 716 855
Decrease (Increase) in accrued interest receivable and other assets 5,430 (139)
Increase in accrued interest payable and other liabilities 11,541 353
----------- -----------
Net cash provided by operating activities 51,161 26,022
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of held-to-maturity securities 624 58
Proceeds from maturities of available-for-sale securities 195,953 148,733
Proceeds from sales of available-for-sale securities 123 10,883
Purchases of available-for-sale securities (13,370) (4,121)
Proceeds from trading activity, net 2,254 (333)
Proceeds from sales of non-hedge derivatives 7,800 -
Net decrease (increase) in loans 203,853 (293,091)
Bad debt recoveries 976 1,466
Purchases of premises and equipment, net (790) (376)
----------- -----------
Net cash provided by (used in) investing activities 397,423 (136,781)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposit accounts 134,319 192,715
Proceeds from issuance of long-term debt - subordinated debentures 25,000 47,500
Repayment of debt (2,000) (7,000)
(Decrease) increase in other borrowings, net (447) 1,080
Stock option exercises/settlements 221 56
Retirements of common shares (7,436) (3,738)
Cash dividends paid on common shares (15,728) (4,510)
----------- -----------
Net cash provided by financing activities 133,929 226,103
----------- -----------
Net increase in cash and cash equivalents 582,513 115,344
Cash and cash equivalents at January 1 745,524 431,660
----------- -----------
Cash and cash equivalents at June 30 $ 1,328,037 $ 547,004
=========== ===========
2003 data restated due to the impact of the adoption of Statement of Financial
Accounting Standards No. 123.
See accompanying notes.
4
1. Consolidated Financial Statements
The Consolidated Balance Sheets and Statements of Income, Cash Flows and
Changes in Shareholders' Equity are unaudited. The interim financial
statements reflect all adjustments (consisting only of normal recurring
accruals) that are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in Corus
Bankshares, Inc.'s consolidated financial statements for the three years
ended December 31, 2003 included in Corus' Annual Report on Form 10-K for
the year ended December 31, 2003. The results of operations for the interim
period may not be indicative of results to be expected for the full year.
In 2003, Corus adopted the fair value recognition provisions of SFAS No.
123, "Accounting for Stock-Based Compensation." Corus elected to adopt SFAS
No. 123 using the modified prospective method. Under this method, the
recognition of compensation cost in 2003 and 2004 is the same as what would
have been recognized had the provisions of SFAS No. 123 been applied since
the date of grant for all outstanding options. Corus' consolidated
financial statements as of June 30, 2003 and for the three and six months
then ended have been restated to reflect the adoption of the SFAS No. 123
effective January 1, 2003.
2. Segment Reporting
Management has determined that Commercial Lending, Consumer Lending, Retail
Banking, and Corporate Support are the primary operating segments of the
Company.
Commercial Lending derives its revenues from interest and fees on loans
made to businesses. The loan products include, among others, commercial
real estate mortgage term loans, construction loans, mezzanine loans, and
loans to customers in the check cashing industry.
Consumer Lending is composed of home equity, residential mortgage, and
other loans to individual borrowers. Revenues for this segment are from
interest and fees on the loans. Loan balances of this segment continue to
decline as the Bank implements plans to allow these portfolios to
"run-off."
The Retail Banking segment provides general banking services such as
checking, savings, money market, and time deposit accounts as well as a
variety of other services. Revenues for Retail Banking are derived from
credit for funds provided to the other segments, as well as fees related to
banking services.
Corporate Support includes the net effect of support units after revenue
and expense allocations, treasury management, and other corporate
activities. Revenues primarily relate to dividends from the Company's
investment in the common stocks of financial industry companies and the net
effect of transfer pricing related to loan and deposit balances. In
addition, revenues include gains/(losses) on equity securities and other
financial instruments. Corporate Support also incorporates the difference
between the Company's reported provision for credit losses, which is
determined in accordance with generally accepted accounting principles, and
the credit provisions allocated to the reportable business units.
Business line results are derived from the Company's business unit
profitability reporting system by specifically attributing managed balance
sheet assets, deposits, and other liabilities and their related income or
expense. Funds transfer pricing methodologies are utilized to allocate a
cost for funds used or credit for funds provided to all business line
assets and liabilities. The provision for credit losses recorded by each
operating segment is based on the net charge-offs incurred by each line of
business. Income and expenses directly related to each business line,
including fees, service charges, salaries and benefits, and other direct
expenses are accounted for within each segment's financial results in a
manner similar to the consolidated financial statements. Expenses incurred
by centrally managed operations units that directly support business lines'
operations are charged to the business lines based on standard unit costs
and volume measurements. Capital is allocated to each line of business,
including both on- and off-balance-sheet items, based on its inherent
risks, including credit, operational, and other business risks.
Designations, assignments, and allocations may change from time to time as
management accounting systems are enhanced or product lines change.
5
Following is a summary of significant segment information, as required by SFAS
No. 131:
FOR THE THREE MONTHS ENDED JUNE 30, 2004
(in thousands) Commercial Consumer Retail Corporate Inter-segment
Lending Lending Banking Support Eliminations Consolidated
---------- ---------- ---------- ---------- ------------- ------------
Total Revenues (1) $ 27,553 $ 725 $ 12,804 $ 10,695 $ - $ 51,777
Net Income 13,607 133 4,354 6,482 - 24,576
Total Average Assets 2,396,704 59,043 2,959,483 769,613 (2,337,154) 3,847,689
End of Period Goodwill - - 4,523 - - 4,523
FOR THE THREE MONTHS ENDED JUNE 30, 2003
(in thousands) Commercial Consumer Retail Corporate Inter-segment
Lending Lending Banking Support Eliminations Consolidated
---------- ---------- ---------- ---------- ------------- ------------
Total Revenues (1) $ 18,216 $ 1,185 $ 9,059 $ 4,052 $ - $ 32,512
Net Income 8,396 439 2,426 2,031 - 13,292
Total Average Assets 2,040,496 84,931 2,257,190 116,617 (1,789,531) 2,709,703
End of Period Goodwill - - 4,523 - - 4,523
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(in thousands) Commercial Consumer Retail Corporate Inter-segment
Lending Lending Banking Support Eliminations Consolidated
---------- ---------- ---------- ---------- ------------- ------------
Total Revenues (1) $ 55,211 $ 1,553 $ 23,922 $ 12,609 $ - $ 93,295
Net Income 27,064 396 7,958 7,093 - 42,511
Total Average Assets 2,496,908 60,935 2,896,519 588,021 (2,289,312) 3,753,071
End of Period Goodwill - - 4,523 - - 4,523
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(in thousands) Commercial Consumer Retail Corporate Inter-segment
Lending Lending Banking Support Eliminations Consolidated
---------- ---------- ---------- ---------- ------------- ------------
Total Revenues (1) $ 35,826 $ 2,574 $ 17,566 $ 6,939 $ - $ 62,905
Net Income 15,380 873 4,614 4,218 - 25,085
Total Average Assets 1,974,138 89,355 2,219,461 146,090 (1,757,614) 2,671,430
End of Period Goodwill - - 4,523 - - 4,523
(1) Net interest income before provision for loan losses plus noninterest
income.
The profitability of each of Corus' business segments may be affected by changes
in, and the level of, interest rates.
The direction and degree of this impact will vary based on the asset/liability
mix of each segment.
6
3. Derivatives
SFAS No. 133, as amended, establishes accounting and reporting standards
requiring that every derivative instrument be recorded on the balance sheet
as either an asset or liability measured at its fair value. Special
accounting for qualifying hedges ("hedge accounting") allows a derivative's
gains and losses to be either offset by the change in fair value of the
hedged risk or deferred through recognition in a component of other
comprehensive income. Those derivatives that do not qualify for hedge
accounting are required to be marked to market with the impact of the
market adjustment recorded directly to income.
