FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2002 Commission File Number 0-11172
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0738665
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1230 MAIN STREET
COLUMBIA, SOUTH CAROLINA 29201
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 733-2659
---------------
NO CHANGE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 2002
----- -------------------------------
VOTING COMMON STOCK, $5.00 PAR VALUE 875,396 SHARES
NON-VOTING COMMON STOCK, $5.00 PAR VALUE 36,409 SHARES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED (DOLLARS IN THOUSANDS, EXCEPT PAR VALUES)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2002 2001 2001
--------------- -------------- ---------------
ASSETS
Cash and due from banks $ 146,033 $ 157,998 $ 133,670
Federal funds sold 74,800 97,900 97,600
--------------- -------------- ---------------
Total cash and cash equivalents 220,833 255,898 231,270
--------------- -------------- ---------------
Investment securities:
Held-to-maturity, at amortized cost (fair value;
September 30, 2002-$22,220; December 31,
2001-$23,729; and September 30, 2001-$26,260) 21,582 23,309 25,710
Available-for-sale, at fair value 861,418 876,446 852,678
--------------- -------------- ---------------
Total investment securities 883,000 899,755 878,388
--------------- -------------- ---------------
Gross loans 2,369,770 2,262,283 2,223,081
Less: Allowance for loan losses (42,285) (40,259) (39,629)
--------------- -------------- ---------------
Net loans 2,327,485 2,222,024 2,183,452
--------------- -------------- ---------------
Premises and equipment 106,927 97,497 98,132
Interest receivable 18,877 20,011 23,901
Intangible assets 37,586 43,648 45,970
Other assets 44,587 35,847 33,237
--------------- -------------- ---------------
TOTAL ASSETS $ 3,639,295 $ 3,574,680 $ 3,494,350
=============== ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Demand $ 568,107 $ 507,930 $ 492,639
Time and savings 2,553,315 2,507,024 2,439,272
--------------- -------------- ---------------
Total deposits 3,121,422 3,014,954 2,931,911
Securities sold under agreements to repurchase 146,023 214,023 220,235
Long-term debt 50,963 50,963 50,963
Other liabilities 24,509 23,825 25,780
--------------- -------------- ---------------
TOTAL LIABILITIES 3,342,917 3,303,765 3,228,889
--------------- -------------- ---------------
Commitments and contingencies -- -- --
STOCKHOLDERS' EQUITY:
Preferred stock 3,173 3,201 3,201
Non-voting common stock - $5.00 par value, authorized
1,000,000; issued and outstanding September 30, 2002,
December 31, 2001 and September 30, 2001 - 36,409 182 182 182
Voting common stock - $5.00 par value, authorized 2,000,000;
issued and outstanding September 30, 2002 - 875,914;
December 31, 2001 - 889,540; and September 30, 2001 4,380 4,448 4,478
- 895,654
Surplus 65,081 65,081 65,081
Undivided profits 203,269 178,399 170,968
Accumulated other comprehensive income, net of taxes 20,293 19,604 21,551
--------------- -------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 296,378 270,915 265,461
--------------- -------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,639,295 $ 3,574,680 $ 3,494,350
=============== ============== ===============
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
Page 2
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
- ---------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(DOLLARS IN THOUSANDS-EXCEPT PER SHARE DATA)
FOR THE FOR THE
QUARTER ENDED NINE MONTTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ----------------------
2002 2001 2002 2001
-------- -------- ---------- ----------
INTEREST INCOME:
Interest and fees on loans $ 42,213 $ 45,582 $ 126,016 $ 135,681
Interest on investment securites:
Taxable 9,362 10,915 29,289 31,770
Non-taxable 141 237 456 774
Federal funds sold 326 1,422 1,993 7,065
-------- -------- ---------- ----------
Total interest income 52,042 58,156 157,754 175,290
-------- -------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits 13,110 22,133 42,490 70,274
Interest on short-term borrowings 714 1,705 2,399 7,507
Interest on long-term debt 1,050 1,050 3,149 3,149
-------- -------- ---------- ----------
Total interest expense 14,874 24,888 48,038 80,930
-------- -------- ---------- ----------
Net interest income 37,168 33,268 109,716 94,360
Provision for loan losses 3,518 2,583 6,979 5,186
-------- -------- ---------- ----------
Net interest income after
provision for loan losses 33,650 30,685 102,737 89,174
-------- -------- ---------- ----------
NONINTEREST INCOME:
Service charges on deposits 8,000 6,706 22,674 19,054
Commissions and fees from fiduciary activities 1,013 702 2,664 1,975
Fees for other customer services 359 303 1,098 875
Mortgage income 1,617 1,022 3,705 2,892
Bankcard discount and fees 1,583 1,480 4,311 4,075
Insurance premiums 708 629 1,741 1,544
Gain on sale of investment securities 228 886 228 3,537
Other 566 505 1,696 1,377
-------- -------- ---------- ----------
Total noninterest income 14,074 12,233 38,117 35,329
-------- -------- ---------- ----------
NONINTEREST EXPENSE:
Salaries and employee benefits 16,749 13,638 46,887 40,604
Net occupancy expense 2,301 2,091 6,689 5,773
Furniture and equipment expense 1,534 1,471 4,395 4,323
Bankcard processing fees 1,674 1,428 4,558 4,117
Data processing fees 2,586 2,516 7,745 7,101
Professional services 442 398 1,240 1,542
Amortization expense 3,074 2,587 8,200 7,898
Donations 146 1,332 252 2,084
Other 5,129 5,130 15,187 14,829
-------- -------- ---------- ----------
Total noninterest expense 33,635 30,591 95,153 88,271
-------- -------- ---------- ----------
Income before income tax expense 14,089 12,327 45,701 36,232
Income tax expense 4,720 3,791 15,310 11,799
-------- -------- ---------- ----------
