1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended June 30, 1996 Commission File Number 2-83542
FIRST CITIZENS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE
(State or other jurisdiction of 62-1180360
incorporation or organization) (I.R.S. Employer Identification No.)
P. O. Box 370
Court Street, Dyersburg, Tennessee 38024
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (901) 285-4410
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 3 months and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Of the registrant's only class of common stock ($1.00 par value) there
were 736,755 shares outstanding as of June 30, 1996 (Net of Treasury).
2
PART I -FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
3
FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, December 31,
1996 1995
ASSETS
Cash and due from banks $ 11,481,000 $ 11,694,000
Federal funds sold 0 1,850,000
Investment securities -
Trading Investments-Stated at Market 0 0
Held to Maturity-amortized cost-Fair
Value of $31,047,000 at June 30, 1996
and $34,258,000 at December 31, 1995. 31,327,000 33,947,000
Available for Sale-Stated at Market 46,018,000 39,944,000
Loans (Excluding unearned income of
$1,561,000 at June 30, 1996, and
$1,657,000 at December 31, 1995) 209,255,000 191,906,000
Less: Allowance for loan losses 2,359,000 2,216,000
Net Loans 206,896,000 189,690,000
Premises and equipment 8,492,000 8,831,000
Other assets 6,295,000 5,456,000
TOTAL ASSETS $310,509,000 $291,412,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $246,198,000 $237,160,000
Securities sold under agreement to
repurchase 21,953,000 19,745,000
Federal funds purchased and Other
Short Term Borrowing 7,300,000 0
Long-term debt - Note 3 (Includes Long
Term FHLB) 4,061,000 4,652,000
Notes payable of employee stock
ownership plan 0 0
Other liabilities 3,269,000 2,752,000
Total Liabilities 282,781,000 264,309,000
Contingent liabilities
Stockholders' Equity:
Common stock, $1 par value - 2,000,000
authorized; 736,880 issued and
outstanding at June 30, 1996;
733,399 issued and outstanding at
December 31, 1995 737,000 733,000
Surplus 9,870,000 9,720,000
Retained earnings 17,625,000 16,167,000
Obligation of Employee Stock
Ownership Plan 0 0
Net Unrealized Gains (Losses) on Available
for Sale (498,000) 485,000
Total Common Stock and Retained Earnings 27,734,000 27,105,000
Less-125 Treasury Shares, at Cost at
June 30, 1996 and 40 Shares at
December 31, 1995 (6,000) (2,000)
Total Stockholders' Equity 27,728,000 27,103,000
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $310,509,000 $291,412,000
NOTE: The balance sheet at December 31, 1995, has been taken from the
audited financial statements at that date and condensed.
4
FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
Interest Income
Interest and fees
on loans $ 4,831,000 $4,393,000 $ 9,516,000 $ 8,413,000
Interest on investment
securities:
Taxable 1,125,000 1,051,000 2,207,000 2,071,000
Tax-exempt 125,000 118,000 250,000 243,000
Other interest income 20,000 63,000 48,000 108,000
Lease financing income 0 1,000 1,000 2,000
Total Interest Income 6,101,000 5,626,000 12,022,000 10,837,000
Interest Expense
Interest on deposits 2,617,000 2,573,000 5,181,000 4,831,000
Other interest expense 334,000 318,000 629,000 587,000
Total Interest Expense 2,951,000 2,891,000 5,810,000 5,418,000
Net Interest Income 3,150,000 2,735,000 6,212,000 5,419,000
Provision for Loan
Losses 134,000 86,000 239,000 151,000
Net Interest Income
after Provision 3,016,000 2,649,000 5,973,000 5,268,000
Other Income
Securities gains
(losses) 43,000 17,000 179,000 24,000
Other income 795,000 674,000 1,557,000 1,321,000
Total Other Income 838,000 691,000 1,736,000 1,345,000
Other expenses 2,333,000 2,251,000 4,735,000 4,559,000
Net income before
income taxes 1,521,000 1,089,000 2,974,000 2,054,000
Provision for income
taxes 524,000 366,000 1,030,000 688,000
Net income $ 997,000 $ 723,000 $1,944,000 $ 1,366,000
Earnings per share $ 1.36 $ 1.00 $ 2.65 $ 1.89
Weighted average number of
shares outstanding 734,476 721,697 734,476 721,697
The accompanying notes are an integral part of these financial
statements.
