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CORUS BANKSHARES REPORTS FIRST-QUARTER EARNINGS

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CORUS BANKSHARES REPORTS FIRST-QUARTER EARNINGS Powered By Docstoc
					FOR IMMEDIATE RELEASE April 16, 2001

FOR MORE INFORMATION: Tim Taylor Chief Financial Officer (773) 832-3470 E-mail: ttaylor@corusbank.com

CORUS BANKSHARES REPORTS FIRST-QUARTER EARNINGS
Chicago, Illinois – Corus Bankshares Inc. (NASDAQ: CORS). Corus reports 2001 first quarter earnings of $14.2 million, or $0.99 per diluted share. This represents an increase versus the prior year of 22.9% in earnings and 23.8% in diluted earnings per share. Robert J. Glickman, President and Chief Executive Officer said: “I am very pleased with our performance in the first quarter of this year. Year-over-year comparisons are strong as we continue to focus on our core strategies.” “During the first quarter of 2001” Glickman continued, “the Federal Reserve reduced key interest rates by 1½ percentage points. While we have taken steps over the years to reduce our exposure to interest rate movements, we nonetheless are negatively impacted by decreases in market interest rates. However, when we analyze our business, we look beyond the impact of short-term interest rate fluctuations and assess the overall direction of our operations. From this perspective, we see a strong loan portfolio, high asset quality and a stable source of noninterest income.” In the first quarter of 2001, Corus’ total loan portfolio grew by nearly $150 million, an increase of 9.4% compared to December 31, 2000. Nonperforming loans declined slightly during the same period and represent a scant 0.30% of outstanding loans. Corus Bankshares, Inc., a part of the NASDAQ Financial-100 Index, is a one-bank holding company headquartered in Chicago, Illinois. Corus Bank, N.A. has eleven branches in the Chicago metropolitan area. In addition to various deposit products, Corus specializes in commercial real estate loans, home equity loans, as well as servicing the currency exchange industry.
This press release 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,”

CORUS BANKSHARES First-Quarter Earnings Report

“anticipates,” “estimates,” “projects,” “target,” “forecasts” or “seeks” or the negative of such terms or other variations on such terms or comparable terminology. By their nature, these statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward- looking statements. Important factors that might cause Corus’ actual results to differ materially include, but are not limited to, the following: • • • • • • • • • Federal and state legislative and regulatory developments; Changes in management's estimate of the adequacy of the allowance for loan losses; Changes in the level and direction of loans and write-offs; Interest rate movements and their impact on customer behavior and Corus’ net interest margin; Changes in the overall mix of Corus' loan and deposit products; The impact of repricing and competitors’ pricing initiatives on loan and deposit products; Corus’ ability to adapt successfully to technological changes to meet customers’ needs and developments in the marketplace; Corus’ ability to access cost-effective funding; and The purchase of the second mortgage high-loan-to-value portfolio and the capability of Corus to minimize loan delinquencies and charge-offs of the acquired loans.

Corus undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this release. Additional information that could affect the Company’s financial results is included in the Company’s 2000 Annual Report, Forms 10-K, 10-Q and 8-K on file with the Securities and Exchange Commission.

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CORUS BANKSHARES First-Quarter Earnings Report

Summary Financial Data (Unaudited)
(Dollars in thousands, except per share data) 2001 $ 2000 11,570 0.81 0.80 2,334,450 27,796 3,505 31,301 0.145 4.76% 14.25% 1.88% 38.67% 8,391 2,900 11,291 0.47% 31,317 373.22% 1.75% 12.14% 15.47% 17.91% 13.23% $ 23.63 23.52 14,369 $ $ 1999 10,378 0.71 0.71 2,454,534 26,087 5,295 31,382 0.140 4.25% 13.00% 1.61% 43.10% 13,710 5,326 19,036 0.84% 35,258 257.17% 2.16% 10.51% 14.79% 17.76% 12.57% 32.13 22.42 14,507 For the Three Months Ended March 31: Net income $ 14,222 Basic earnings per share 1.01 Diluted earnings per share 0.99 Average earning assets 2,483,727 Net interest income (fully taxable equivalent) 30,299 Noninterest income (without securities gains/losses) 4,052 (1) Net operating revenue 34,351 Cash dividends declared per common share 0.150 Net interest margin (fully taxable equivalent) 4.88% Return on equity (ROE) 13.94% Return on assets (ROA) 2.19% (2) Efficiency Ratio 37.46% Asset Quality at March 31: Nonperforming loans (NPLs) Other real estate owned Total nonperforming assets NPLs / Total loans Allowance for loan losses Allowance for loan losses / NPLs Allowance for loan losses / Total loans Capital Ratios at March 31: Leverage Tier 1 capital Total risk-based capital Common equity Common Stock Data at March 31: Market price per common share Common shareholders' equity per share Shares outstanding at end of period
(1) (2)