Corus utilizes derivatives primarily to hedge its interest rate risk. This
is accomplished via interest rate swaps (to effectively convert fixed-rate
loans and brokered CDs to floating rate) and interest rate basis swaps (to
effectively convert LIBOR-based floating rate loans to Treasury-based
floating-rate loans). While these derivatives provide the desired economic
hedge to interest rate fluctuations, they do not all meet the strict
criteria required to qualify for hedge accounting. Nearly all of the
interest rate swaps qualified as fair value hedges and received hedge
accounting treatment. The interest rate basis swaps, which were sold in
April 2004, did not meet the strict criteria required to qualify for hedge
accounting.
Corus may also occasionally purchase and sell interest rate derivatives in
anticipation of trading gains. The impact of market adjustments, as well as
any gains or losses upon the sale of these swaps held for trading is
recorded directly into income.
The income statement impact and notional amounts related to both hedge and
non-hedge derivatives were as follows:
DERIVATIVE GAIN/(LOSS) THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
Income Statement ------------------------- ---------------------
(in thousands) Classification 2004 2003 2004 2003
- ------------------------------------------------------------------------------------------ ---------------------
Fair value hedge (fixed-to-floating swaps):
Loan hedge Interest Income $ 18 $ (9) $ 22 $ 15
Brokered CD hedge(1) Interest Expense - - - -
------- ------- ------- -------
Total fair value hedge 18 (9) $ 22 $ 15
Non-hedge:
Fixed-to-floating swaps Noninterest Income 1,881 5 1,630 10
Basis swaps Noninterest Income 23 1,024 1,446 2,635
------- ------- ------- -------
Total Non-hedge 1,904 1,029 3,076 2,645
------- ------- ------- -------
Total Derivative Gain/(Loss) $ 1,922 $ 1,020 $ 3,098 $ 2,660
======= ======= ======= =======
NOTIONAL AMOUNTS OF DERIVATIVES
(in thousands) JUNE 30, 2004 JUNE 30, 2003
- --------------------------------------------------------------------------------
Fair value hedge (fixed-to-floating swaps):
Loan hedge $ 5,567 $ 5,761
Brokered CD hedge(1) 427,503 122,000
Non-hedge:
Fixed-to-floating swaps 921 1,005
Basis swaps - 1,000,000
(1) These swaps qualify for the "shortcut method," as defined by SFAS No. 133.
Corus does not anticipate any income statement impact from the associated
mark-to-market adjustments.
7
4. Long-Term Debt -- Subordinated Debentures
From June 2003 to May 2004 Corus formed six wholly owned finance
subsidiaries for the sole purpose of issuing Trust Preferred securities.
The subsidiaries issued $197.5 million in Trust Preferred securities and
Corus, in turn, issued subordinated debentures to the trusts in the amount
of $203.6 million - the difference being Corus' investment in the
subsidiaries. The terms for both the Trust Preferred securities and the
subordinated debentures are essentially identical. The instruments all
mature 30 years after issuance, although the securities are callable
quarterly on or after the fifth year subsequent to issuance, or earlier in
the event of certain changes or amendments to regulatory requirements or
federal tax rules. The instruments accrue interest at rates ranging from
LIBOR plus 2.60% to LIBOR plus 3.10%, resetting quarterly. Combined
issuance fees totaled $1.6 million and are being amortized over the 30-year
periods.
5. Other Borrowings
On June 26, 2001, Corus entered into an agreement to borrow $70 million,
consisting of a term note in the amount of $50 million and a revolving note
line of credit in the amount of $20 million, both at an effective interest
rate equal to LIBOR plus 150 basis points, adjusted quarterly. In the
second quarter of 2004 Corus increased the revolving note line of credit to
$50 million.
Corus has extended the maturity date on both notes to June 25, 2006, and
either note may be prepaid without a material penalty. The term note
requires quarterly repayments of $1 million beginning September 30, 2001
and the revolving note is payable upon maturity. As of June 30, 2004, the
term note had an outstanding balance of $33.0 million and the revolving
credit line had no balance outstanding. Interest is payable quarterly. In
addition, a fee at an annual rate of 1/4% of the average unused revolving
note commitment is due quarterly. Interest and fees for both notes for the
six months ended June 30, 2004 totaled $501,000.
Among other restrictions, loan covenants require Corus to maintain
prescribed levels of capital, limit the level of nonperforming loans
relative to capital, and maintain a minimum ratio of the allowance for loan
losses to total loans. The debt is secured by 100% of the common stock of
the subsidiary bank. As of June 30, 2004, Corus was in compliance with all
loan covenants.
6. Net Income Per Share
Net income per share was calculated as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------- --------------------
(In thousands, except per share data) 2004 2003 2004 2003
-------------------- --------------------
Denominator for basic earnings per share:
Average common shares outstanding 27,876 28,061 27,943 28,138
Dilutive common stock options 896 546 888 535
------- ------- ------- -------
Denominator for diluted earnings per share 28,772 28,607 28,831 28,673
======= ======= ======= =======
Numerator: Net income attributable to common shares $24,576 $13,292 $42,511 $25,085
Net income per share:
Basic $ 0.88 $ 0.47 $ 1.52 $ 0.89
Diluted 0.85 0.46 1.47 0.87
2003 data reflects a 100% stock dividend on 12/15/03 and has been restated due
to the impact of the adoption of Statement of Financial Accounting Standards No.
123.
8
7. Employee Benefit Plans
The following reflects the disclosure requirements set forth by SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits."
Corus maintains a noncontributory defined benefit pension plan. No
contributions were made for the three months ended June 30, 2004 and 2003,
and Corus expects to make no contributions to the plan in 2004.
Net periodic benefit cost was comprised of the following:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------ ------------------
(in thousands) 2004 2003 2004 2003
----- ----- ----- -----
Service cost $ 197 $ 188 $ 394 $ 375
Interest cost 347 317 694 634
Expected return on plan assets (399) (313) (798) (625)
Net amortization and deferral 8 71 17 141
----- ----- ----- -----
Net Periodic Benefit Cost $ 153 $ 263 $ 307 $ 525
===== ===== ===== =====
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS SUMMARY
Corus Bankshares, Inc. is a one-bank holding company headquartered in Chicago,
Illinois. In addition to deposit gathering and servicing the check cashing
industry, Corus specializes in making commercial real estate and construction
loans with a concentration, by property type, in residential condominiums,
hotels, apartments, and office buildings. With regard to the remainder of its
loan portfolio, Corus is allowing its residential first mortgage and home equity
loan balances to run off.
SIGNIFICANT ACCOUNTING POLICIES
Management has determined that one particular accounting policy requires a high
level of judgment: the assessment of the allowance for loan losses.
The allowance for loan losses is based upon quarterly reviews. These reviews
include an assessment of the loan portfolio and include reviews of both specific
credits and an overall assessment. Specific reviews are performed in accordance
with SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," and can
result in a specific reserve for certain impaired loans. For those loans not
specifically reviewed, an assessment is performed, by loan type (i.e.,
commercial, commercial real estate, construction, home equity, residential first
mortgage, etc.) to determine an inherent loss rate. The inherent loss rate is
based primarily on a combination of historical loss experience and delinquency
levels (current vs. historical).
Additional factors are also considered including the level of problem and
potential problem loans, trends in volume and terms of loans, changes in risk
selection and underwriting standards, experience, ability and depth of lending
management, and economic and industry conditions.
The assessment as to the adequacy of the allowance for loan losses is grounded
by the assumption that historical experience is a good predictor of future
performance. This assumption, while supported by guidance provided by the
Financial Accounting Standards Board, the Office of the Comptroller of the
Currency, and the Securities & Exchange Commission, may not ultimately be
correct. In that event, estimates of inherent losses may materially differ from
actual results.