NET INCOME $ 9,369 $ 8,536 $ 30,391 $ 24,433
======== ======== ========== ==========
NET INCOME PER COMMON SHARE -
BASIC AND DILUTED $ 10.19 $ 9.10 $ 32.92 $ 25.99
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING-BASIC AND DILUTED 915,576 933,857 919,321 934,882
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
Page 3
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME - UNAUDITED
(DOLLARS IN THOUSANDS)
NON- ACCUMULATED TOTAL
VOTING VOTING OTHER STOCK-
PREFERRED COMMON COMMON UNDIVIDED COMPREHENSIVE HOLDERS'
STOCK STOCK STOCK SURPLUS PROFITS INCOME/(LOSS) EQUITY
----------- ------- -------- -------- ----------- --------------- ----------
Balance at December 31, 2000 $ 3,219 $ 182 $ 4,499 $ 65,081 $ 148,502 $ 12,210 $ 233,693
Comprehensive income:
Net income 24,433 24,433
Change in unrealized gain
on investment securities
available-for-sale, net of
taxes of $5,029 9,341 9,341
----------
Total comprehensive income 33,774
----------
Reacquired preferred stock (18) (1) (19)
Reacquired voting common stock (21) (1,168) (1,189)
Common stock dividends (674) (674)
Preferred stock dividends (124) (124)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at September 30, 2001 3,201 182 4,478 65,081 170,968 21,551 265,461
Comprehensive income:
Net income 9,443 9,443
Change in unrealized gain
on investment securities
available-for-sale, net of
benefit of $1,048 (1,947) (1,947)
----------
Total comprehensive income 7,496
----------
Reacquired voting common stock (30) (1,746) (1,776)
Common stock dividends (224) (224)
Preferred stock dividends (42) (42)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at December 31, 2001 3,201 182 4,448 65,081 178,399 19,604 270,915
Comprehensive income:
Net income 30,391 30,391
Change in unrealized gain
on investment securities
available-for-sale, net of
taxes of $371 689 689
----------
Total comprehensive income 31,080
----------
Reacquired preferred stock (28) (3) (31)
Reacquired voting common stock (68) (4,722) (4,790)
Common stock dividends (673) (673)
Preferred stock dividends (123) (123)
----------- ------- -------- -------- ----------- --------------- ----------
Balance at September 30, 2002 $ 3,173 $ 182 $ 4,380 $ 65,081 $ 203,269 $ 20,293 $ 296,378
=========== ======= ======== ======== =========== =============== ==========
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
Page 4
FIRST CITIZENS BANCORPORATION OF SOUTH CAROLINA AND SUBSIDIARY
============================================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (DOLLARS IN THOUSANDS)
FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
2002 2001
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 30,391 $ 24,433
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 6,979 5,186
Depreciation and amortization 13,848 12,939
Amortization of investment securities 743 455
Change in deferred taxes (528) (60)
Loss/(Gain) on sale of premises and equipment 53 (84)
Decrease in accrued interest receivable 1,134 212
Decrease in accrued interest payable (3,940) (289)
Origination of mortgage loans held-for-resale (210,427) (207,097)
Proceeds from sales of mortgage loans held-for-resale 242,294 185,096
Gain on sales of mortgage loans held-for-resale (1,624) (1,184)
Gain on sales of investment securities (228) (3,537)
(Increase)/Decrease in other assets (8,822) 170
Increase/(Decrease) in other liabilities 4,624 (5,338)
----------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 74,497 10,902
======================
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (144,840) (122,079)
Calls, maturities and prepayments of investment securities, available-for-sale 357,716 356,658
Purchases of investment securities, available-for-sale (341,400) (484,428)
Calls, maturities and prepayments of investment securities, held-to-maturity 3,231 12,348
Purchases of investment securities, held-to-maturity (2,247) (4,994)
Proceeds from sales of premises and equipment 90 693
Purchases of premises and equipment (15,221) (10,504)
Decrease/(Increase) in other real estate owned 454 (572)
Increase in intangible assets (196) (5,572)
Purchase of institutions, net of cash acquired - 45,980
----------------------
NET CASH USED IN INVESTING ACTIVITIES (142,413) (212,470)
======================
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 106,468 330,702
Decrease in federal funds purchased and securities sold
under agreements to repurchase (68,000) (148,983)
Cash dividends paid (796) (798)
Cash paid to reacquire preferred stock (31) (19)
Cash paid to reacquire common stock (4,790) (1,189)
----------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 32,851 179,713
======================
NET DECREASE IN CASH AND CASH EQUIVALENTS (35,065) (21,855)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 255,898 253,125
----------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 220,833 $ 231,270
======================
Page 5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies of First Citizens
Bancorporation of South Carolina, Inc. ("Bancorporation") is set forth in Note 1
to the Consolidated Financial Statements in Bancorporation's Annual Report on
Form 10-K for 2001. The significant accounting policies used during the current
quarter are unchanged from those disclosed in the 2001 Annual Report.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial preparation. In the opinion of management, all material
adjustments necessary to present fairly the financial position of Bancorporation
as and for each of the periods presented, and all adjustments comprising normal
recurring accruals necessary for a fair presentation of the consolidated
financial statements have been recorded. Certain amounts in prior periods have
been reclassified to conform to the 2002 presentation. Such reclassifications
had no effect on shareholders' equity or net income.