$

5,016 1,203 6,219 0.30% 41,219 821.75% 2.43% 14.18% 16.22% 18.69% 15.74%

$

$

$

51.00 29.19 14,143

Fully taxable equivalent net interest income plus noninterest income, excluding securities gains/losses. Period ended 3/31/00 excludes student loan lawsuit settlement.

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CORUS BANKSHARES First-Quarter Earnings Report

Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands) March 31 2001 December 31 2000 March 31 2000

Assets Cash and due from banks - noninterest-bearing Federal funds sold Securities: Available-for-sale, at fair value Held-to-maturity, at amortized cost Total Securities Loans, net of unearned discount Less: Allowance for loan losses Net Loans Premises and equipment, net Accrued interest receivable and other assets Goodwill, net of accumulated amortization Total Assets

$

127,269 474,350 296,303 6,137 302,440 1,697,574 41,219 1,656,355 31,396 25,546 5,240 2,622,596

$

111,115 458,450

$

75,032 77,875

$

441,977 6,192 448,169 1,551,880 39,601 1,512,279 31,691 31,285 5,478 $ 2,598,467

567,652 5,304 572,956 1,784,790 31,317 1,753,473 33,334 33,747 8,733 $ 2,555,150

Liabilities & Shareholders' Equity Deposits: Noninterest-bearing Interest-bearing Total Deposits Short-term borrowings Federal Home Loan Bank advances Accrued interest payable and other liabilities Total Liabilities Shareholders' Equity Common stock, surplus and retained earnings Net unrealized gains on available-for-sale securities Total Shareholders' Equity Total Liabilities and Shareholders' Equity

$

239,702 1,885,343 2,125,045 95 40,000 44,637 2,209,777 372,647 40,172 412,819 2,622,596

$

227,412 1,880,218 2,107,630 1,085 40,000 47,399 2,196,114

$

206,443 1,929,825 2,136,268 174 40,000 40,713 2,217,155

$

360,544 41,809 402,353 $ 2,598,467

308,906 29,089 337,995 $ 2,555,150

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CORUS BANKSHARES First-Quarter Earnings Report

Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended March 31 2001 2000 $ 53,422 $ 51,118 23,595 23,900 29,827 27,218 29,827 2,682 885 (86) 1,456 4,937 8,080 1,175 676 475 239 2,495 13,140 21,624 7,402 $ 14,222 $ 27,218 2,472 (1,502) (81) 595 519 2,003 7,366 939 621 560 287 (600) 2,650 11,823 17,398 5,828 11,570

(Dollars in thousands, except per share data) Interest and dividend income Interest expense Net Interest Income Provision for loan losses Net Interest Income after Provision for Loan Losses Noninterest Income: Service charges on deposit accounts Securities gains/(losses), net Trading account losses, net Trust and investment management services Other income Total noninterest income Noninterest Expense: Salaries and employee benefits Net occupancy Data processing Depreciation - furniture & equipment Goodwill amortization Student loan lawsuit settlement Other expenses Total noninterest expense Income before income taxes Income tax expense Net Income Earnings Per Common Share: Basic Diluted Weighted Average Common and Common Equivalent Shares Outstanding

$ $

1.01 0.99

$ $

0.81 0.80

14,354

14,389

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CORUS BANKSHARES First-Quarter Earnings Report

Average Balance Sheets and Net Interest Margin (Unaudited)
Three Months Ended March 31 2001 Average Yield/ Average Interest Cost Balance 2000 Average Yield/ Cost

(Dollars in thousands) Assets Earning Assets: Federal funds sold Taxable securities other than common stocks Common stocks
(1)