OPERATING RESULTS
For the three months ended June 30, 2004, net income was $24.6 million, or $0.85
per share on a diluted basis, compared to net income of $13.3 million, or $0.46
per share on a diluted basis, in 2003. For the six months ended June 30, 2004,
net income was $42.5 million, or $1.47 per share on a diluted basis, versus
$25.1 million, or $0.87 per share on a diluted basis, in 2003. 2003 data
reflects a 100% stock dividend on December 15, 2003 and has been restated due to
the impact of the adoption of SFAS No. 123.
Earnings for the second quarter of 2004 represented annualized returns of 17.8%
on equity (ROE) and 2.6% on assets (ROA) compared to 10.8% and 2.0% for the same
period in 2003. Earnings for the first six months of 2004 represented annualized
returns of 15.4% on equity and 2.3% on assets compared to 10.3% and 1.9% for the
same period in 2003.
10
AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN
- ------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED JUNE 30
------------------------------------------------------------------------
2004 2003
------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE INTEREST YIELD/ AVERAGE INTEREST YIELD/
(in thousands) BALANCE AND FEES COST BALANCE AND FEES COST
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Earning Assets:
Liquidity management assets (1) $ 1,280,628 $ 4,397 1.37% $ 605,433 $ 3,150 2.08%
Common stocks at the Bank Holding Company (2) 198,487 2,149 4.33% 148,308 1,798 4.85%
Loans, net of unearned income (3) 2,282,573 44,391 7.78% 1,870,849 34,505 7.38%
- ----------------------------------------------------------------------------------- -----------------------
Total earning assets 3,761,688 50,937 5.42% 2,624,590 39,453 6.01%
Noninterest-earning assets:
Cash and due from banks--noninterest bearing 74,736 69,124
Allowance for loan losses (36,849) (35,751)
Premises and equipment, net 26,259 27,686
Other assets, including goodwill 21,855 24,054
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 3,847,689 $2,709,703
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits--interest-bearing:
Money market deposits $ 1,241,403 $ 5,561 1.79% $ 907,320 $ 3,846 1.70%
Brokered certificates of deposit 560,464 3,366 2.40% 286,558 3,397 4.74%
Retail certificates of deposit 492,655 2,602 2.11% 395,279 2,642 2.67%
NOW deposits 248,330 674 1.09% 154,367 206 0.53%
Savings deposits 169,980 210 0.50% 168,112 368 0.88%
- ----------------------------------------------------------------------------------- -----------------------
Total interest-bearing deposits 2,712,832 12,413 1.83% 1,911,636 10,459 2.19%
Other borrowings 78,379 293 1.49% 39,235 285 2.90%
Long-term debt -- subordinated debentures 190,016 1,979 4.17% 3,049 32 4.19%
- ----------------------------------------------------------------------------------- -----------------------
Total interest-bearing liabilities 2,981,227 14,685 1.97% 1,953,920 10,776 2.21%
Noninterest-bearing liabilities and shareholders' equity:
Noninterest-bearing deposits 257,906 225,444
Other liabilities 55,621 36,658
Shareholders' equity 552,935 493,681
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 3,847,689 $2,709,703
====================================================================================================================================
Interest income and loan fees/average earning assets $ 3,761,688 $50,937 5.42% $2,624,590 $39,453 6.01%
Interest expense/average interest-bearing liabilities $ 2,981,227 14,685 1.97% $1,953,920 10,776 2.21%
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest spread $36,252 3.45% $28,677 3.80%
====================================================================================================================================
Net interest margin 3.85% 4.37%
====================================================================================================================================
Tax equivalent adjustments are based on a Federal income tax rate of 35%.
(1) Liquidity management assets include federal funds sold and securities held
at the subsidiary bank. Interest income on securities includes a tax
equivalent adjustment of $6,000 and $9,000 for 2004 and 2003, respectively.
(2) Dividends on the common stock portfolio include a tax equivalent adjustment
of $588,000 and $492,000 for 2004 and 2003, respectively.
(3) Interest income on tax-advantaged loans includes a tax equivalent
adjustment of $15,000 and $22,000 for 2004 and 2003, respectively.
Unremitted interest on nonaccrual loans is not included in the amounts.
Includes net interest income derived from interest rate swap contracts.
11
AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30
--------------------------------------------------------------------------
2004 2003
--------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE INTEREST YIELD/ AVERAGE INTEREST YIELD/
(in thousands) BALANCE AND FEES COST BALANCE AND FEES COST
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Earning Assets:
Liquidity management assets (1) $ 1,070,594 $ 7,684 1.44% $ 628,542 $ 6,726 2.14%
Common stocks at the Bank Holding Company (2) 196,926 4,316 4.38% 147,480 3,521 4.78%
Loans, net of unearned income (3) 2,385,203 90,287 7.57% 1,804,829 67,958 7.53%
- ------------------------------------------------------------------------------------ ---------------------
Total earning assets 3,652,723 102,287 5.60% 2,580,851 78,205 6.06%
Noninterest-earning assets:
Cash and due from banks--noninterest bearing 85,361 74,008
Allowance for loan losses (36,737) (36,227)
Premises and equipment, net 26,275 27,931
Other assets, including goodwill 25,449 24,867
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 3,753,071 $2,671,430
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits--interest-bearing:
Money market deposits $ 1,217,342 $10,624 1.75% $ 914,500 $ 7,860 1.72%
Brokered certificates of deposit 575,949 7,119 2.47% 393,669 5,532 2.81%
Retail certificates of deposit 456,181 4,831 2.12% 265,644 7,111 5.35%
NOW deposits 240,712 1,265 1.05% 142,577 320 0.45%
Savings deposits 168,578 417 0.49% 165,694 769 0.93%
- ------------------------------------------------------------------------------------ ---------------------
Total interest-bearing deposits 2,658,762 24,256 1.82% 1,882,084 21,592 2.29%
Other borrowings 57,129 544 1.91% 42,481 627 2.95%
Long-term debt -- subordinated debentures 183,926 3,836 4.17% 1,533 32 4.17%
- ------------------------------------------------------------------------------------ ---------------------
Total interest-bearing liabilities 2,899,817 28,636 1.98% 1,926,098 22,251 2.31%
Noninterest-bearing liabilities and shareholders' equity:
Noninterest-bearing deposits 248,493 223,097
Other liabilities 53,940 33,772
Shareholders' equity 550,821 488,463
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 3,753,071 $2,671,430
====================================================================================================================================
Interest income and loan fees/average earning assets $ 3,652,723 $102,287 5.60% $2,580,851 $78,205 6.06%
Interest expense/average interest-bearing liabilities $ 2,899,817 28,636 1.98% $1,926,098 22,251 2.31%
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest spread $73,651 3.62% $55,954 3.75%
====================================================================================================================================
Net interest margin 4.03% 4.34%
====================================================================================================================================
Tax equivalent adjustments are based on a Federal income tax rate of 35%.
(1) Liquidity management assets include federal funds sold and securities held
at the subsidiary bank. Interest income on securities includes a tax
equivalent adjustment of $14,000 and $17,000 for 2004 and 2003,
respectively.
(2) Dividends on the common stock portfolio include a tax equivalent adjustment
of $1.2 million and $964,000 for 2004 and 2003, respectively.
(3) Interest income on tax-advantaged loans includes a tax equivalent
adjustment of $31,000 and $46,000 for 2004 and 2003, respectively.
Unremitted interest on nonaccrual loans is not included in the amounts.
Includes net interest income derived from interest rate swap contracts.
12
Net Interest Income and Net Interest Margin
Net interest income, which is the difference between interest income and fees on
earning assets and interest expense on deposits and borrowings, is the major
source of earnings for Corus. The related net interest margin represents net
interest income as a percentage of the average earning assets during the period.
For the three and six months ended June 30, 2004, Corus' net interest income
grew to $35.6 million and $72.4 million, respectively, compared to $28.2 million
and $54.9 million for the same periods in 2003. These increases are attributable
primarily to increases in average outstanding loans during the two periods.