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations ("SFAS No. 141")
and No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). SFAS 141
requires all business combinations initiated after September 30, 2001 to be
accounted for using the purchase method. Under SFAS No. 142, goodwill and
intangible assets with indefinite lives are no longer amortized, but are
reviewed annually (or more frequently if impairment indicators arise) for
impairment. Separable intangible assets that are not deemed to have indefinite
lives will continue to be amortized over their useful lives (but with no maximum
life). The amortization provisions of SFAS No. 142 apply to goodwill and
intangible assets acquired after September 30, 2001. Bancorporation adopted
SFAS No. 142 effective January 1, 2002, the impact of which was not material.
NEW ACCOUNTING STANDARDS
In June of 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This Statement amends SFAS No. 19, "Financial Accounting and
Reporting by Oil and Gas Producing Companies." SFAS No. 143 applies to all
entities and addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs will be accounted for consistently, resulting in
comparability among financial statements of different entities. This Statement
is effective for financial statements issued for fiscal years beginning after
June 15, 2002. Bancorporation will adopt SFAS No. 143 on January 1, 2003. The
adoption of this Statement is not expected to have a material impact on
Bancorporation's financial position or results of operations.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
was issued during the third quarter of 2001. SFAS No. 144 supersedes both SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which previously governed impairment of long-lived
assets, and the portions of APB Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Usual and Infrequently Occurring Events and Transactions," which
addressed the disposal of a business segment. This Statement improves financial
reporting by requiring one accounting model be used for long-lived assets to be
disposed of by sale and by broadening the presentation of discontinued
operations to include more disposal transactions. Bancorporation adopted SFAS
No. 144 effective January 1, 2002, and it did not have a material impact on
Bancorporation's financial position or results of operations.
In May of 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as
of April 2002." This Statement rescinds Statements No. 4 and 64, "Reporting
Gains and Losses from Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements," respectively, and restricts the classification of early
extinguishment of debt as an extraordinary item to the provisions of APB Opinion
No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequent Occurring
Events and Transactions." The Statement also rescinds Statement No, 44,
"Accounting for Intangible Assets of Motor Carriers," which is no longer
necessary because the transition to the provisions of the Motor Carrier Act of
1980 is complete. The Statement also amends Statement No. 13, "Accounting for
Leases," to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. Finally, the Statement makes various technical corrections to
existing pronouncements, which are not considered substantive.
Page 6
The provisions of this Statement relating to the rescission of Statement No. 4
and 64 are effective for fiscal years beginning after May 15, 2002.
Additionally, there is retroactive application for any gain or loss on
extinguishment of debt that was classified as extraordinary in a prior period
that does not meet the criteria in Opinion No. 30, requiring reclassification of
the gain or loss with the exception of the rescission of Statement No. 4 and 64,
which will eliminate the extraordinary treatment for extinguishment of debt,
will be adopted January 1, 2003. Bancorporation does not expect the remaining
provisions of this Statement to have a material impact on Bancorporation's
financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 provides guidance on the
recognition and measurement of liabilities for costs associated with exit or
disposal activities. SFAS No. 146 is effective for exit or disposal activities
that are initiated after December 31, 2002. The adoption of this Statement is
not expected to have a material impact on Bancorporation's financial position or
results of operations.
In June 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial
Institutions, an amendment of FASB Statements No. 72 and 144 and Interpretation
No. 9." Except for transactions between two or more mutual enterprises, this
Statement removes financial institutions from the scope of both Statement No. 72
and Interpretation 9 and requires that those transactions be accounting for in
accordance with SFAS No. 141 and 142. Additionally, this Statement amends SFAS
No. 144 to include in its scope long-term customer-relationship intangible
assets of financial institutions. Bancorporation adopted the Statement effective
October 1, 2002, and it did not have a material impact on Bancorporation's
financial position or results of operations.
FORWARD-LOOKING STATEMENTS
This discussion may contain statements that could be deemed forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934 and the Private Securities Litigation Reform Act, which statements are
inherently subject to risks and uncertainties. Forward-looking statements are
statements that include projections, predictions, expectations or beliefs about
future events or results or otherwise are not statements of historical fact.
Such statements are often characterized by the use of the qualifying words (and
their derivatives) such as "expect," "believe," "estimate," "plan," "project,"
"anticipate," or other statements concerning opinions or judgments of
Bancorporation and its management about future events. Factors that could
influence the accuracy of such forward-looking statements include, but are not
limited to, the financial success or changing strategies of Bancorporation's
customers, actions of government regulators, the level of market interest rates,
and general economic conditions.
GOODWILL AND OTHER INTANGIBLES (DOLLARS IN THOUSANDS)
In accordance with SFAS No.142, no goodwill amortization was recorded for the
nine months ended September 30, 2002. Goodwill amortization expense for the
nine months and quarter ended September 30, 2001 was $171 and $57, respectively.
At September 30, 2002, the total carrying amount of intangible assets not
subject to amortization was $3,217. The discontinuation of amortization of
goodwill has had an immaterial effect on Bancorporation's consolidated financial
statements.
The following table relates to the carrying values of core deposit intangibles
recorded in Bancorporation's consolidated financial statements, all of which are
being amortized:
AS OF AS OF AS OF
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2002 2001 2001
--------------- -------------- ---------------
CORE DEPOSIT INTANGIBLES:
Gross carrying value $ 102,498 $ 102,362 $ 102,326
Accumulated amortization (68,129) (61,930) (59,624)
--------------- -------------- ---------------
Balance at end of period $ 34,369 $ 40,432 $ 42,702
=============== ============== ===============
Amortization expense on core deposit intangibles was $6,258 and $7,316 for the
nine months ended September 30, 2002 and 2001, respectively. Amortization
expense on core deposit intangibles was $1,973 and $2,382 for the quarter ended
September 30, 2002 and 2001, respectively.
Page 7
Bancorporation projects the following aggregate amortization expense:
2002 $8,088
2003 $6,905
2004 $6,398
2005 $4,999
2006 $3,325
MERGERS AND ACQUISITIONS
There were no mergers or acquisitions completed during the quarter ended
September 30, 2002.