Average Balance

Interest

$

513,941 194,983 165,020 1,243 6,425

$

7,069 3,125 1,443 28 76 42,153 53,894

5.50% 6.41% 3.50% 9.15% 4.71% 10.52% 8.68%

$

61,413 360,727 159,963 1,241 7,459 1,743,647 2,334,450 90,597 (31,908) 33,691

$

878 5,405 1,734 29 122 43,528 51,696

5.72% 5.99% 4.34% 9.35% 6.54% 9.99% 8.86%

Tax-advantaged securities (2) Trading account securities Loans, net of unearned discount Total earning assets Noninterest-earning assets: Cash and due from banks--noninterest bearing Allowance for loan losses Premises and equipment, net Other assets, including goodwill Total assets Liabilities and Shareholders' Equity Deposits -- interest-bearing: Money market deposits NOW deposits Savings deposits Time deposits Total interest-bearing deposits Short-term borrowings Federal Home Loan Bank advances Total interest-bearing liabilities Noninterest-bearing liabilities and shareholders' equity: Noninterest-bearing deposits Other liabilities Shareholders' equity Total liabilities and shareholders' equity Interest income/average earning assets Interest expense/average interest-bearing liabilities Net interest spread Net interest margin
(1) (2)
(2) (3) (4)

1,602,115 2,483,727 86,604 (40,441) 31,656 $ 33,377 2,594,923

38,025 $ 2,464,855

$

990,549 107,293 147,234 633,582 1,878,658 1,720 40,000 1,920,378 215,151 51,257 408,137 2,594,923 2,483,727 1,920,378

$

11,892 422 959 9,695 22,968 48 579 23,595

4.80% 1.57% 2.61% 6.12% 4.89% 11.08% 5.79% 4.91%

$

918,664 93,105 158,221 663,356 1,833,346 5,571 40,000 1,878,917 219,807 41,332

$ 12,374 373 1,035 9,427 23,209 80 611 23,900

5.39% 1.60% 2.62% 5.68% 5.06% 5.74% 6.11% 5.09%

$ $ $

324,799 $ 2,464,855 $ $ 53,894 23,595 30,299 8.68% 4.91% 3.77% 4.88% $ 2,334,450 $ 1,878,917 $ 51,696 23,900 $ 27,796 8.86% 5.09% 3.77% 4.76%

Dividends on the bank stock portfolio reflects a tax equivalent adjustment for the 70% dividend received deduction. Interest income on tax-advantaged loans and securities reflects a tax equivalent adjustment based on an income tax rate of 35%. (3) Unremitted interest on nonaccrual loans is not included in the amounts. (4) Includes net interest income derived from interest rate swap contracts.

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CORUS BANKSHARES First-Quarter Earnings Report

Review and Analysis of Earnings for first quarter 2001 versus 2000 Below is a table that displays the reported first quarter earnings for 2001 and 2000. The table also includes a list of several material non-recurring items that occurred during each of the respective periods and a calculation of each quarter’s adjusted earnings, excluding the non-recurring items. In summary, first quarter earnings excluding non-recurring items increased $1.6 million or 13.7%.

2001 (Dollars in thousands) Reported Net Income Nonrecurring Items Student Loan Curing Profits Net Security Gains / (Losses) Student Loan Lawsuit Settlement Total Nonrecurring Items - Pre Tax Total Nonrecurring Items - After Tax Reported Net Income less Nonrecurring Items
Net Interest Income

2000 Diluted EPS $ 0.99 Amount $ 11,570 Diluted EPS $ 0.80

Amount $ 14,222

$ $

28 885 913 593 $ 0.95

259 (1,502) 600 $ (643) $ (418) $ 11,988 $ 0.83

$ 13,629

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.

During the three months ended March 31, 2001, Corus’ net interest margin increased, versus the prior year, by 12 basis points. This increase was driven primarily by the continued growth in Corus’ highest yielding asset, commercial real estate (“CRE”) loans. The average outstanding balance of CRE loans grew by nearly $300 million or 30% vs. the prior year. This increase is the direct result of Corus’ continued focus in this area.

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CORUS BANKSHARES First-Quarter Earnings Report

Noninterest Income

For the three months ended March 31, 2001, noninterest income was $4.9 million, representing an increase of $2.9 million compared to the same period in 2000. This increase was primarily the result of security gains of $0.9 million compared to losses of $1.5 million in the first quarter of 2000. The 2001 gains consisted of net gains from both the stock portfolio of $0.6 million and from other securities of an additional $0.6 million reduced by $0.3 million related to the net impact of Statement of Financial Accounting Standards No. 133/138.

Additionally, other noninterest income increased $0.9 million, due to fees received from a temporary servicing agreement related to the sale of the majority of student loans in December of 2000. This source of income, together with the related expenses, is expected to cease in the second quarter of 2001, when the final sale is completed. Offsetting these increases was the absence of Trust and Investment Management income due to the sale of that business in 2000.