Increases in loan fees of $3.8 million and $5.6 million for the three and six
months ended June 30, 2004, respectively, to $10.3 million and $19.2 million,
respectively, also contributed to the growth in net interest income.
For the three and six months ended June 30, 2004, Corus' net interest margin
decreased by 52 and 31 basis points, respectively, compared to the prior year.
The decrease is primarily a function of Corus taking advantage of opportunities
to secure funding at favorable rates and spreads in advance of anticipated loan
growth. While providing Corus with additional liquidity, this had a negative
impact on the net interest margin.
Changes in market interest rates will also have an impact on Corus net interest
margin. See the Market Risk Management section under Item 3 of this filing for
discussion of Corus' projected sensitivity to changes in interest rates.
Noninterest Income
For the three and six months ended June 30, 2004, noninterest income increased
by $11.8 million and $12.9 million, respectively, compared to the prior year.
The increase mainly resulted from higher net securities gains, as described
below.
Securities Gains/(Losses), net
For the three and six months ended June 30, 2004, Corus recorded net securities
gains of $12.6 million and $13.9 million, respectively, compared to gains of
$766,000 and $665,000 in the same periods of 2003. The following details the net
securities gains/(losses) by source:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------- --------------------
(in thousands) 2004 2003 2004 2003
------------------- --------------------
Gains on common stocks at Bank Holding Company $10,070 $ - $10,151 $ 7,315
Trading account gains/(losses), net 2,512 (263) 2,254 (333)
Mark-to-market adjustments on non-hedge derivatives 41 1,029 1,472 2,645
Sales of securities at subsidiary bank 13 - 13 -
Charge for "other than temporary" impairment - - - (8,962)
------- ------- ------- -------
Total securities gains/(losses), net $12,636 $ 766 $13,890 $ 665
======= ======= ======= =======
Gains on common stocks at Bank Holding Company
Gains on common stocks at the Bank Holding Company relate to the common stock
portfolio of various financial industry companies held at the Bank Holding
Company. Gains or losses are recognized when either the investment is sold or
when the stock held is acquired by another company. Several of the companies in
which Corus holds investments have been, or are expected to be acquired in 2004.
See the Common Stock Portfolio section for additional details.
Trading account gains/(losses), net
From time to time, the Bank trades Treasury securities, agency securities,
and/or interest rate derivatives. For the three- and six-month periods ending
June 30, 2004, the Company realized net pre-tax gains of $2.5 million and $2.3
million, respectively, relating to this trading.
13
Mark-to-market adjustments on non-hedge derivatives
For the three and six months ended June 30, 2004, the Bank recorded gains of
$41,000 and $1.5 million, respectively, from what we refer to as mark-to-market
adjustments on non-hedge derivatives. Due to their unusual nature, the basis for
these gains requires additional explanation.
Like many banks, Corus utilizes derivatives to hedge its interest rate risk.
This is accomplished primarily via interest rate swaps (to effectively convert
fixed-rate loans and brokered CDs to floating rate) and interest rate basis
swaps (to effectively convert LIBOR-based floating rate loans to Treasury-based
floating-rate loans).
As of January 1, 2001, virtually all companies were required to adopt new
derivative accounting rules (known as SFAS No. 133). These rules require that
all derivative instruments be included on the balance sheet at market value. In
addition, the rules provide that if derivatives are "paired-off" against
specific assets and/or liabilities ("the hedged items") and also pass an
additional succession of tests, then the income statement impact of any periodic
changes in the value of the derivatives are effectively offset by changes in the
value of the hedged items. Such derivatives are afforded what is termed "hedge
accounting" treatment.
"Hedge accounting" rules are enormously complex, but suffice it to say not all
of the derivatives held by Corus, primarily the basis swaps, qualify for hedge
accounting treatment and thus the impact of changes in the market value of these
instruments is reflected on our income statement as securities gains/(losses).
Corus has recorded these gains/(losses) each quarter since the adoption of SFAS
No. 133. In April 2004, Corus made the decision to sell its entire portfolio of
basis swaps. Mark-to-market adjustments related to the remaining swaps are
expected to be immaterial.
Charge for "other than temporary" impairment
In the first quarter of 2003, Corus recorded a charge of $9.0 million related to
"other than temporary" declines in value of certain common stocks held at the
Bank Holding Company. It is important to point out that this charge was not as a
result of the Company selling the associated stocks, but rather an accounting
entry with no cash flow or tax implications.
While we are required to report securities losses from these "other than
temporary" declines in value, we are not allowed to report securities gains when
those same securities recover in value unless the security is either sold or in
some instances the underlying corporation is acquired. Case in point, as of June
30, 2004, Corus recognized the $5.0 million recovery in the price of FleetBoston
Financial Corp. (previously written down as an OTT decline in value) due to
Fleet's acquisition by Bank of America Corp. However, Corus is not permitted to
record a gain for the $3.6 million of price appreciation realized related to the
impairment charge on the other securities, but must instead record it as an
unrealized gain (as Other Comprehensive Income in Shareholders' Equity).
14
Noninterest Expense
For the three and six months ended June 30, 2004, noninterest expense increased
by $1.7 million and $3.3 million, respectively, compared to the prior year, due
to increases in salaries and benefits expense and data processing costs.
The increase of $1.4 million and $2.8 million in salaries and benefits for the
three and six months ended June 30, 2004, respectively, is largely attributable
to the increase in commercial loan officer compensation of $1.0 million and $2.0
million, respectively. For the full year, commercial loan officer compensation
expense, which is on a commission basis, is expected to increase by $2.5 million
as compared to 2003, due to anticipated loan growth. Salaries, other than those
attributable to commercial loan officers, increased by $330,000 and $539,000 for
the three and six months ended June 30, 2004.
The increase in data processing expense is attributable to non-recurring
conversion costs of $293,000 related to the implementation of a new core data
processing system in the second quarter of 2004. The conversion to the new data
processing system will result in significant cost savings. For all of 2004,
total data processing expense is estimated to be approximately $2.5 million, a
savings of $200,000 compared to 2003. Further savings are anticipated in the
future with 2005 costs estimated to be $1.5 to $1.8 million.
FINANCIAL CONDITION
Earning Assets
The following table details the composition of Corus' earning assets:
(in thousands) JUNE 30, 2004 December 31, 2003 June 30, 2003
AMOUNT PERCENT Amount Percent Amount Percent
--------------------- -------------------- ------------------------
Loans, net of unearned income $2,229,448 59% $2,433,771 68% $2,032,640 72%
Federal funds sold 1,262,000 34 682,000 19 489,925 17
Common stocks at the Bank Holding Company 208,081 6 188,844 6 160,031 6
Securities other than common stocks 56,722 1 255,806 7 128,609 5
--------------------- -------------------- -----------------------
Total $3,756,251 100% $3,560,421 100% $2,811,205 100%
===================== ==================== =======================
Loans
The following table details the composition of Corus' loan portfolio:
(in thousands) JUNE 30, 2004 December 31, 2003 June 30, 2003
AMOUNT PERCENT Amount Percent Amount Percent
---------------------- ---------------------- ------------------------
Loans:
Commercial real estate:
Non-construction $ 909,597 41% $1,207,015 50% $1,188,809 58%
Construction 1,141,432 51 1,005,206 41 652,944 32
Mezzanine 44,515 2 53,790 2 33,349 2
---------------------- ----------------------- -----------------------
Total commercial real estate 2,095,544 94% 2,266,011 93% 1,875,102 92%
Commercial 74,521 3 98,621 4 75,743 4
Residential real estate and other 59,383 3 69,139 3 81,795 4
---------------------- ----------------------- -----------------------
Total Loans $2,229,448 100% $2,433,771 100% $2,032,640 100%
====================== ===================== =======================
Commercial Real Estate Lending
Commercial real estate loans are comprised of non-construction, construction,
and mezzanine loans. The non-construction loans are of relatively short
duration, rarely more than five years in length, and usually shorter. Some would
call these "bridge" loans or "mini-perms", but the meaning of these labels is
not standardized in the lending industry. These loans are fully funded, or
nearly so, when the loan closes. Construction loans typically have maturities of
24 to 36 months
15
and are funded throughout the term as construction progresses. Mezzanine loans
are essentially second mortgage loans on commercial real estate projects, almost
always subordinate to a Corus construction or non-construction loan (as opposed
to a third party's). Interest rates charged for mezzanine loans are considerably
higher than those charged for typical commercial real estate loans, but they
also carry additional risk.