On July 3, 2002, Bancorporation entered into an Agreement and Plan of
Reorganization and Merger with CB Financial Corp. ("CBF"). CBF is a Georgia
corporation, which operates as a registered bank holding company and owns all
the outstanding shares of common stock of Citizens Bank, an insured,
state-chartered Georgia bank headquartered in Warrenton, Georgia. Citizens Bank
operates two banking offices in McDuffie and Warren counties. As of September
30, 2002, CBF has total unaudited deposits and loans of $40,000 and $19,000,
respectively. The merger was completed effective October 1, 2002.
On July 15, 2002, First-Citizens Bank and Trust of South Carolina ("Bank")
entered into a Branch Purchase and Assumption Agreement to acquire two branches
from an unrelated financial institution with estimated total deposits and loans
of $17,000 and $3,000, respectively. On October 25, 2002, the Bank completed
its acquisition of one of the aforementioned branches. Total deposits and loans
acquired were $9,101 and $2,213, respectively. The acquisition of the other
branch is expected to be completed during the first quarter of 2003.
On September 17, 2002, the Bank signed a Letter of Intent to merge with First
Banks, Inc. ("First Banks"), a two-bank holding company headquartered in
Carnesville, Georgia, which is the parent company of First Bank and Trust and
The Bank of Toccoa. As of September 30, 2002, First Banks had total unaudited
consolidated assets, net loans and deposits of $253,157, $189,451 and $209,298,
respectively.
SUBSEQUENT EVENTS (DOLLARS IN THOUSANDS)
On October 23, 2002, Bancorporation's Board of Directors declared a $.25
dividend on common stock to shareholders of record on November 1, 2002, payable
November 15, 2002.
Page 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
SUMMARY (DOLLARS IN THOUSANDS)
Net income for the quarter and nine months ended September 30, 2002 totaled
$9,369, or $10.19 per common share and $30,391, or $32.92 per common share,
respectively. Net income for the quarter and nine months ended September 30,
2001 totaled $8,536, or $9.10 per common share and $24,433, or $25.99 per common
share, respectively.
The primary factors affecting the increase in net income for the quarter ended
September 30, 2002 were a $2,965 or 9.66% increase in net interest income after
provision for loan losses, and a $1,841 or 15.05% increase in noninterest
income. These favorable changes were partially offset by a $3,044 or 9.95%
increase in noninterest expense, and a $929 or 24.51% increase in income tax
expense.
The primary factors affecting the increase in net income for the nine months
ended September 30, 2002 were a $13,563 or 15.21% increase in net interest
income after provision for loan losses, and a $2,788 or 7.89% increase in
noninterest income. These favorable changes were partially offset by a $6,882
or 7.80% increase in noninterest expense, and a $3,511 or 29.76% increase in
income tax expense.
Return on average stockholders' equity and average assets are key measures of
earnings performance. Return on average stockholders' equity for the quarter
ended September 30, 2002 and September 30, 2001 was 12.57% and 12.98%,
respectively. Return on assets increased from .97% to 1.01% for the quarter
ended September 30, 2001 and September 30, 2002, respectively. The increase in
return on assets was due to a 18 basis point increase in net interest margin
after provision for loan losses to average assets, partially offset by a 4 basis
point decline in non-interest margin (noninterest expense less noninterest
income) to average assets and an increase of 10 basis points in income tax
expense to average assets.
Return on average stockholders' equity for the nine months ended September 30,
2002 and September 30, 2001 was 14.24% and 13.02%, respectively. The increase
was primarily the result of an increase in return on assets from .95% to 1.11%
for the nine months ended September 30, 2001 and September 30, 2002,
respectively. The increase in return on assets was due to a 27 basis point
increase in net interest margin after provision for loan losses to average
assets. This was partially offset by a 2 basis point decline in noninterest
margin to average assets and an increase of 10 basis points in income tax
expense to average assets.
Individual components of net income are discussed further in the following
sections.
Page 9
Table 1 provides summary information on selected ratios, average and
year-to-date balances.
TABLE 1: SELECTED SUMMARY INFORMATION (DOLLARS IN THOUSANDS)
AS OF AND FOR THE AS OF AND FOR THE
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
SELECTED RATIOS: 2002 2001 2002 2001
----------- ----------- ----------- -----------
Return on average assets 1.01% .97% 1.11% .95%
Return on average stockholders' equity 12.57% 12.98% 14.24% 13.02%
Return on average common stockholders' equity 12.70% 13.14% 14.40% 13.19%
Yield on average interest-earning assets (tax
equivalent) 4.43% 4.16% 4.40% 4.06%
Average loans to average deposits 75.27% 74.69% 73.54% 75.01%
Nonperforming assets to total loans .30% .25% .31% .25%
Allowance for loan losses to total loans 1.78% 1.78% 1.78% 1.78%
Allowance for loan losses to nonperforming assets N/A N/A 5.99x 7.29x
Average stockholders' equity to average total
assets 8.10% 7.46% 7.79% 7.32%
Common stockholders' equity to total assets 8.06% 7.51% 8.06% 7.51%
Dividends per common share $ 0.25 $ 0.25 $ 0.75 $ 0.75
Total risk-based capital ratio N/A N/A 12.89% 12.25%
Tier I risk-based capital ratio N/A N/A 11.63% 11.01%
Tier I leverage ratio N/A N/A 7.95% 7.19%
SELECTED AVERAGE BALANCES:
Total assets $3,651,191 $3,495,962 $3,662,395 $3,428,205
Interest-earning assets 3,354,754 3,199,731 3,363,513 3,135,556
Investment securities 946,242 852,820 933,552 798,470
Loans 2,332,854 2,190,061 2,274,560 2,132,593
Deposits 3,099,334 2,932,046 3,092,917 2,842,923
Noninterest-bearing deposits 550,451 487,866 531,898 472,191
Interest-bearing deposits 2,548,883 2,444,180 2,561,019 2,370,732
Interest-bearing liabilities 2,776,401 2,714,707 2,817,201 2,672,778
Stockholders' equity 295,755 260,880 285,429 250,923
SELECTED YEAR-TO-DATE BALANCES:
Total assets $3,639,295 $3,494,350 $3,639,295 $3,494,350
Interest-earning assets 3,327,570 3,199,070 3,327,570 3,199,070
Investment securities 883,000 878,388 883,000 878,388
Loans 2,369,770 2,223,081 2,369,770 2,223,081
Deposits 3,121,422 2,931,911 3,121,422 2,931,911
Noninterest-bearing deposits 568,107 492,639 568,107 492,639
Interest-bearing deposits 2,553,315 2,439,272 2,553,315 2,439,272
Interest-bearing liabilities 2,750,301 2,710,470 2,750,301 2,710,470
Stockholders' equity 296,378 265,461 296,378 265,461
NET INTEREST INCOME (DOLLARS IN THOUSANDS)
Net interest income represents the principal source of earnings for
Bancorporation. Tables 2 and 3 compare average balance sheet items and analyzes
net interest income on a tax equivalent basis for the quarters and nine months
ended September 30, 2002 and 2001.