5
FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
Six Months Ended
June 30,
1996 1995 1994
Net Cash Provided by Operating
Activities $ 3,036,000 $ 1,347,000 $ 2,187,000
Investing Activities
Proceeds of Maturities of Held to
Maturity Securities 4,085,000 9,563,000 10,054,000
Purchase of Held to Maturity
Investments (1,500,000) (11,000,000) (15,739,000)
Proceeds from Maturities of
available for Sales Securities 1,812,000 812,000 0
Proceeds from Sales of available
for Sale Securities 7,600,000 630,000 0
Purchase of available for Sale
Securities (17,125,000) (3,133,000) 0
Increase in Loans-Net (17,445,000) (16,598,000) (15,980,000)
Purchases of Premises and
Equipment (146,000) (819,000) (692,000)
Net Cash Provided by
Investing Activities (22,719,000) (20,545,000) (22,357,000)
Financing Activities
Net increase (decrease) in Demand
and Savings Accounts 862,000 (1,212,000) (854,000)
Increase (decrease) in
Time Accounts 8,176,000 23,377,000 8,073,000
Increase (decrease) in Long
Term Debt (591,000) 2,615,000 4,220,000
Treasury Stock Transactions (4,000) (7,000) 60,000
Proceeds from Sale of Common Stock 154,000 14,000 66,000
Cash Dividends Paid (485,000) (441,000) (376,000)
Net increase (decrease) in
Short-term Borrowings 9,508,000 (501,000) 5,225,000
Net Cash Provided (used) by
Financing Activities 17,620,000 23,845,000 16,414,000
Increase (decrease) in Cash
and Cash Equivalents (2,063,000) 4,647,000 (3,756,000)
Cash and Cash Equivalents at
Beginning of Year 13,544,000 12,684,000 13,608,000
Cash and Cash Equivalents at
End of Year $11,481,000 $17,331,000 $ 9,852,000
Cash payments made for interest and income taxes during the years
presented are as follows:
1996 1995 1994
Interest $5,404,000 $4,877,000 $3,430,000
Income Taxes 833,000 841,000 520,000
The accompanying notes are an integral part of these financial
statements.
6
FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1996
Note 1 - Consolidated Financial Statements
The consolidated balance sheet as of June 30, 1996, the
consolidated statements of income for the three month and
six month periods ended June 30, 1996, 1995 and 1994, and
the consolidated statement of cash flows for the three month
periods then ended have been prepared by the company without
audit. The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S - X. Accordingly they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments necessary to present fairly the financial
position, results of operations and cash flows at June 30,
1996 and for all periods presented have been made.
Operating results for the reporting periods presented are
not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements
and footnotes thereto included in the company's annual
report on Form 10-K for the year ended December 31, 1995.
Note 2 - Organization
First Citizens Bancshares, Inc., is a bank holding company
chartered on December 14, 1982, under the laws of the State
of Tennessee. On September 23, 1983, all of the outstanding
shares of common stock of First Citizens National Bank were
exchanged for an equal number of shares in First Citizens
Bancshares, Inc.
Note 3 - Long-Term Debt
Long term debt for the periods ending June 30 consists of
Federal Home Loan Bank Borrowings totaling $4,076,000. These
borrowings are maturity matched with specific loans and
investments. The average volume, rate and maturity is as
follows:
Average Average Average
Volume Rate Maturity
FHLB Borrowings $2,169,000 5.66% 8 Years
FHLB Borrowings 1,907,000 5.56% 11 Years
Note 4 - Statement of Cash Flows
June 30,
1996 1995 1994
Actual payments made
during the periods:
Income taxes $ 833,000 $ 841,000 $ 520,000
Interest 5,404,000 4,877,000 3,430,000
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Note 5 - Contingent Liabilities
There are no material pending litigations as of the current
reportable date.
Note 6 - Investment Securities
The differences between book values of investment securities
and market values at June 30, 1996 and June 30, 1995, total
($280,000) and $410,000 respectively. FASB 115 requires
banks to classify securities into held to maturity,
available for sale, and trading. First Citizens has $0 in
the trading account. Available for Sale securities values
are adjusted to market quarterly and the adjustments flow to
the capital section (net of tax). For the current quarter,
this adjustment was ($675,000). Changes in the market value
of these investments are a direct result of increases/
decreases in interest rates. Held to Maturity securities are
stated at amortized cost. First Citizens has not engaged in
derivative activities as defined by paragraphs 5-7 of FASB
119 for any of the reported periods.
Note 7 - Regulatory Capital Requirements
Regulatory agencies impose certain minimum capital
requirements on both First Citizens Bancshares, Inc. and
First Citizens National Bank. On December 16, 1988, the
Federal Reserve Board approved risk based capital guidelines
for bank holding companies. Presently, the holding company
and First Citizens National Bank exceed the required minimum
standards established by regulation. Tier 1 and tier 2 risk
based capital ratios are 12.95% and 14.03%.
Note 8 - Deferred Income Taxes
First Citizens adopted FASB 109 as of January 1, 1993. The
deferred tax asset account reflects a total balance of
$650,000. The timing differences mainly consist of Reserve
for Loan Loss deductions and FASB 115 entries of $332,000.
Note 9 - Reserve for Loan Losses
FASB 114 and 118 was implemented during the first quarter of
1995. This standard requires companies to set aside
reserves for impaired loans.
The following data reflects impaired totals for the
reportable periods:
Impaired Loan Balance or Recorded Balance $2,194,000
Amount of Recorded Balance with Related Allowance $1,808,000
Amount of Recorded Balance with no Related Allowance $ 386,000
Interest income recognized on impaired loans will be recognized on a
cash basis. Cash receipts will be applied as cost recovery or principal
recovery first. This is consistent with OCC Regulations.