The following table is a summary of commercial real estate loans and unfunded
commitments. Including commitments, the commercial real estate loan portfolio
totals $4.1 billion.
JUNE 30, 2004 December 31, 2003 June 30, 2003
(in thousands) AMOUNT PERCENT Amount Percent Amount Percent
--------------------- ---------------------- -------------------------
Funded commercial
real estate loans, net $2,095,544 52% $2,266,011 59% $1,875,102 61%
Commitments:
Loans - unfunded portion 1,387,141 34 1,168,115 31 1,049,032 34
Commitment Letters 544,840 13 375,865 10 122,675 4
Letters of Credit 30,170 1 10,502 - 20,682 1
-------------------- ---------------------- ----------------------
Total $4,057,695 100% $3,820,493 100% $3,067,491 100%
==================== ====================== ======================
While committed amounts are useful for period-to-period comparisons, caution
should be used in attempting to use commitments as a basis for predicting future
outstanding balances.
Commercial Real Estate Loans -- Originations
Corus originated 44 loans with commitments aggregating $1.2 billion in the six
months of 2004. This compares to 35 loans aggregating $734 million in the first
six months of 2003, an increase of 66%.
Commercial Real Estate Loans -- Pay-offs
Total pay-offs in the first six months of 2004 were $1.1 billion. This compares
to total payoffs of less than $400 million in the first six months of 2003. The
timing of loan pay-offs is inherently difficult to predict.
16
The following tables break out commercial real estate loans by size, property
type, and location:
COMMERCIAL REAL ESTATE LOANS - BY SIZE
- --------------------------------------------------------------------------------
(dollars in millions) AS OF JUNE 30, 2004
--------------------------------------------------------
TOTAL COMMITMENT(1) FUNDED BALANCE
# OF ----------------------------------------------
LOANS AMOUNT % AMOUNT %
------ ----------------------------------------------
$60 million and above 20 $1,487 37% $ 607 29%
$40 million to $60 million 16 759 19 402 19
$20 million to $40 million 40 1,093 27 576 27
$1 million to $20 million 80 705 17 499 24
Less than $1 million 156 36 1 34 2
Deferred fees/other discounts N/A (22) (1) (22) (1)
------ ----------------------------------------------
Total 312 $4,058 100% $2,096 100%
===== ==============================================
COMMERCIAL REAL ESTATE LOANS - BY PROPERTY TYPE
- --------------------------------------------------------------------------------
(dollars in millions) AS OF JUNE 30, 2004
--------------------------------------------------------
TOTAL COMMITMENT(1) FUNDED BALANCE
# OF ----------------------------------------------
LOANS AMOUNT % AMOUNT %
------ ----------------------------------------------
Condominiums 67 $2,466 61% $ 970 46%
Hotel 37 609 15 446 21
Office 16 454 11 222 11
Rental apartments 12 382 10 341 17
Warehouse/Light industrial 9 54 1 29 1
Nursing homes 6 47 1 47 2
Vacant land 5 25 1 22 1
Retail 3 6 - 6 -
Other 1 1 - 1 -
Loans less than $1 million 156 36 1 34 2
Deferred fees/other discounts N/A (22) (1) (22) (1)
----- ----------------------------------------------
Total 312 $4,058 100% $2,096 100%
===== ==============================================
(1) Includes both funded and unfunded commitments, letters of credit, and
outstanding commitment letters.
17
COMMERCIAL REAL ESTATE LOANS - BY MAJOR METROPOLITAN AREA
- --------------------------------------------------------------------------------
(dollars in millions) AS OF JUNE 30, 2004
---------------------------------------------------------
TOTAL COMMITMENT(1) FUNDED BALANCE
# OF -----------------------------------------------
LOANS AMOUNT % AMOUNT %
------ -----------------------------------------------
California:
Los Angeles 22 $ 495 12% $ 290 14%
San Francisco 8 240 6 150 7
San Diego 8 175 4 78 4
Sacramento 1 33 1 33 1
----- --------- ---------- --------- -------
California Total 39 943 23 551 26
Washington, D.C.(2) 29 905 22 369 18
New York City 18 588 15 242 11
Miami 11 466 12 250 12
Chicago 30 422 10 294 14
Chicago-Loans less than $1 million 144 33 1 31 1
Las Vegas 4 171 4 2 -
Texas:
Houston 4 84 2 81 4
Dallas 2 23 1 14 1
----- --------- ---------- --------- -------
Texas Total 6 107 3 95 5
Other (3) 31 445 11 284 14
Deferred fees/other discounts N/A (22) (1) (22) (1)
----- --------- ---------- --------- -------
Total 312 $4,058 100% $2,096 100%
===== ========= ========== ========= =======
(1) Includes both funded and unfunded commitments, letters of credit, and
outstanding commitment letters.
(2) Includes northern Virginia and Maryland loans.
(3) No other metropolitan area exceeds three percent of the total.
18
Commercial Real Estate Loans - Loans Pending
Finally, the following table presents a comparison of Corus' loans pending
listed in descending order with respect to stage of completion. In other words,
a prospective loan categorized as Commitment Accepted is essentially one step
away from closing while a prospective loan classified as Discussion Pending is
in its earliest stages.
COMMERCIAL REAL ESTATE LOANS PENDING
- --------------------------------------------------------------------------------
(dollars in millions) JUNE 30, 2004 DECEMBER 31, 2003 JUNE 30, 2003
------------------------ ------------------------ ----------------------
# OF COMMITMENT # OF COMMITMENT # OF COMMITMENT
LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT
------- ----------- ------- ---------- ------- ----------
Commitment Accepted 2 $ 67 3 $ 94 5 $ 86
Commitment Offered 9 478 6 282 1 37
Application Received 15 643 9 305 12 393
Application Sent Out 8 403 8 451 7 126
Term Sheet Issued 35 2,286 36 1,715 37 1,201
Discussion Pending 2 73 5 115 - -
-- ------- -- ------ -- ------
Total 71 $ 3,950 67 $2,962 62 $1,843
== ======= == ====== == ======
In total, loans pending have increased significantly from both the most recent
year-end and from a year ago. For perspective, for the loans pending at June 30,
2003, 90% of the loans that had reached the Application Received stage
ultimately closed.
Loan Participations
While Corus generally prefers to initiate and fund its own loans without
participations either bought or sold, there are limited instances where Corus
has either purchased or sold interests in certain loans. As of June 30, 2004,
Corus had purchased participations in two loans. Corus' total commitment on
these loans is $98.6 million, or 2.4% of Corus' total commercial real estate
portfolio. As of June 30, 2003, loan participations sold were immaterial.
Other Lending
Commercial loans are primarily loans to Corus' customers in the check cashing
industry. Balances fluctuate based on seasonal cash requirements and are
generally secured by the equity of the check cashing operation.
With regard to the remaining portfolio, residential first mortgage and home
equity loan balances continue to decline as the Bank implements plans to allow
these portfolios to "run-off." Minimal new originations are expected.