Page 10
TABLE 2: COMPARATIVE AVERAGE BALANCE SHEETS AND TAXABLE EQUIVALENT RATE/VOLUME VARIANCE (DOLLARS IN THOUSANDS)
AS OF AND FOR THE QUARTER ENDED SEPTEMBER 30,
---------------------------------------------
YIELD/ CHANGE DUE TO (2)
AVERAGE BALANCE INTEREST INC/EXP (1) RATE ------------------ NET
---------------------- ------------------------ -------------- YIELD INCREASE
2002 2001 2002 2001 2002 2001 /RATE VOLUME (DECREASE)
---------- ---------- ----------- ----------- ------- ----- --------- -------- -----------
INTEREST-EARNING ASSETS:
Loans (3) $2,332,854 $2,190,061 $ 42,417 $ 45,761 7.21% 8.29% $ (5,918) $ 2,574 $ (3,344)
Investment securities:
Taxable 934,594 834,636 9,362 10,915 3.97 5.19 (2,545) 992 (1,553)
Non-taxable 11,648 18,184 218 365 7.49 8.03 (25) (122) (147)
Federal funds sold 75,658 156,850 326 1,422 1.71 3.60 (749) (347) (1,096)
---------- ---------- ----------- ----------- --------- -------- -----------
Total interest-earning
assets 3,354,754 3,199,731 52,323 58,463 6.19 7.25 (9,237) 3,097 (6,140)
---------- ---------- ----------- ----------- --------- -------- -----------
NONINTEREST-EARNING
ASSETS:
Cash and due from banks 133,714 137,274
Premises and equipment 105,191 97,676
Other, less allowance for
loan losses 57,532 61,281
---------- ----------
Total noninterest-earning
assets 296,437 296,231
---------- ----------
TOTAL ASSETS $3,651,191 $3,495,962
---------- ----------
INTEREST-BEARING
LIABILITIES:
Deposits $2,548,883 $2,444,180 $ 13,110 $ 22,133 2.04% 3.59% $ (9,557) $ 534 $ (9,023)
Securities sold under
agreements to repurchase 176,555 219,564 714 1,705 1.60 3.08 (819) (172) (991)
Long-term debt 50,963 50,963 1,050 1,050 8.24 8.24 - - -
---------- ---------- ----------- ----------- --------- -------- -----------
Total interest-bearing
liabilities 2,776,401 2,714,707 14,874 24,888 2.13 3.64 (10,376) 362 (10,014)
---------- ---------- ----------- ----------- --------- -------- -----------
NONINTEREST-BEARING
LIABILITIES:
Demand deposits 550,451 487,866
Other liabilities 28,584 32,509
---------- ----------
Total noninterest-bearing
liabilities 579,035 520,375
---------- ----------
TOTAL LIABILITIES 3,355,436 3,235,082
---------- ----------
Stockholders' equity 295,755 260,880
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,651,191 $3,495,962
========== ==========
Net interest spread 4.06% 3.61%
======= =====
Net interest margin: $ 37,449 $ 33,575 $ 1,139 $ 2,735 $ 3,874
=========== =========== ========= ======== ===========
to average assets 4.07% 3.81%
======= =====
to average interest-earning
assets 4.43% 4.16%
======= =====
(1) Non-taxable interest income has been adjusted to a taxable equivalent rate,
using the federal income tax rate of 35%.
(2) Yield/rate-volume changes have been allocated to each category based on the
percentage of each to the total change.
(3) Nonaccrual loans are included in the average loan balances. Interest income
on nonaccrual loans is generally recognized on a cash basis.