A quarterly review of the adequacy of the loan loss reserve by the Board
of Directors will ensure the sufficiency of said reserve for both losses
and impairment.
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Note 10 - Asset Impairment
The Financial Accounting Standards Board issued Statement 121 addressing
the accounting for the impairment of long-lived assets that will be held
and used, including certain identifiable intangibles, and the good-will
related to those assets. The statement, which is effective for
calendar-year 1996 financial statements, also addresses accounting for
long-lived assets and certain identifiable assets to be disposed.
The statement requires that assets to be held and used be reviewed for
impairement whenever events or changes in circumstances indicate that
the carrying amount of the asset in question may not be recoverable.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of the following discussion is to address significant
changes in income and expense accounts when compared to the quarter
ending June 30, 1995. Reference should be made to the financial
statements included as ITEM 1 for a more thorough understanding of the
analysis. The discussion relates mainly to activities of First Citizens
National Bank (First Citizens) in its banking business. However, the
consolidated statements of income reflect activities of both First
Citizens and First Citizens Bancshares Inc. (Bancshares). Limited
activity to date by the Holding Company does not materially affect the
income report.
Intense strategic planning efforts resulted in record earnings for
Bancshares' for the first six months of 1996. Net income rose 37.9%
when compared to the same quarter in 1995. Net interest income of
$3,150,000 at June 30, 1996 was up from $2,735,000 in 1995, an increase
in excess of 15 percent. Net interest spread for the same time period
was 4.62% up from 4.38% on this date in 1995. Increased earnings
resulted in a return on average assets (annualized) of 1.29% compared to
1.01% for the first half of 1995. Return on average equity annualized
is 14.18% compared to 11.02% at June 30, 1995. Earnings per share were
$1.36, an increase of 36% from the $1.00 per share earned in the second
quarter of 1995. Price to earnings (annualized) was 9.27 compared to
11.10, down 1.83, a direct result of bank earnings out pacing market
value increases in Bancshares' stock. The strong earnings performance
was driven by excellent loan demand as well as improved operating
efficiencies. Improved operating performance can also be attributed to
intense strategic planning that sets goals (1) To remain an independent
community bank serving the needs of individuals, small businesses,
corporations and agriculture customers; (2) To maximize the value of
First Citizens to its shareholders by providing the highest level of
customer service and the widest selection of quality products and
services; (3) To consistently generate earnings that are at a minimum
equal to that of peer banks; (4) To attract and retain high quality
personnel, while rightsizing staffing levels to be more in line with
peer banks; and (5) To continuously evaluate and invest in a product
and service distribution system that will provide our customers with
personal access as well as electronic delivery of products and services.
The bank made great strides in accomplishing these goals in 1995 and the
first half of 1996. Two new branches were opened to expand in the
development of new and future business; Full-time equivalent employees
were further reduced from 149 at June 30, 1995 to 145 at June 30, 1996.
POD and item imaging was introduced to the market; An automated Teller
system, "TellerPro" was installed; The bank's Automated Teller Machine
network was converted from Deluxe, Inc. to Internet/Most, Reston,
Virginia in June 1996. The switch to Internet/Most provides the bank
9
with an innovative network for electronic and remote banking services.
Electronic services provided by the network are ATM and POS servicing,
while remote banking products include home banking programs using
personal computers and screen phone devices as well as bill payment
services. The bank's management believes that a successful
electronic/home banking program is a key factor in accomplishing
strategic planning goals set for the bank's future service delivery
system. A Visa Check Card referred to as "Check Connection" was
developed and is currently in the first stage of testing. The "Check
Connection" is expected to be introduced to bank customers around
September 1, 1996. Visa Check Card is considered to be the most widely
accepted debit card by consumers in today's market. Another strategic
element included in the decision to add a debit card product was the
selection of an online communication between the bank and retailer.
When debit transactions are authorized online, transactions are
automatically memo posted to the Demand Deposit Account, eliminating
certain elements of preapproval risk. Memo posted transactions are then
deducted from the account when Visa settlement of the transaction
occurs. The 1996 strategic planning sessions resulted not only in
retaining the goals listed within this section, but also accomplished
the development of a Technology Strategic Plan. Brintech, Inc. New
Smyrna Beach, FL. was contracted in May, 1996 to perform a technology/
productivity assessment of First Citizens National Bank. Strategic
action goals were adopted that includes, but not limited to the
following: (1) Install Document Imaging in the loan department of the
bank; (2) Evaluate a Marketing CIF system which will allow us to
identify needs and opportunities which exist in the existing and
potential customer base; (3) To maintain the IBM AS/400 as the bank's
technology infrastructure; (4) To evaluate existing system interfaces as
well as develop new system interfaces to eliminate redundant manual
labor cost; and (5) To survey the market to identify the potential for
Home Banking and Corporate Cash Management.