19
Common Stocks
At June 30, 2004, Corus had investments in the common stocks of 30 financial
industry companies with a current market value totaling $208.1 million,
including net unrealized gains of $89.1 million. These investments are included
in the available-for-sale classification. The following is a list of Corus'
holdings, by market value, as of June 30, 2004:
TICKER MARKET PERCENTAGE OF
CORPORATION SYMBOL SHARES HELD VALUE PORTFOLIO
- -----------------------------------------------------------------------------------------------
(dollars in thousands)
Bank of America Corp. BAC 335,297 $ 28,373 13.6%
Comerica Inc. CMA 339,300 18,621 8.9
Charter One Financial Inc. CF 338,536 14,960 7.2
JP Morgan Chase & Co. JPM 319,100 12,371 5.9
MAF Bancorp Inc. MAFB 281,550 12,017 5.8
Amsouth Bancorporation ASO 466,015 11,869 5.7
Citigroup Inc. C 225,000 10,462 5.0
Wachovia Corp. WB 223,840 9,961 4.8
Fremont General Corp. FMT 469,500 8,287 4.0
South Trust Corp. SOTR 195,900 7,603 3.7
US Bancorp USB 268,870 7,410 3.6
Merrill Lynch & Co. Inc. MER 132,000 7,125 3.4
Bank One Corp. ONE 137,700 7,023 3.4
City National Corp. CYN 84,000 5,519 2.7
Compass Bancshares Inc. CBSS 108,750 4,676 2.2
Morgan Stanley Dean Witter & Co. MWD 82,000 4,327 2.1
Amcore Financial Inc. AMFI 142,500 4,298 2.1
Union Planters Corp. UPC 143,554 4,279 2.1
Hibernia Corp. HIB 154,200 3,747 1.8
Associated Banc Corp. ASBC 121,179 3,591 1.7
Suntrust Banks Inc. STI 48,000 3,120 1.5
Bank of New York Co. Inc. BK 100,000 2,948 1.4
Mellon Financial Corp. MEL 100,000 2,933 1.4
Banknorth Group Inc. BNK 90,000 2,923 1.4
Mercantile Bankshares Corp. MRBK 58,500 2,739 1.3
National City Corp. NCC 74,520 2,609 1.3
Commerce Bancshares Inc. CBSH 28,491 1,309 0.6
Provident Bancshares Corp. PBKS 43,757 1,262 0.6
BB&T Corp. BBT 33,736 1,247 0.6
First Source Corp. SRCE 18,992 472 0.2
----------------------
Total $ 208,081 100.0%
======================
During the three and six months ended June 30, 2004, Corus received dividends on
the stock portfolio of $1.6 million and $3.1 million compared to $1.3 million
and $2.6 million during the same periods of 2003.
On April 1, 2004, Bank of America Corp. (BAC) acquired FleetBoston Financial
Corp. (FBF) in a stock-for-stock transaction. Corus received 235,424 additional
shares of BAC, bringing its total position in BAC to 335,297 shares. Corus' book
basis in the FBF shares before the acquisition was $9.0 million whereas the
market value of the 235,424 BAC shares on April 1, 2004 was $19.1 million.
Therefore, the acquisition gave rise to a book gain of $10.1 million as
securities gains in the second quarter of 2004. It should be noted that this
gain has neither a cash flow nor net tax impact; this is GAAP treatment for
accounting for stock-for-stock acquisitions.
20
Subsequent Events
Subsequent to quarter-end, two additional stock-for-stock transactions involving
companies of which Corus owns stock were completed. JP Morgan Chase & Co. (JPM)
acquired Bank One Corp. (ONE), which gave rise to a book gain of $3.0 million.
Regions Financial Corp. (RF) acquired Union Planters Corp. (UPC), which caused a
book gain of $1.3 million. In addition, early in the third quarter of 2004 Corus
sold the stock of Charter One Financial Inc. (CF) resulting in a gain of $10.0
million. These gains, totaling $14.3 million, will be reported in the third
quarter.
In the fourth quarter of 2004, Corus expects to report a gain from Wachovia
Corp's (WB) announced plans to acquire South Trust Corp. (SOTR). Corus currently
owns shares of both Wachovia and South Trust. Under the announced terms and at
WB's price as of June 30, 2004, the acquisition would cause a book gain of $4.5
million.
Nonperforming Assets
Nonperforming assets were as follows:
JUNE 30 December 31 June 30
(in thousands) 2004 2003 2003
-------- ----------- --------
Total nonperforming loans:
Nonaccrual $ 7,090 $ 7,896 $ 8,376
Troubled debt restructurings 8,496 6,436 11,290
Loans 90 days or more past due 2,367 1,236 3,431
------- ------- -------
Total nonperforming loans 17,953 15,568 23,097
Other real estate owned 130 66 207
------- ------- -------
Total nonperforming assets $18,083 $15,634 $23,304
======= ======= =======
Nonperforming loans/Total loans 0.81% 0.64% 1.14%
Nonperforming assets/Total assets 0.47% 0.43% 0.81%
Total nonperforming assets increased compared to December 2003 by $2.4 million
to $18.1 million. The increase is attributable to the addition of a $3.9 million
troubled debt restructuring. The only other item of significance is a $7.0
million non-construction commercial real estate loan that was placed on
nonaccrual in May 2003. Management believes both of these loans are well secured
and no loss is expected.
21
Allowance for Loan Losses
The allowance for loan losses is based on management's analysis of individual
loans, prior and current loss experience, delinquency levels, overall growth in
the portfolio, current economic conditions, and other factors. Management
believes that the level of the allowance for loan losses was adequate at June
30, 2004. A reconciliation of the activity in the allowance for loan losses is
as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
(in thousands) JUNE 30 JUNE 30
---------------------------- ----------------------------
2004 2003 2004 2003
---------------------------- ----------------------------
Balance at beginning of period $ 36,767 $ 35,517 $ 36,448 $ 36,629
Provision for loan losses - - - -
Less charge-offs:
Residential real estate and other 193 340 428 736
Overdraft--Check Cashing - - - 1,105
Commercial--Check Cashing - 7 - 443
Commercial real estate - - - -
---------------------------- ----------------------------
Total charge-offs 193 347 428 2,284
---------------------------- ----------------------------
Add recoveries:
Residential real estate and other 422 585 976 1,070
Overdraft--Check Cashing - 22 - 360
Commercial - 34 - 36
Commercial real estate - - - -
---------------------------- ----------------------------
Total recoveries 422 641 976 1,466
---------------------------- ----------------------------
Net recoveries/(charge-offs) 229 294 548 (818)
---------------------------- ----------------------------
Balance at June 30 $ 36,996 $ 35,811 $ 36,996 $ 35,811
============================ ============================
Loans at June 30 $ 2,229,448 $ 2,032,640 $ 2,229,448 $ 2,032,640
============================ ============================
Allowance as a percentage of loans 1.66% 1.76% 1.66% 1.76%
============================ ============================
Net (Charge-off) / Recovery - 10 Year History
CHECK CONSUMER
COMMERCIAL CASHING RESIDENTIAL
REAL ESTATE INDUSTRY COMMERCIAL REAL ESTATE STUDENT
(in thousands) LOANS LOANS (1) LOANS LOANS LOANS TOTAL
- ----------------------------------------------------------------------------------------------------------------
2004 (YTD) $ - $ - $ - $ 502 $ 46 $ 548
2003 - (950) 191 488 90 (181)
2002 17 (3,227) 8 (674) 48 (3,828)
2001 10 - (1) (1,865) 2,712 856
2000 42 - (104) (2,473) 10,046 7,511
1999 62 - (19) (2,536) (1,190) (3,683)
1998 148 - 7 (3,945) (1,097) (4,887)
1997 (155) - (3) (8,167) (9,683) (18,008)
1996 820 - 678 (5,945) (4,525) (8,972)
1995 (240) - (200) 120 24 (296)
---------------------------------------------------------------------------------------
Total $ 704 $ (4,177) $ 557 $ (24,495) $ (3,529) $ (30,940)
=======================================================================================
(1) Represents loans to Corus' customers in the check cashing industry
Corus has had particularly impressive results with commercial real estate
lending. In fact, we have actually had, in total, net recoveries on this
portfolio over the past 10 years. While our commercial real estate portfolio
continues to show minimal delinquencies and virtually no losses, we recognize
this sort of performance cannot persist indefinitely.