Page 11
TABLE 3: COMPARATIVE AVERAGE BALANCE SHEETS AND TAXABLE EQUIVALENT RATE/VOLUME VARIANCE (DOLLARS IN THOUSANDS)
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------
YIELD/ CHANGE DUE TO (2)
AVERAGE BALANCE INTEREST INC/EXP (1) RATE ------------------- NET
---------------------- ------------------------ -------------- YIELD INCREASE
2002 2001 2002 2001 2002 2001 /RATE VOLUME (DECREASE)
---------- ---------- ----------- ----------- ------- ----- --------- -------- -----------
INTEREST-EARNING ASSETS:
Loans (3) $2,274,560 $2,132,593 $ 126,644 $ 136,230 7.44% 8.54% $(17,508) $ 7,922 $ (9,586)
Investment securities:
Taxable 921,047 778,955 29,289 31,770 4.25 5.45 (7,010) 4,529 (2,481)
Non-taxable 12,505 19,515 703 1,191 7.50 8.14 (94) (394) (488)
Federal funds sold 155,401 204,493 1,993 7,065 1.71 4.62 (4,442) (630) (5,072)
---------- ---------- ----------- ----------- --------- -------- -----------
Total interest-earning
assets 3,363,513 3,135,556 158,629 176,256 6.31 7.52 (29,054) 11,427 (17,627)
---------- ---------- ----------- ----------- --------- -------- -----------
NONINTEREST-EARNING
ASSETS:
Cash and due from banks 139,085 133,645
Premises and equipment 102,290 95,853
Other, less allowance for
loan losses 57,507 63,151
---------- ----------
Total noninterest-earning
assets 298,882 292,649
---------- ----------
TOTAL ASSETS $3,662,395 $3,428,205
---------- ----------
INTEREST-BEARING
LIABILITIES:
Deposits $2,561,019 $2,370,732 $ 42,490 $ 70,274 2.22% 3.96% $(30,952) $ 3,168 $ (27,784)
Securities sold under
agreements to repurchase 205,219 251,083 2,399 7,507 1.56 4.00 (4,571) (537) (5,108)
Long-term debt 50,963 50,963 3,149 3,149 8.24 8.24 - - -
---------- ---------- ----------- ----------- --------- -------- -----------
Total interest-bearing
liabilities 2,817,201 2,672,778 48,038 80,930 2.28 4.05 (35,523) 2,631 (32,892)
---------- ---------- ----------- ----------- --------- -------- -----------
NONINTEREST-BEARING
LIABILITIES:
Demand deposits 531,898 472,191
Other liabilities 27,867 32,313
---------- ----------
Total noninterest-
bearing
liabilities 559,765 504,504
---------- ----------
Total liabilities 3,376,966 3,177,282
---------- ----------
Stockholders' equity 285,429 250,923
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,662,395 $3,428,205
========== ==========
Interest rate spread 4.03% 3.47%
======= =====
Net interest margin: $ 110,591 $ 95,326 $ 6,469 $ 8,796 $ 15,265
=========== =========== ========= ======== ===========
to average assets 4.04% 3.72%
======= =====
to average interest
-earning assets 4.40% 4.06%
======= =====
(1) Non-taxable interest income has been adjusted to a taxable equivalent rate,
using the federal income tax rate of 35%.
(2) Yield/rate-volume changes have been allocated to each category based on the
percentage of each to the total change.
(3) Nonaccrual loans are included in the average loan balances. Interest income
on nonaccrual loans is generally recognized on a cash basis.
Page 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
NET INTEREST INCOME (CONTINUED)
CURRENT QUARTER COMPARED TO PRIOR YEAR QUARTER
- ----------------------------------------------
Net interest income on a tax equivalent basis increased $3,874 or 11.54% for the
quarter ended September 30, 2002, over the comparable period in 2001. Net
interest margin to average assets increased from 3.81% for the quarter ended
September 30, 2001 to 4.07% for the quarter ended September 30, 2002. This is
attributable to a 27 basis point increase in the net interest margin to average
interest-earning assets.
Net interest margin to average interest-earning assets increased from 4.16% for
the quarter ended September 30, 2001 to 4.43% for the quarter ended September
30, 2002. This was primarily attributable to an increase in the net interest
spread from 3.61% for the quarter ended September 30, 2001 to 4.06% for the
quarter ended September 30, 2002. The increase in the net interest spread was
due to the decrease in the cost of interest-bearing liabilities exceeding the
decrease in interest earned on interest-earning assets. The yield on
interest-earning assets decreased from 7.25% for the quarter ended September 30,
2002 to 6.19% for the quarter ended September 30, 2001, or by 106 basis points,
while the cost of interest-bearing liabilities decreased from 3.64% to 2.13%, or
by 151 basis points. The decrease in the yield on interest-earning assets was
due to a decrease in the yields on loans, investment securities and federal
funds sold. The decrease in the cost of interest-bearing liabilities was due to
a decrease in the rates paid on interest-bearing deposits and securities sold
under agreements to repurchase. Decreases in yields and rates are due to the
declining interest rate environment.
CURRENT YEAR-TO-DATE PERIOD COMPARED TO PRIOR YEAR-TO-DATE PERIOD
- ------------------------------------------------------------------------
Net interest income on a tax equivalent basis increased $15,265 or 16.01% for
the nine months ended September 30, 2002, over the comparable period in 2001.
Net interest margin to average assets increased from 3.72% for the nine months
ended September 30, 2001 to 4.04% for the nine months ended September 30, 2002.
This is attributable to a 34 basis point increase in the net interest margin to
average interest-earning assets.
Net interest margin to average interest-earning assets increased from 4.06% for
the nine months ended September 30, 2001 to 4.40% for the nine months ended
September 30, 2002. This was primarily attributable to an increase in the net
interest spread from 3.47% for the nine months ended September 30, 2001 to 4.03%
for the nine months ended September 30, 2002. The increase in the net interest
spread was due to the decrease in the cost of interest-bearing liabilities
exceeding the decrease in interest earned on interest-earning assets. The yield
on interest-earning assets decreased from 7.52% for the nine months September
30, 2001 to 6.31% for the nine months ended September 30, 2002, or by 121 basis
points, while the cost of interest-bearing liabilities decreased from 4.05% to
2.28%, or by 177 basis points. The decrease in the yield on interest-earning
assets was due to a decrease in the yields on loans, investment securities and
federal funds sold. The decrease in the cost of interest-bearing liabilities
was due to a decrease in the rates paid on interest-bearing deposits and
securities sold under agreements to repurchase. Decreases in yields and rates
are due to the declining interest rate environment.