As a conscious effort to improve our return on assets and equity, the
cost of funds was reduced from 4.60% at June 30, 1995 to 4.31% at June
30, 1996. Interest margins are projected to increase with continued
reductions in cost of funds. Loan growth exceeded 12.89%, while
deposit growth was slightly less at 7.67 percent. Liquidity ratio at
6/30/96 was 17.09% including approved lines of credit totaling $20
million. Loan to deposit ratio is 83.64%, excluding Repurchase
Agreements and loans funded with Federal Home Loan Bank borrowings.
When including these items the liquidity ratio is 76.41 percent. Short
term borrowings averaging $9,508,000 were used to fund financing
activities for the quarter. A more thorough report of liquidity is
included in this report in the Liquidity and Interest Rate Sensitivity
Section.
Bad debt allocations increased approximately $143,000 or 6.45% when
reviewing the periods under comparison. The percentage of loan loss
reserve to total loans is well within policy guidelines of one percent.
The reserve was increased to support growth and the addition of one
credit line in the amount of $991,000 to the problem list. For more
information reference the Analysis of the Loan Loss Reserve section of
this report.
There are no known trends, events or uncertainties that are likely to
have a material effect on First Citizens liquidity, capital resources or
results of operations. There currently exists no recommendation by
regulatory authorities which if implemented, would have such an effect.
There are no matters which have not been disclosed. Interstate
Banking/Branching became a reality by legislation passed September 13,
10
1994. The act permits full nationwide interstate branching after June
1, 1997. First Citizens Bancshares, Inc. and First Citizens National
Bank are located in a highly competitive market place. There are
presently four banks competing for deposit dollars and earning assets,
two of which are branches of large regional competitors. First Tennessee
Bank and Union Planters National Bank are two of the largest financial
institutions in the state. While First Citizens has historically
maintained in excess of 50% of local market share, statistics reflect a
loss of approximately 2% over the past five years by both First Citizens
and First Tennessee. This is reflective of increased competition
brought about by the presence of two additional banks into the market
place, both of whom were bought out by Union Planters National Bank.
Interstate banking could possibly bring about the location of large out
of state banks to the area. If so, First Citizens would continue to
operate as it has in the past, focusing on the wants and needs of
existing and potential customers. The quality of service and individual
attention afforded by an independent community bank cannot be matched by
large regional competitors, managed by a corporate team unfamiliar to
the area. First Citizens is a forward moving bank offering products and
services required for maintaining a satisfactory customer relationship
moving into the next decade and beyond. A recent market analysis
completed in September 1995 indicates a remarkably strong performance by
First Citizens in satisfying customer expectations in the areas of
personnel, service and convenience.
The following table compares year-to-date non-interest income, and
expense of First Citizens as of June 30, 1996, 1995, and 1994:
Non-Interest Income
(in thousands)
June 30 June 30 June 30
1996 % of Change 1995 % of Change 1994
Service Charges
on Deposit
Accts. $663 10.50% $600 5.07% $571
Other Income $701 56.47% $448 (43.36%) $791
Trust Income $372 25.25% $297 6.83% $278
TOTAL NON-INTEREST
INCOME $1,736 29.07% $1,345 (17.98%) $1,640
Total Non-Interest Income is up over 29% when comparing June 30, 1996 to
June 30, 1995 after declining 17.98% when comparing the same time
periods in 1995 to 1994. The increase in 1996 is attributed to a 56.47%
increase in other income; a 25.25% increase in Trust income; and a
10.50% increase in overdraft fee income. Other income increased due to
a one time refund of $70,705 from bankruptcy trustees of Southeast Fort
Worth Ltd, increased fee income received from the bank's subsidiary,
Financial Plus, Inc. and security gains realized from the sale of
investment portfolio securities. The Southeast refund partially
reimbursed the bank for settlement made to trust customers by the bank
in December 1989 who later filed for bankruptcy. In April, 1995, the
per item overdraft fee increased from $17.50 to $20.00. In addition, a
daily overdraft charge of $3.00 for each day the account is overdrawn
after a 5 day grace period was raised to $5.00 per day. Non-Interest
Income decreased in 1995 when compared to 1994 for two reasons: (1) a
one time after tax credit of $178,000 resulting from the sale of other
real estate was realized in the first quarter of 1994; and (2) a decline
in fee income received from the Bank's subsidiary, Financial Plus, Inc.
11
Peer group comparisons published by the Federal Reserve March 1996
reflects Non-Interest Income for Bancshares was 1.05% compared to peer
group banks of .90%.
Non-Interest Expense
1996 % of Change 1995 % of Change 1994
Salaries & Employee
Benefits $2,536 4.50% $2,427 4.34% $2,326
Net Occupancy
Expense $ 901 7.17% $ 769 13.59% $ 677
Other Operating
Expense $1,298 (4.77%) $1,363 9.39% $1,246
TOTAL NON-INTEREST
EXPENSE $4,735 3.86% $4,559 7.29% $4,249
Total Non-Interest Expense reflects a marginal 3.86% increase when
comparing 6/30/96 to 6/30/95. A comparison of Non-Interest Expense for
6/30/95 and 6/30/94 reflects a 7.29% increase. Salaries and employee
benefits posted an increase of 4.50% in 1996 reflecting salary increases
rather than additions to staff. Full-time equivalent employees as of
6/30/96 was 145 compared to 149 and 145 for the same time periods in
previous years. The bank is currently in the process of employing four
to six part-time tellers to complete the bank's teller training program.