Noninterest Expense

For the three months ended March 31, 2001, noninterest expense increased by $1.3 million compared to 2000. This increase was caused primarily by higher bonus accruals, commensurate with the growth in CRE loans, and other employee benefits. In addition, net occupancy costs increased due to increases in the cost of natural gas and real estate taxes. Finally the first quarter of 2001 compared unfavorably to the same quarter of 2000 due to the impact in 2000 of the $600,000 reversal related to the student loan lawsuit settlement. These increases were partially offset by savings related to the sale of the Trust and Investment Management business in October, 2000.

Statement of Financial Accounting Standards No. 133/138 (“FAS 133/138”) This statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in 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 results of the hedged item or deferred through recognition in a component of other comprehensive income. Those derivatives 8

CORUS BANKSHARES First-Quarter Earnings Report

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. This Statement is effective for Corus beginning January 1, 2001.

In the first quarter of 2001, Corus recorded a net FAS 133/138 expense of $150,000, which consisted of $114,000 of income included in net interest income and $264,000 of expense included in Securities gains/(losses).

Common Stock Portfolio

At March 31, 2001, Corus had investments in the common stocks of 35 financial industry companies totaling $157 million, including net unrealized gains of $61 million. These investments are included in the available-for-sale classification. At March 31, 2001, the holdings by market capitalization were as follows:
Amount of Holdings 97,600 25,360 15,999 10,021 8,011 $ 156,991 $ Percentage of Portfolio 62% 16 10 7 5 100%

Market Capitalization (Dollars in thousands) Over $10 billion Between $5 and $10 billion Between $1 and $5 billion Between $500 million and $1 billion Under $500 million Total

During the three months ended March 31, 2001, Corus received dividends on the stock portfolio of $1.0 million compared to $1.3 million during the same period in 2000. In addition, Corus realized net gains from the bank stock portfolio of $594,000 in the first quarter of 2001 compared to net losses of $1.5 million in the first quarter of 2000.

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CORUS BANKSHARES First-Quarter Earnings Report

Loan Portfolio The following table details the composition of Corus’ loan portfolio:

(Dollars in thousands) Loans: Commercial real estate: Mortgage Construction Home equity Student Commercial Residential first mortgage Medical finance & consumer Total loans

March 31, 2001 Amount Percent

December 31, 2000 Amount Percent

March 31, 2000 Amount Percent

702,555 634,867 112,603 85,334 77,235 66,354 18,626 $ 1,697,574

$

41% 37 7 5 5 4 1 100%

$ 655,148 534,832 117,858 63,096 91,093 71,197 18,656 $ 1,551,880

42% 34 8 4 6 5 1 100%

560,875 427,884 130,457 459,364 98,431 86,316 21,463 $ 1,784,790

$

31% 24 7 26 6 5 1 100%

Total loans have decreased from the prior year by $87.2 million, or 4.9%. This is primarily due to the sale of approximately $400 million of student loans in December of 2000, offset by an increase in commercial real estate loans of $348.7 million. The sale was a result of a strategic decision to exit the student loan business and reinvest deposits in more profitable commercial real estate loans. The $147 million increase compared to December 31, 2000 reflects the planned increase in commercial real estate loans.

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CORUS BANKSHARES First-Quarter Earnings Report

The following tables break out commercial real estate loans by property type, location, and size: Commercial Real Estate Loans - By Property Type (Dollars in millions) # of Loans Hotel 37 Office 41 Condo/loft conversion 25 Rental apartments 238 Nursing Homes 24 Warehouse / Light industrial 49 Vacant Land 23 Retail 112 Other 37 Deferred Loan Fees / Other Discounts N/A Total 586 Commercial Real Estate Loans - By Location (Dollars in millions) # of Loans Illinois 476 California 33 New York 11 Arizona 7 Texas 13 Indiana 4 Other 42 Deferred Loan Fees / Other Discounts N/A Total 586

As of March 31, 2001 Loans Outstanding Total Commitments Amount % Amount % $ 360 27% $ 432 22% 240 18 471 24 282 21 538 27 137 10 179 9 107 8 107 5 71 5 76 4 64 5 78 4 48 4 49 3 41 3 54 3 (13) (1) (13) (1) $ 1,337 100% $ 1,971 100%