22
The check cashing industry loan charge-offs relate to a specific control
weakness, which has since been corrected. Finally, Corus made the decision in
2000 to exit the consumer residential real estate and student lending businesses
and the portfolios have since either been sold or are running off.
Deposits
The following table details the composition of deposit products by type:
JUNE 30 December 31 June 30
(in thousands) 2004 2003 2003
-------------------- ------------------- --------------------
Money Market $ 1,239,645 42% $ 1,208,784 42% $ 919,582 41%
Retail certificates of deposit 541,570 18 422,091 15 425,021 19
Brokered certificates of deposit 537,644 18 596,831 21 339,468 15
NOW 252,420 8 223,590 8 180,236 8
Demand 239,995 8 227,960 8 220,148 10
Savings 169,447 6 167,146 6 168,033 7
------------------- ------------------- --------------------
Total $ 2,980,721 100% $ 2,846,402 100% $ 2,252,488 100%
=================== =================== ====================
Funding/Liquidity
Corus' policy is to ensure the availability of sufficient funds to accommodate
the needs of borrowers and depositors at all times. This objective is achieved
primarily through the maintenance of liquid assets. Liquid assets are defined as
federal funds sold and marketable securities that can be sold quickly without a
material loss of principal.
The liquidity to fund loan commitments will first come from a combination of
available liquidity, normal paydowns/payoffs of the existing loan portfolio, and
net retail deposit growth. To the extent that total loans outstanding grow in
excess of the aforementioned funding sources, management expects to supplement
funding with the use of brokered certificates of deposit ("BRCD"). In order to
avoid the liquidity risk of an overly significant portion of BRCD maturing
during any given year, Corus works to have the BRCD maturities staggered,
ranging from 1 to 7 years. To further mitigate liquidity risk, Corus' liquidity
policy requires that the Bank hold more liquid assets as the level of BRCD
increases. As of June 30, 2004, BRCD totaled $538 million. The Bank has
established a BRCD limit such that BRCD will not exceed 41% of total deposits
(i.e., retail deposits and BRCD). Based on current deposit levels, this implies
a maximum amount of BRCD of $1.7 billion.
Capital
Regulatory capital and the associated ratios for Corus and its subsidiary bank
as of June 30, 2004 are presented below:
Tier 1 Risk-Based Total Risk-Based
Tier 1 Leverage (1) Capital (2) Capital (3)
--------------------------------------------------------------------------
(in thousands) Amount Ratio Amount Ratio Amount Ratio
--------------------------------------------------------------------------
Minimum ratios for well-capitalized 5.00% 6.00% 10.00%
Corus Bankshares, Inc. $664,537 17.70% $664,537 18.13% $773,151 21.10%
Subsidiary Bank $611,289 16.76% $611,289 17.42% $648,285 18.48%
(1) Tier 1 capital, which is shareholders' equity less goodwill, disallowed
portion of deferred income taxes and unrealized gains on available-for-sale
securities; computed as a ratio to quarterly average assets less goodwill,
disallowed portion of deferred income taxes, and unrealized gains on
available-for-sale securities.
(2) Tier 1 capital; computed as a ratio to risk-adjusted assets.
(3) Tier 1 capital plus qualifying loan loss allowance and SFAS No. 115 gain;
computed as a ratio to risk-adjusted assets.
23
Commercial Real Estate Risk Disclosure
The following disclosure is not computed in accordance with Generally Accepted
Accounting Principles ("GAAP") and is considered a non-GAAP disclosure.
Management believes that this presentation, while not in accordance with GAAP,
provides useful insight into how management analyzes and quantifies risk and
determines the appropriate level of capital.
Management has made a concerted effort to distill the numerous objective, as
well as subjective, risks inherent in the commercial real estate ("CRE") loans
we originate into a rigorous system to analyze and quantify risk. At its core,
this system takes the form of management and loan officers estimating a loan's
Probability of Default ("POD") and its Loss Given Default ("LGD") if a serious
recession should occur. This point bears repeating - the POD and LGD estimates
are not based on today's market conditions, instead they are arrived at by
"stressing" all major assumptions regarding the cash flow and/or values of the
underlying real estate down to levels that could manifest themselves during a
"serious" recession. As a proxy, we use, among other things, the extreme
declines in CRE property values witnessed during the late 1980's and early
1990's. Typically, we assume that office and hotel projects will be worth only
50% to 60% of their cost (not appraised value) and we typically assume that
rental and for-sale housing will be worth 60% to 80% of cost. Keep in mind that
while these are the typical discounts, each loan is analyzed individually and
may have discounts larger or smaller than mentioned above. Lastly, it is
important to realize that we could well have nonperforming loans and/or
charge-offs in economic conditions other than what might be characterized as
"serious." While Corus has attempted to be conservative in its assessment of
potential defaults and losses, it is conceivable that actual defaults and/or
losses may be greater, perhaps materially, than estimated.
Following is a table that summarizes the total size of our CRE loan portfolio,
the weighted average POD and LGD percentages and the resulting implied CRE loans
that could default and losses that could occur.
(in millions) JUNE 30 December 31 June 30
2004 2003 2003
-----------------------------------------
CRE LOANS & UNFUNDED COMMITMENTS
CRE loans outstanding $ 2,096 $ 2,266 $ 1,875
Unfunded Commitments 1,962 1,554 1,192
-----------------------------------------
CRE Loans + Unfunded Commitments $ 4,058 $ 3,820 $ 3,067
=========================================
POTENTIAL DEFAULTS & LOSSES
CRE Loans + Unfunded Commitments $ 4,058 $ 3,820 $ 3,067
Weighted average Probability of Default (POD) (1) 15.0% 14.4% 14.4%
-----------------------------------------
Potential CRE Loans that could default 609 550 442
Weighted average Loss Given Default (LGD) (1) 16.0% 16.4% 16.5%
-----------------------------------------
Potential losses that could occur $ 97 $ 90 $ 73
=========================================
NONPERFORMING & NONACCRUAL LOANS
Potential CRE loans that could default $ 609 $ 550 $ 442
Potential losses that could occur (97) (90) (73)
-----------------------------------------
Potential remaining CRE NPL balances 512 460 369
Percentage that could be nonaccrual(2) 100% 100% 100%
-----------------------------------------
Potential nonaccrual CRE NPL balances $ 512 $ 460 $ 369
=========================================
(1) The POD and LGD estimates are not based on today's market conditions,
instead they are arrived at by "stressing" all major assumptions regarding
the cash flow and/or values of the underlying real estate down to levels
that could manifest themselves during a "serious" recession.
(2) Not necessarily all nonperforming loans would be nonaccrual, however in
order to be conservative we will assume 100% of the above nonperforming
loans are nonaccrual.
24
FORWARD-LOOKING STATEMENTS
This filing contains forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be identified by, among other things, the use of
forward-looking terms such as "may," "intends," "expects," "anticipates,"
"estimates," "projects," "targets," "forecasts" "seeks," or "attempts" or the
negative of such terms or other variations on such terms or comparable
terminology. By their nature, these statements are subject to numerous
uncertainties that could cause actual results to differ materially from those in
the statements. Important factors that might cause Corus' actual results to
differ materially include, but are not limited to, the following:
o the general state of the economy and, together with all aspects of
Corus' business that are affected by changes in the economy, the
impact that changes in rates have on Corus' net interest margin;
o Corus' ability to continue its strong loan originations and, in turn,
its ability to increase the commercial real estate loan portfolio;
o Corus' ability to access cost-effective funding, especially with
brokered certificates of deposit, to fund marginal loan growth;
o Corus' ability to limit losses associated with nonperforming loans;
o changes in management's estimate of the adequacy of the allowance for
loan losses;
o the impact of competitors' pricing initiatives on loan and deposit
products;
o the extent of defaults and losses given default, and the resulting
lost interest income from such defaults; and
o changes in the laws, regulations and policies governing financial
services companies.