Part-time tellers are trained in a one month training program, then
utilized to meet additional staffing needs during peak time hours and to
support extended banking hours. The bank also employs approximately
16.5 employees to support non-traditional bank services. These services
include Trust Department, 10 employees, Mortgage Lending, 3.5
employees; and Brokerage Service,3 employees. Net Occupancy Expense, up
17.17% due to increased computer services of $20,000; Depreciation,
$60,000; Property Taxes $10,000; and Machine Service $12,000. Controls
on Other Operating Expense continue to reduce expenses in this area.
Other Operating Expense reduced 4.77% from 1995 after increasing 9.39%
when comparing 1995 to 1994. Reductions in the cost of FDIC Insurance
as well as professional services, bad check chargeoffs, and other real
estate expenses are reflected in the reduction from 1995 to 1996. Total
Non-Interest Expense for peer banks as of March 1996 was 3.23% compared
to peer group banks of 3.27%.
Deposits
The average daily amount of deposits and average rates paid on such
deposits is summarized for the quarter ending June 30 for the years
indicated:
COMPOSITION OF DEPOSITS
(in thousands)
1996 1995 1994
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
Non-Interest
Bearing Demand
Deposits $ 26,303 - $ 25,348 - $ 24,361 -
Savings Deposits $ 73,362 3.12% $ 64,485 3.03% $ 65,059 2.64%
Time Deposits $145,941 5.61% $138,484 6.01% $106,319 4.50%
TOTAL DEPOSITS $245,606 4.27% $228,317 4.50% $195,739 3.32%
12
Growth in Total Deposits continues to be a challenge for First Citizens
National Bank. The Company's marketplace is described as highly
competitive, with a fairly sophisticated customer base. Competition is
aggressive for loans and deposits. According to a market share
analysis, Bancshares holds approximately 50% (excluding overnight and
fixed term repurchase agreements) of the bank deposits domiciled in Dyer
County. The bank competes with First Tennessee Bank, N.A.( 22% of total
county deposits), and Security Bank (14%). Union Planters, another
regional bank also holds market share of 13 percent. First Citizens
also competes with Dyersburg City Employees Credit Union and other types
of financial service providers in the area. In spite of aggressive
competition, total deposits increased $17.2 million and $32.5 million
when comparing 6/30/96 to 6/30/95 and 6/30/94. A review of the
composition of deposits in 1996 reflects growth of $8.8 million in
savings deposits and $7.4 million in time deposits. Approximately $32
million in deposit growth in 1995 was centered primarily in the time
deposit category. Other factors contributing to the substantial growth
in 1995 was rising interest rates and the purchase of $8 million in
deposits in the Ripley Branch acquisition. An analysis of 1994
reflects customers response to low interest rates paid on deposits and
their reluctance to recommit funds into bank certificates of deposits.
Demand deposits have remained relatively flat when reviewing the years
under comparison. However, sweep account funds totaling $14,385,000 are
not included in the average balances for non-interest bearing demand
deposits. The "Sweep" total is included in the balance sheet category
of securities sold under an agreement to repurchase totaling $21,953,000
at an average rate of 4.39% for the second quarter of 1996. The average
rate paid on deposits has continued to drop when reviewing each quarter
end from 1995 to 1996. The average rate was 4.27% at 6/30/96 compared
to 4.50% at 6/30/95. The average rate paid on time deposits reflected
the most significant drop from 6.01 percent to 5.61 percent. There
were no significant changes to products and services during the first
half of 1996.
The following tables set forth the maturity distribution of Certificates
of Deposits and other time deposits of $100,000 or more outstanding on
the books of First Citizens on June 30, 1996. The overall total
reflects an increase of $8.7 million when compared to June 1995 total.
Maturity Distribution Of Time Certificates Of Deposit
In Amounts of $100,000.00 Or More As Of June 30, 1996
(in thousands)
Maturity Total Amount
3 months or less $ 6,047
3 through 6 months $10,019
6 through 12 months $ 9,718
over 12 months $ 7,138
Total $32,922
A summary of average interest earning assets and interest bearing
liabilities is set forth in the following table together with average
yields on the earnings assets and average costs on the interest bearing
liabilities. Average yield on interest earning assets dropped slightly
from 8.92% at 6/30/95 to 8.85% at 6/30/96. Total interest earning
assets as of 6/30/96 was $278,894,000 up from $254,536,000 for the same
quarter end in 1995. Rates paid on total interest bearing liabilities
declined approximately 30 basis points when comparing June 1996 to June
1995. The rate paid on total interest bearing liabilities was 3.78% at
6/30/94. Net yield on average earning assets was 4.62%, 4.38% and 4.94%
as of 6/30/96, 1995, and 1994. The bank set a goal at the end of the
13
second quarter of 1995 to reduce cost of funds. Reductions in interest
expense have resulted in an annualized savings of $699,000. The average
rate paid on deposits in 1996 was 4.27% compared to 4.50% in 1995,
reducing annualized interest expense by $564,000. First Citizens has
historically outperformed peer banks with the average rate earned on the
loan portfolio. Asset/Liability policies are in place that effectively
monitor interest rate sensitivity. Interest margins are managed to
achieve acceptable profits and a return on equity within policy
guidelines.