NONINTEREST INCOME AND EXPENSE (DOLLARS IN THOUSANDS)
CURRENT QUARTER COMPARED TO PRIOR YEAR QUARTER
- ----------------------------------------------------
Noninterest income increased by $1,841 or 15.05% for the quarter ended September
30, 2002, over the comparable period in 2001 primarily due to increases in
service charges on deposits, mortgage income, and commissions and fees from
fiduciary activities, offset by a decrease in gains from the sale of investment
securities. Service charges on deposits increased by $1,294 or 19.30% over the
comparable period primarily due to overall deposit growth and an increase in NSF
fees. These increases were partially offset by a decrease in gain on sale of
investment securities of $658. Mortgage income increased by $595, or 58.22%, due
to a $459 and a $135 increase in the gain on sale of mortgage loans and
servicing income, respectively. Commissions and fees from fiduciary activities
increased by $311, or 44.30%, primarily due to increased trust income.
Noninterest expense increased by $3,044, or 9.95%, for the quarter ended
September 30, 2002 over the comparable period in 2001 due to increases in
salaries and employee benefits and amortization of intangibles. These increases
were offset by a decrease in donations.
Page 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
NONINTEREST INCOME AND EXPENSE (CONTINUED)
Salaries and employee benefits increased by $3,111, or 22.81%, during the
quarter primarily due to an increase in the number of employees, merit increases
and increasing health insurance costs. Amortization of intangibles increased by
$487, or 18.82%, due primarily to $820 of impairment recorded on
Bancorporation's mortgage servicing rights during the quarter. The effect on
amortization was offset by a decline in amortization expense related to the
run-off of core deposit intangibles on former branch acquisitions.
In 2001, Bancorporation funded First Citizens Foundation through the sale of
certain of its equity securities to make charitable donations. The increases in
noninterest expense noted above were offset by a $1,186 decrease in donations
during the quarter. The donations in 2001 were primarily funded through
Bancorporation's security gains in 2001.
CURRENT YEAR-TO-DATE PERIOD COMPARED TO PRIOR YEAR-TO-DATE PERIOD
- ------------------------------------------------------------------------
Noninterest income increased by $2,788 or 7.89% for the nine months ended
September 30, 2002, over the comparable period in 2001 due to increases in
service charges on deposits, mortgage income and commissions and fees from
fiduciary activities. Service charges on deposits increased by $3,620 or 19.00%
over the comparable period, primarily due to overall deposit growth and an
increase in NSF fees. Mortgage income increased by $813, or 28.11%, due to a
$440 and $373 increase in the gain on sale of mortgage loans and servicing
income, respectively. Commissions and fees from fiduciary activities increased
by $689, or 34.89%, primarily due to increased trust income.
Noninterest expense increased by $6,882 or 7.80% for the nine months ended
September 30, 2002 over the comparable period in 2001 due to increases in
salaries and employee benefits expense, net occupancy expense, and data
processing expense. Salaries and employee benefits expense increased $6,283 or
15.47% over the comparable period primarily due to an increase in the number of
employees, merit increases and increased health insurance costs. Net occupancy
expense increased by $916 or 15.87% over the comparable period primarily due to
an increase in depreciation expense. Data processing expense increased $644 or
9.07% over the comparable period due to the on-going growth realized in the
number of loan and deposit accounts processed by Bancorporation's third-party
processor. These increases were offset by a $1,832 decrease in donations during
the period. See discussion in the quarter to quarter analysis regarding First
Citizens Foundation.
INCOME TAXES (DOLLARS IN THOUSANDS)
Total income tax expense increased by $929 or 24.51% for the quarter ended
September 30, 2002 over the comparable period in 2001 due to the increase in net
income. Total income tax expense increased by $3,511 or 29.76% for the nine
months ended September 30, 2002 over the comparable period in 2001 due to the
increase in net income. The effective tax rate was 33.50% and 32.57% at
September 30, 2002 and September 30, 2001, respectively.
Page 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
INVESTMENT SECURITIES (DOLLARS IN THOUSANDS)
As of September 30, 2002, the investment portfolio totaled $883,000, compared to
$878,388 at September 30, 2001. Bancorporation continues to invest primarily in
short-term U.S. government obligations and agency securities to minimize credit,
interest rate and liquidity risk. The investment portfolio consisted of 94.16%
and 94.27% U.S. government and agency securities as of September 30, 2002 and
September 30, 2001, respectively. The remainder of the investment portfolio
consists of municipal bonds and equity securities.
LOANS AND THE ALLOWANCE FOR LOAN LOSSES (DOLLARS IN THOUSANDS)
As of September 30, 2002, loans totaled $2,369,770, compared to $2,223,081 at
September 30, 2001, an increase of $146,689, or by 6.60%. The composition of
the loan portfolio has not shifted significantly since September 30, 2001. Loan
growth was funded through core deposits and short-term borrowed funds.
It is the policy of Bancorporation to maintain an allowance for loan losses to
absorb potential losses inherent in the loan portfolio. Management believes
that the provision taken during the quarter and nine months ended September 30,
2002 was appropriate to provide an allowance for loan losses which considers the
past experience of charge-offs, the level of past due and nonaccrual loans, the
size and mix of the loan portfolio, credit classifications and general economic
conditions in Bancorporation's market areas.
An analysis of activity in the allowance for loan losses as of September 30,
2002 and 2001 is presented below. The allowance for loan losses is maintained
through charges to the provision for loan losses. Loan charge-offs and
recoveries are charged or credited directly to the allowance for loan losses.