Corus undertakes no obligation to revise or update these forward-looking
statements to reflect events or circumstances after the date of this filing.
25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Management
Corus' operations are subject to risk resulting from interest rate fluctuations
to the extent that there is a difference between the amount of interest-earning
assets and the amount of interest-bearing liabilities that are
prepaid/withdrawn, mature, or reprice in specified periods. The principal
objective of Corus' asset/liability management activities is to provide maximum
levels of net interest income while maintaining acceptable levels of interest
rate and liquidity risk and facilitating funding requirements. Corus utilizes an
interest rate sensitivity model as the primary quantitative tool in measuring
the amount of interest rate risk that is present at the end of each quarter. The
model uses income simulation to quantify the effects of various interest rate
scenarios on the projected net interest income over a five-year period. Factored
into the modeling is the use of derivative financial instruments, which may
include basis swaps, interest rate swaps, floors and options.
Corus' projected sensitivity to interest rates is dependent on both the degree
and direction of the projected rate movement as well as the absolute level of
rates. For example, under both downward rates shocks and moderate upward rate
shocks (+100bp and less) the Bank is net liability-sensitive. This means that,
compared to stable rates, we project our net interest margin will expand when
rates fall and contract when rates rise moderately. As we have discussed at
length previously, this liability-sensitivity is caused primarily by
"in-the-money" interest rate floors embedded within many of our floating-rate
commercial real estate loans which effectively "fix" the rate on the loans when
short-term interest rates are low. These quasi-fixed loans limit the downside
when rates are falling, but also limit the upside when rates rise. The Bank's
interest rate sensitivity model projects continued growth in commercial real
estate loans and assumes that a growing percentage of the Bank's future
commercial real estate loans will have "in-the-money" floors (assuming
short-term rates stay at such historically low levels).
For more significant upward rates shocks, we project the Bank will return to its
historic net asset-sensitive position. Once the short-term interest rate rise
sufficiently whereby the interest floors discussed above are "out-of-the-money"
the Bank will have more purely variable-rate assets than variable-rate
liabilities (this is due primarily to the Bank's large equity base and
administered-rate deposits that we project will not reprice in lock-step with
changes in rates coupled with the primarily variable-rate nature of the Bank's
assets).
The change in the Bank's interest rate risk profile from December 31, 2003 is
largely a function of two factors. First, the rise in interest rates since
year-end has reduced the projected impact of interest rate floors - the primary
cause of the Bank's liability-sensitivity. Second, the Bank's deposit base has
grown primarily from an increase in certificates of deposit with terms of six
and twelve months. The model assumes that these deposits are generally invested
in variable-rate assets.
Interest rate sensitivity was as follows:
Rate Shock Amount (1) -75 bp -50 bp 0 bp +50 bp +100 bp +200 bp +300 bp
------ ------ ---- ------ ------- ------- -------
Percent change in the next 12 month's
net interest income vs. constant rates
June 30, 2004 2.5% 2.7% - (2.4)% (0.9)% 4.6% 9.7%
December 31, 2003 1.5% 1.3% - (2.8)% (4.3)% (1.5)% 2.7%
(1) These "shocks" represent hypothetical instantaneous and sustained changes
from current rates.
Corus is also exposed to price risk with its common stock portfolio in financial
industry companies valued at $208.1 million as of June 30, 2004, including net
unrealized gains of $89.1 million. This price risk would impact the net income
of Corus, in the form of securities losses, should unrealized losses on
individual securities be determined to be "other than temporary." This price
risk would also affect any gains or losses that may be realized on the sale of
certain equity securities in the future.
26
ITEM 4. CONTROLS AND PROCEDURES
Under the supervision and with the participation of the Company's management,
the Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of June 30, 2004. Based on and as of the time of such
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures were effective in timely
alerting them to material information relating to the Company (including its
consolidated subsidiary) required to be included in the Company's reports that
it files with or submits to the Securities and Exchange Commission under the
Securities Exchange Act of 1934.
During the quarter ended June 30, 2004, the Company implemented a new core data
processing system. As part of the conversion process, systems were tested,
material items were reconciled and reporting was validated. As a result,
management does not believe that the conversion materially affected the
Company's internal control over financial reporting. There have been no other
changes in the Company's internal control over financial reporting that occurred
during the Company's quarter ended June 30, 2004 that have materially affected,
or are reasonably likely to materially affect, the Company's internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
- ----------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d)
Total Number of Shares Maximum Number of
Total Number Average Purchased as Part of Shares that May Yet Be
of Shares Price Paid Publicly Announced Plans Purchased Under the
Period Purchased per Share or Programs Plans or Programs
- ----------------------------------------------------------------------------------------------------------------------
April 1-30, 2004 - $ - - 1,000,000
- ----------------------------------------------------------------------------------------------------------------------
May 1-31, 2004 52,900 $ 37.73 52,900 947,100
- ----------------------------------------------------------------------------------------------------------------------
June 1-30, 2004 1,000 $ 39.00 1,000 946,100
- ----------------------------------------------------------------------------------------------------------------------
Total 53,900 $ 37.75 53,900 946,100
- ----------------------------------------------------------------------------------------------------------------------
On April 21, 2004, Corus' Board of Directors approved a new program to
repurchase up to 1,000,000 common shares of Corus stock. The program expires in
April 2009. Coincident with the approval of the new plan, the repurchase program
that was approved by the Board of Directors in November 1999 was terminated.
27
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Shareholders was held on April 21, 2004.
(c) At the Annual Meeting of Shareholders the following matter was submitted to
a vote of the shareholders:
(1) The election of seven directors to the Board of Directors to hold office
until the next annual meeting of shareholders and until their successors
are elected and qualify:
Director Votes For Votes Withheld
-------- --------- --------------
Joseph C. Glickman 23,375,069 2,902,837
Robert J. Glickman 25,506,042 2,771,864
Robert J. Buford 25,974,403 303,503
Steven D. Fifield 22,544,459 3,733,447
Rodney D. Lubeznik 25,982,203 295,703
Michael J. McClure 22,562,010 3,715,896
Peter C. Roberts 25,984,603 293,303
(2) The ratification of the appointment of Ernst & Young LLP as Corus'
independent auditors for the fiscal year ending December 31, 2004:
Votes For Votes Against Abstentions
--------- ------------- -----------
26,201,205 50,638 26,063
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3(i) Amended and Restated Articles of Incorporation are incorporated
herein by reference from Exhibit 3(i) to the Form 10-Q filing
dated May 8, 2003
3(ii) Amended and Restated By-Laws are incorporated herein by reference
from Exhibit 3(ii) to the Form 10-K/A filing dated March 19, 2004
10.1 Commission Program for Commercial Loan Officers(1)(2)(3)
10.2 The 1999 Stock Option Plan is incorporated herein by reference
from the Form S-8 filing dated April 30, 1999(2)
15 Letter re unaudited interim financial information(1)
31.1 Rule 13a-14(a)/15d-14(a) Certification(1)
31.2 Rule 13a-14(a)/15d-14(a) Certification(1)
32 Section 1350 Certifications(1)
99 Independent Accountants' Review Report(1)
(1) Filed herewith
(2) Management contract or compensatory plan or arrangement
(3) Confidential treatment requested for portions of this document.
(b) Reports on Form 8-K.
A Form 8-K was filed under items 7 and 12 on April 16, 2004 regarding
publicly released information on the Company's financial condition and
results of operations for the quarter ended March 31, 2004.
28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORUS BANKSHARES, INC.
(Registrant)
August 9, 2004 By: /s/ Michael E. Dulberg
------------------------------
Michael E. Dulberg
Senior Vice President and Chief
Accounting Officer
(Principal Accounting Officer and duly
authorized Officer of Registrant)
29