14
First Citizens National Bank
Quarter Ending June 30
Monthly Average Balances and Interest Rates
(in thousands)
1996 1995 1994
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST EARNING
ASSETS:
Loans (1)(2)(3) $201,919 $4,828 9.57% $178,914 $4,395 9.82% $156,607 $3,561 9.10%
Investment Securities:
Taxable $ 65,866 $1,126 6.84% $ 62,072 $1,030 6.63% $ 50,265 $ 757 6.02%
Tax Exempt (4) $ 10,886 $ 208 7.65% $ 10,165 $ 197 7.76% $ 13,725 $ 258 7.52%
Interest Earning
Deposits $ 135 $ 2 5.93% $ 164 $ 2 4.87% $ 102 $ 1 3.92%
Trading Account $ - $ - - $ - $ - - $ 100 $ - -
Federal Funds Sold $ 83 $ 3 14.46% $ 3,211 $ 49 6.11% $ 921 $ 10 4.34%
Lease Financing $ 5 $ - - $ 10 $ 1 40.00% $ 51 $ 1 7.84%
Total Interest
Earning Assets $278,894 $6,167 8.85% $254,536 $5,674 8.92% $221,771 $4,588 8.28%
NON-INTEREST
EARNING ASSETS:
Cash and Due From
Banks $ 9,549 $ - - $ 9,263 $ - - $ 8,853 $ - -
Bank Premises and
Equipment $ 8,585 $ - - $ 8,595 $ - - $ 7,911 $ - -
Other Assets $ 4,651 $ - - $ 4,707 $ - - $ 3,246 $ - -
Total Assets $301,679 $ - - $277,101 $ - - $241,781 $ - -
LIABILITIES AND
SHAREHOLDERS' EQUITY:
INTEREST BEARING
LIABILITIES:
Savings Deposits $ 73,362 $ 572 3.12% $ 64,485 $ 490 3.03% $ 65,059 $ 430 2.64%
Time Deposits $145,941 $ 2,046 5.61% $138,484 $2,084 6.01% $106,319 $1,196 4.50%
Federal Funds
Purchased and
Other Interest
Bearing
Liabilities $ 28,101 $ 333 4.74% $ 24,410 $ 317 5.19% $ 24,237 $ 224 3.70%
Total Interest
Bearing
Liabilities $247,404 $ 2,951 4.78% $227,379 $2,891 5.08% $195,615 $1,850 3.78%
NON-INTEREST
BEARING
LIABILITIES:
Demand Deposits $ 26,303 $ - - $ 25,348 $ - - $ 24,361 $ - -
Other Liab. $ 2,300 $ - - $ 1,979 $ - - $ 1,503 $ - -
Total Liab. $276,007 $ - - $254,706 $ - - $221,479 $ - -
SHAREHOLDERS'
EQUITY $ 25,672 $ - - $ 22,395 $ - - $ 20,302 $ - -
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $301,679 $ - - $277,101 $ - - $241,781 $ - -
NET INTEREST
INCOME $ - $ 3,216 - $ - $2,783 - $ - $2,738 -
NET YIELD ON
AVERAGE EARNING
ASSETS
(ANNUALIZED) $ - $ - 4.62% $ - $ - 4.38% $ - $ - 4.94%
[FN]
(1) Loan totals are shown net of interest collected, not earned and
Loan Loss Reserve.
(2) Non-accrual loans are included in average total loans.
(3) Loan Fees are included in interest income and the computations of
the yield on loans.
(4) Interest and rates on securities which are non-taxable for Federal
Income Tax purposes are presented on a taxable equivalent basis.
15
COMPOSITION OF LOANS
The loan portfolio, First Citizens' largest earning asset, has grown
from $136,873,000 at 6/30/92 to $209,255,000 at 6/30/96. Loan growth
for the past twelve months represents $23.8 million or 12.89% increase.
In a report addressed to the Board of Directors on May 31, 1996,
Internal Loan Review determined the loan portfolio to be in sound
condition based on the percentage of problem loans to gross capital
funds. Problem loans totaled $3,566,698 or 12.63% of gross capital.
When combined with Other Real Estate Owned of $19,421, problem loan
totals represent 12.70% of gross capital funds. Problem loan totals
have increased $312,519 or 9.60% within the last twelve months. Watch
list loans represent a balance of $8,856 at 5/31/96. Delinquent
commercial loans of more than 30 days past due total $2,665,992 or 1.48%
of the commercial loan portfolio, while delinquent installment loans
more than 30 days comprise 2.12% of the installment loan portfolio.