AS OF AND FOR THE AS OF AND FOR THE
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
ALLOWANCE FOR LOAN LOSSES: 2002 2001 2002 2001
---------- ----------- ---------- -----------
Balance at beginning of period $ 40,740 $ 38,459 $ 40,259 $ 37,001
Provision for loan losses 3,518 2,583 6,979 5,186
---------- ----------- ---------- -----------
Charge-offs (2,322) (1,784) (6,121) (3,645)
Recoveries 349 371 1,168 1,087
---------- ----------- ---------- -----------
Net charge-offs (1,973) (1,413) (4,953) (2,558)
---------- ----------- ---------- -----------
Balance at end of period $ 42,285 $ 39,629 $ 42,285 $ 39,629
---------- ----------- ---------- -----------
Nonperforming assets $ 7,062 $ 5,434 $ 7,062 $ 5,434
Annualized net charge-offs to:
Average loans .34% .26% .29% .16%
Loans at end of period .33% .25% .28% .15%
Allowance for loan losses 18.66% 14.26% 15.62% 8.61%
FUNDING SOURCES (DOLLARS IN THOUSANDS)
Bancorporation's primary source of funds is its deposit base. Total deposits
increased $189,511 or by 6.46% from September 30, 2001 to September 30, 2002.
Average deposits were $3,092,917 and $2,842,923 at September 30, 2002 and
September 30, 2001, respectively.
Short-term borrowings in the form of securities sold under agreements to
repurchase are another source of funds. Short-term borrowings decreased $74,212
or 33.70% from September 30, 2001 to September 30, 2002. Average short-term
borrowings were $205,219 and $251,083 at September 30, 2002 and September 30,
2001, respectively.
Page 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- --------------------------------------------------------------------------------
CAPITAL RESOURCES
Regulatory agencies define capital as Tier I, consisting of stockholders' equity
less ineligible intangible assets, and Total Capital, consisting of Tier I
Capital plus the allowable portion of the allowance for loan losses and certain
long-term debt.
Regulatory guidelines require a minimum ratio of total capital to risk-adjusted
assets of 8 percent, with at least 50 percent consisting of tangible common
stockholders' equity and a minimum Tier I leverage ratio of 3 percent. Banks
which meet or exceed a Tier I ratio of 6 percent, a total capital ratio of 10
percent, and a Tier I leverage ratio of 5 percent are considered
well-capitalized by regulatory standards. The following table details
Bancorporation's capital ratios at September 30, 2002 and 2001.
CAPITAL RATIOS SEPTEMBER 30,
-----------------
2002 2001
----- ------
Tier I leverage ratio 7.95% 7.19%
Total risk-based capital ratio 12.89% 12.25%
Tier I 11.63% 11.01%
Tier II 1.26% 1.24%
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk exposures that affect the
quantitative and qualitative disclosures presented as part of Bancorporation's
Annual Report on Form 10-K for the year ended December 31, 2001.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Within 90 days prior to the date of this report (the "Evaluation Date"),
Bancorporations's Chief Executive Officer and Chief Financial Officer have
evaluated the disclosure controls and procedures and concluded that these
controls and procedures are effective.
(b) Changes in Internal Controls
There were no significant changes in Bancorporation's internal controls or
in other factors that could significantly affect those controls subsequent
to the Evaluation Date.
Page 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Bancorporation and its subsidiaries, are not parties to, nor is any of their
property the subject of, any material or other pending legal proceeding, other
than ordinary routine proceedings incidental to their business.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The following exhibits are either attached hereto or
incorporated by reference:
11 Statement re computation of per share earnings (filed
herewith).
(b) The following Form 8-K's were filed during the quarter ended
September 30, 2002.
Form 8-K filed on July 5, 2002, reporting that Registrant entered
into a definitive agreement to acquire CB Financial Corp.
Form 8-K filed on September 30, 2002, reporting that Registrant
had consummated the merger with CB Financial Corp.
Form 8-K filed on September 17, 2002, reporting that
Registrant 's wholly-owned subsidiary First Citizens Bank and
Trust Company had entered into a letter of intent to merge with
First Banks, Inc.
Page 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST CITIZENS BANCORPORATION
OF SOUTH CAROLINA, INC.
(Registrant)
Dated: November 13, 2002
By: /s/ Craig L. Nix
-------------------------------
Craig L. Nix
Chief Financial Officer
Page 18
CERTIFICATION
I, Jim B. Apple, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Citizens
Bancorporation of South Carolina, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosures controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit committee
of Registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002 /s/ Jim B. Apple
---------------------------------
Jim B. Apple
Chief Executive Officer
Page 19
CERTIFICATION
I, Craig L. Nix, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Citizens
Bancorporation of South Carolina, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosures controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit committee
of Registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002 /s/ Craig L. Nix
------------------------------------
Craig L. Nix
Chief Financial Officer
Page 20
CERTIFICATION
(PURSUANT TO 18 U.S.C. SECTION 1350)
The undersigned hereby certifies that, to his knowledge, (I) the Form 10-Q
filed by First Citizens Bancorporation of South Carolina, Inc. (the "Company")
for the quarter ended September 30, 2002, fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (II) the
information contained in that report fairly presents, in all material respects,
the financial condition at September 30, 2002, September 30, 2001 and December
31, 2001, and the results of operations of the Company for the nine months and
quarter ended September 30, 2002 and September 30, 2001.
Date: November 13, 2002 /s/ Jim B. Apple
--------------------------------
Jim B. Apple
Chief Executive Officer
Date: November 13, 2002 /s/ Craig L. Nix
--------------------------------
Craig L. Nix
Chief Financial Officer
Page 21
EXHIBIT INDEX
11 Statement of Re Computation of Net Income per Share