ROCKY MOUNT, N.C., July 5 /PRNewswire/ -- Centura Banks Inc. (NYSE: CBC)
today announced that it is reducing its earnings outlook for the second
quarter and full year 2000. The revised outlook is due primarily to the
recent rise in interest rates and the accompanying pressure on net interest
margins.
For the second quarter, operating earnings are expected to be in the range
of 71 to 74 cents per diluted share before merger-related and other
significant charges, compared with the analysts' consensus estimate of
99 cents per share as reported by First Call. Operating earnings for the full
year 2000 are expected to range from $3.37 to $3.47 per diluted share,
compared with the First Call consensus of $4.05. These results include
$5 million of additional loan loss provisions recorded in order to align the
credit risk management methodologies of Triangle Bancorp, Inc. with those of
Centura. Centura expects to report second-quarter financial results on
July 13.
As anticipated, the second quarter will include approximately $12 million
in charges related to the acquisition of Triangle and the previously announced
Hannaford store closings. After these items, Centura expects to report
diluted earnings per share in a range of 51 to 54 cents for the second quarter
and $2.47 to $2.57 for the full year. The revised earnings outlook for 2000,
excluding the merger-related and the Hannaford charges, continues to project a
return on equity of approximately 15.6%, compared with 15.7% at year end 1999,
and a return on assets of 1.22%, compared with 1.23% a year ago. Centura is
reassessing its relationship with Hannaford and may close additional stores
during the year, which could result in additional charges of approximately
$5-$7 million.
"The rise in interest rates and the accompanying pressure on our net
interest margin was partly exacerbated by our acquisition of Triangle," said
Cecil W. Sewell, chief executive officer. "Operationally, the integration has
gone smoothly, but we experienced additional margin pressures as we both
absorbed Triangle's portfolio and sacrificed some retail pricing to our
overriding priority of customer retention."
Addressing credit quality, Sewell said: "Although we have not seen any
weakness in our credit quality from the first quarter or any stress on our
loan portfolio, we anticipate an economy marked by higher interest rates and
the potential for further slowing. It also is our intent, based on current
pricing and interest rates, to sell our mortgage servicing in the third
quarter and reinvest the gain in restructuring the investment portfolio.
These transactions will enable us to eliminate the interest rate risk inherent
in mortgage servicing.
"Looking forward, we will be very focused on improving the net interest
margin by stimulating core deposits and retail funding, and on growing our
wealth management business," Sewell said. "We also plan to continue our
diligent expense control efforts without sacrificing long-term growth.
"Our integration of Triangle has progressed according to plan in terms of
reduced expenses and customer retention goals," Sewell continued. "To date we
have achieved in excess of a 98% retention rate for Triangle high-value
households and now have a much strengthened North Carolina franchise in high
growth MSA markets, particularly the Triangle area. Our focus on customer
retention represents the best long-term strategy for building lasting
relationships, reducing the need for wholesale funding, and strengthening our
net interest margin."
Factors Contributing To Revised Outlook
Contributing factors to the company's revised earnings outlook for the
second quarter and 2000 are primarily related to rising interest rates. The
cumulative effect of rising interest rates since October 1999 has put pressure
on Centura's net interest margin and the 50 basis-point increase in the second
quarter intensified that pressure.
* Net Interest income. A decline in net interest income is expected to
account for approximately 45% of the earnings revision or 9 to 11 cents
for the quarter and 25 to 30 cents per share for the full year. This is
due primarily to margin pressure created by rising interest rates, which
occurred at the same time Centura was engaged in an aggressive campaign
to retain Triangle Bancorp customers. The successful integration of
Triangle will enable Centura to focus on building core deposits and
improving the net interest margin for the remainder of the year.
* Fee-based businesses linked to interest rates. An industry-wide
downturn in the mortgage business, a result of rising interest rates,
has affected Centura's three mortgage-related businesses, which are
expected to account for approximately 20% of the earnings revision or 12
to 14 cents per share for the year. The second quarter impact is
approximately 1 to 2 cents per share. Centura's mortgage-related
businesses are: Centura Bank, which originates and services conforming
mortgages; Capital Advisors, which provides commercial mortgage
placements; and Centura's 49% interest in First Greensboro Home Equity,
a sub-prime mortgage lender. The decline in income from these business
units is partially offset with increases in fee income from NCS Mortgage
Company, a new business unit acquired late in the first quarter of 2000.
* Operating expenses. Operating expenses are expected to account for
approximately 20% of the earnings revision or 13 to 16 cents for the
full year. The impact on the second quarter is approximately 7 to 8
cents per share. We have achieved the projected cost savings from the
Triangle acquisition, however, expenses are above expectations due to
continued technology investments, the filling of previously approved
vacant positions, and operating expenses from NCS Mortgage Lending
Company. NCS expenses represent about one-third of the revision in
operating expenses. Despite this, operating expenses are expected to be
relatively flat for the year.
* Loan Loss Provision. As previously discussed, the additional loan loss
provision accounts for 15% or $5 million of the earnings revision.
About Centura
With assets of more than $11 billion and deposits exceeding $7 billion,
Centura Banks Inc. provides a complete line of banking, investment, insurance,
leasing and asset management services to individuals and businesses in North
Carolina, South Carolina and Virginia. Centura's broad range of financial
solutions is provided through more than 250 full-service financial offices and
Centura Highway, the bank's multifaceted customer access system that includes
telephone banking, an extensive ATM network, PC banking, online bill payment
and the bank's suite of Internet products and services. Additional
information may be found on Centura's Web site at http://www.centura.com .
Safe Harbor
Statements made in this press release, other than those containing
historical information, are forward-looking statements made pursuant to the
safe-harbor provisions of the Private Securities Litigation Act of 1995.
These include statements about Centura, including descriptions of plans or
objectives of its management for future operations, products or services, and
forecasts of its revenues, earnings or other measures of economic performance.
Such statements reflect current views, but are based on assumptions and are
subject to risks, uncertainties and other factors that may cause results to
differ materially from those set forth in such statements. Those factors
include, but are not limited to, the following: (i) expected cost savings
from completed mergers may not be fully realized or costs or difficulties
related to the integration of the businesses of Centura and merged
institutions may be greater than expected; (ii) customer and deposit
attrition, or revenue loss, following completed mergers may be greater than
expected; (iii) competitive pressure in the banking industry may increase
significantly; (iv) changes in the interest rate environment may reduce
margins; (v) general economic conditions, either nationally or regionally, may
be less favorable than expected, resulting in, among other things, credit
quality deterioration and the possible impairment of collectibility of loans;
(vi) the impact of changes in monetary and fiscal policies, laws, rules and
regulations; (vii) the impact of the Gramm-Leach-Bliley Act of 1999; (viii)
changes in business conditions and inflation; and (ix) other risks and factors
identified in Centura's filings with the Securities and Exchange Commission
and other regulatory bodies.
SOURCE Centura Banks, Inc.
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Related links:
http://www.centura.com
Company News On-Call:
http://www.prnewswire.com/comp/870954.html or fax,
800-758-5804, ext. 870954
CONTACT:
Steven J. Goldstein, Chief Financial Officer
of Centura Banks, Inc., 252-454-8356, or sgoldstein@centura.com
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