Credit and collateral exceptions are at an acceptable level according to
Loan Administration.
The loan portfolio is made up of quality loans and is well diversified
with no concentrations of credit. Real Estate Loans comprise
$131,643,000 or 62.91% of the total portfolio. The upward trend in both
construction and mortgage loans is attributed to substantial growth in
both population and number of households recorded in Dyer County over
the past decade. First Citizens is located in the Dyersburg/Dyer County
trade area, having a population of approximately 40,000. The entire
trade area has out paced both the state and the nation in per capital
personal income growth since the early 1980's. The State of Tennessee
projects that per capital income in the area will be greater than the
national average by the year of 2000. The mix of industry in the local
economy has provided stable, growing employment opportunities for
residents under all economic conditions. The Dyer County distribution
of employment consists primarily of service employers 14.9%, government
14.7%, trade 19.3%, and manufacturing 40.5%. Dyer County's unemployment
rate at 6/30/96 was 7.2%, up from figures of 5.2% in February 1996 and
weaker than the State of Tennessee's rate of 4.8%. Manufacturers within
the area have indicated that increased unemployment was caused by a
softness in demand for their products. Also during the last half of
1995 a local factory was closed causing the loss of some 400 jobs. It
is projected that approximately 50 jobs will be created from the opening
of a plant located at the Dyersburg Industrial Park in the second to
third quarter of 1996. Other industries located in Dyersburg and the
surrounding areas have announced either the opening date of a
manufacturing plant or expansion of an existing facility. Layoffs are
more prevalent in the first quarter of 96 than in 95, but are not
considered to be a serious problem overall. Retailers reported that
sales appear to be gaining strength. Local economic conditions are
stable and represent no immediate threat to the loan portfolio.
Loan Administration sets policy guidelines approved by the Board of
Directors regarding portfolio diversification and underwriting
standards. Loan policy also includes board approved guidelines for
collateralization, loans in excess of loan to value limits, maximum loan
amount, maximum maturity and amortization period for each loan type.
Policy guidelines for loan to value ratio and maturities related to
various collateral are as follows:
16
Collateral Max. Amortization Max. LTV
Real Estate Amort. discussed herein Amort. discussed herein
Equipment 5 Years 75%
Inventory 5 Years 50%
A/R 5 Years 75%
Livestock 5 Years 80%
Crops 1 Year 50%
*Securities 10 Years 75% (Listed)
50% (Unlisted)
*Maximum LTV on margin stocks (stocks not listed on a national exchange)
when proceeds are used to purchase or carry same, shall be 50%.
Diversification of the banks' real estate portfolio is a necessary and
desirable goal of the bank's real estate loan policy. In order to
achieve and maintain a prudent degree of diversity, given the
composition and general economic state of the bank's market area, the
bank will strive to maintain a real estate loan portfolio
diversification based upon the following:
*Agricultural loans totaling in aggregate no more than 20% of the
Bank's total loans;
*Land acquisition and development loans totaling in aggregate no
more than 10% of the Bank's total loans;
*Commercial construction loans totaling in aggregate no more than
10% of the Bank's total loans;
*Residential construction loans totaling in aggregate no more than
10% of the Bank's total loans;
*Residential mortgage loans totaling in aggregate no more than 40%
of the Bank's total loans; and
*Commercial loans totaling in aggregate no more than 30% of the
Bank's total loans.
It is the policy of FCNB that no real estate loan will be made (except
in accordance with the provisions for certain loans in excess of
supervisory limits provided for hereinafter) that exceed the loan-to-value
percentage limitations ("LTV limits") designated by category as follows:
Loan Category LTV Limit (%)
Raw Land 65
Land Development or Farmland 75
Construction:
Commercial, multi-family, and
other non-residential 80
1-to-4 family residential 80
Improved Property 80
Owner-occupied 1-to-4 family
and home equity 80
Multi-family construction loans include loans secured by cooperatives
and condominiums. Owner-occupied 1-to-4 family and home equity loans
which equal or exceed 90% LTV at origination must have either private
mortgage insurance or other readily marketable collateral pledged in
support of the credit.
17
On occasion, the Loan Committee may entertain and approve a request to
lend sums in excess of the LTV limits as established by policy, provided
that:
a. The request is fully documented to support the fact that other
credit factors justify the approval of that particular loan as an
exception to the LTV limit;
b. The loan, if approved, is designated in the Bank's records and
reported as an aggregate number with all other such loans approved
by the full Board of Directors on at least a quarterly basis;
c. The aggregate total of all loans so approved, including the
extension of credit then under consideration, shall not exceed 50%
of the Bank's total capital; and
d. Provided further that the aggregate portion of these loans in
excess of the LTV limits that are classified as commercial,
agricultural, multi-family or non-1-to-4 family residential
property shall not exceed 30% of the Bank's total capital.