As of March 31, 2001 Loans Outstanding Total Commitments Amount % Amount % $ 569 43% $ 773 39% 212 16 354 18 122 9 155 8 80 6 111 6 61 5 159 8 16 1 16 1 290 21 416 21 (13) (1) (13) (1) $ 1,337 100% $ 1,971 100%

Commercial Real Estate Loans - By Total Commitment (Dollars in millions) As of March 31, 2001 # of Loans Outstanding Total Commitments Loans Amount % Amount % Less than $10 million 522 $ 471 35% $ 557 28% $10 million to $20 million 29 275 20 387 20 $20 million to $30 million 22 344 26 540 28 $30 million to $40 million 9 210 16 321 16 Over $40 million 4 50 4 179 9 Deferred Loan Fees / Other Discounts N/A (13) (1) (13) (1) Total 586 $ 1,337 100% $ 1,971 100% 11

CORUS BANKSHARES First-Quarter Earnings Report

Over the past several decades, the banking industry has shown higher delinquency and loss rates for construction loans than for commercial real estate mortgage loans. The commercial real estate markets have been good for many years and Corus has had particularly impressive results. Net charge-offs on Corus’ commercial real estate loans have totaled just $222,000 from 1989 through March 31, 2001. While our commercial real estate portfolio continues to show minimal delinquencies and virtually no losses, we recognize this sort of performance cannot persist forever.

Asset Quality

Nonperforming Assets Nonperforming loans are nonaccrual loans, restructured loans and 90 days or more past due loans still accruing interest. Overall, Corus’ nonperforming assets are essentially flat compared to December 31, 2000 and have decreased significantly versus the prior year. The year-over-year declines are evident across nearly all categories, as shown below:

(Dollars in thousands) Nonperforming loans: Residential first mortgage Home equity Medical finance Commercial real estate Student Commercial Consumer Total nonperforming loans Other real estate owned Total nonperforming assets Nonaccrual loans included in nonperforming loans above 90 days or more past due loans included in nonperforming loans above Nonperforming loans/Total loans Nonperforming assets/Total assets

March 31 2001 $ 3,089 781 400 392 275 57 22 5,016 1,203 6,219 1,214 3,739 0.30% 0.24%
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December 31 2000 $ 3,391 832 555 132 147 40 47 5,144 1,200 $ 6,344 $ 1,300 $ 3,781 0.33% 0.24%

March 31 2000 $ 4,783 836 460 1,754 228 329 1 8,391 2,900 $ 11,291 $ 2,290 $ 5,775 0.47% 0.44%

$ $ $

CORUS BANKSHARES First-Quarter Earnings Report

Nonperforming residential first mortgage loans are secured by first mortgages on primarily owner-occupied, residential property. At March 31, 2001, other real estate owned was comprised of one commercial real estate property with a book value of $57,000 and thirteen residential properties with aggregate book values of $1.1 million. During the first quarter of 2001, Corus sold two residential properties with aggregate book values of $243,000 for a net gain of $39,000. There was also a writedown of $14,000 on residential property during the first quarter.

Excluded from the preceding table are student loans that Corus has no reason to believe have lost their guarantee. Guaranteed student loans more than 90 days past due and not included in the above nonperforming asset table totaled $12.7, $16.7 and $22.6 million at March 31, 2001, December 31, 2000 and March 31, 2000, respectively.

Allowance for Loan Losses A reconciliation of the activity in the allowance for loan losses is as follows:
Three Months Ended March 31 2001 2000 39,601 $ 32,090 (930) (1,376) 2,548 603 41,219 $ 31,317 1,697,574 2.43% $ 1,784,790 1.75%

(Dollars in thousands) Balance at beginning of period Provision for loan losses Charge-offs Recoveries Balance at March 31 Loans at March 31 Allowance as a percentage of loans

$

$ $

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CORUS BANKSHARES First-Quarter Earnings Report

Net Charge-off / (Recovery) Detail

(Dollars in thousands) Home equity Consumer Commercial Residential first mortgage Commercial real estate Student Total Net Charge-offs/(Recoveries) $

$

Three Months Ended March 31 2001 2000 451 $ 632 24 1 3 106 1 (18) (2,097) 52 (1,618) $ 773

Year-to-date, Corus has recovered $2.2 million of previously charged off student loans relating to the settlement of the lawsuit in 2000. The 2001 recoveries, combined with the $10.3 million recovered in 2000, bring the total recoveries thus far to $12.5 million. Overall, Corus estimates that it will be able to submit and receive additional guarantee payments of approximately $1 million.

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