Amortization Schedules. Every loan must have a documented repayment
arrangement. While reasonable flexibility is necessary to meet the
credit needs of the Bank's customers, in general all loans should be
repaid within the following time frames:
Loan Category Amortized Period
Raw Land 10 years
Construction:
Commercial, multi-family, and
other non-residential 20 years
1-to-4 family residential 20 years
Improved Property Farmland 20 years
Owner-occupied 1-to-4 family
and home equity 20 years
The aggregate amount of unused guarantees, commitments to extend credit
and standby letters of credit was $22,936,000 as of 6/30/96.
The average yield on loans of First Citizens National Bank for the
second quarter of the years indicated is as follows:
1996 - 9.57%
1995 - 9.82%
1994 - 9.10%
1993 - 9.38%
1992 - 10.05%
18
The following table sets forth loan totals net of unearned income by
category for the past five years:
June 30
(in thousands)
1996 1995 1994 1993 1992
Real Estate Loans:
Construction $ 14,924 $ 12,619 $ 8,681 $ 6,881 $ 4,712
Mortgage $116,719 $102,235 $ 91,510 $ 83,383 $ 79,695
Commercial, Financial
and Agricultural Loans $ 53,279 $ 48,010 $ 44,164 $ 35,433 $ 34,428
Installment Loans to
Individuals $ 22,083 $ 20,518 $ 16,953 $ 15,233 $ 15,579
Other Loans $ 2,250 $ 1,978 $ 3,998 $ 2,098 $ 2,459
TOTAL LOANS $209,255 $185,360 $165,306 $143,028 $136,873
Loan Maturities and Sensitivity to Changes in Interest Rates
The degree of risk to which a bank is subjected can be controlled
through a well managed asset/liability program. First Citizens controls
interest rate risk by employing interest sensitive liabilities in assets
that are also interest sensitive. One tool used to ensure market rate
return is variable rate loans. Loans totaling $91,477,000 or 43.71% of
the total portfolio are subject to repricing within one year or carry a
variable rate of interest. The ratio is up from 41.80% at 6/30/95
reflecting efforts of the customer base to lock in lower interest rates
available in those time periods. Maturities in the one to five year
category total $121,140,000 reflecting a moderate increase of $8,000
when compared to 6/30/95. The trend to lock in interest rates reflected
in previous year comparisons is projected to continue in 1996.
Due after
Due in one one year but Due after
year or less within five years five years
(in thousands)
Real Estate $25,162 $90,957 $15,524
Commercial, Financial
and Agricultural $39,521 $10,060 $ 3,698
All Other Loans $ 4,176 $20,123 $ 34
TOTAL $68,859 $121,140 $19,256
Loans with Maturities After One Year for which:
(in thousands)
Interest Rates are Fixed or Predetermined $117,778
Interest Rates are Floating or Adjustable $ 22,618
NON-PERFORMING ASSETS
A review of non-performing assets for the years under comparison
reflects a continous reduction until 1996. Non-performing loans
increased over 35% when comparing June 30, 1996 to June 30, 1995 due to
the placement of one loan (Bennett Funding, Inc. $991,029) on non-accrual
status. Total non-performing loans are .88% at 6/30/96 compared
19
to .73% at 6/30/95. Peer group ratios for those same time periods were
.73% and .56 percent. The provision of loan losses increased in
proportion to loan growth as required by loan policy. Experience of the
lending and loan review staff as well as adherence to policy lends a
comfort level to the portfolio and supports the Loan Loss Allowance at
the present level. In April 1996, First Citizens was made aware that
Bennett Funding Group, Inc., Syracuse, New York had filed Chapter 11
Bankruptcy and that legal claims had been filed against the company's
CEO claiming among other things the selling of fictitious leases.
Assets of the corporation have been frozen as a result of the bankruptcy
filing. First Citizens National Bank is a holder of outstanding debt on
Bennett Funding Group, Inc. In the principal balance of $991,029 down
from the beginning balance of $1,699,880. The bank holds 176
outstanding leases securing this debt. Of the total, 25 have been
contacted using the acceptable language provided by Bennett. Response
received indicate that the equipment securing the leases is in place and
in working order. All leases have been reinspected and we have no
reason to believe there are fictitious or fraudulent leases in our
portfolio. First Citizens has joined with other banks, also purchasers
of leases from Bennett Funding, to employ legal representation as a
group until all facts can be sorted out. At this time no loss is
expected. The Kansas Bankers Surety Company, holder of the bank's
blanket bond insurance policy has been notified of the issue. The loan
has been added to the problem list and an allocation made to the loan
loss reserve in the amount of $200,000 to cover any exposure to the bank
not covered by the bond.
Categorization of a loan as non-performing is not in itself a reliable
indicator of potential loan loss. The banks' policy states that the
Bank shall not accrue interest or discount on (1) any asset which is
maintained on a cash basis because of deterioration in the financial
position of the borrower, (2) any asset for which payment-in-full of
interest or principal is not expected, or (3) any asset upon which
principal or interest has been in default for a period of 90 days or
more unless it is both well secured and in the process of collection.
For purposes of applying the 90 day due test for the non-accrual of
interest discussed above, the date on which an asset reaches non-accrual
status is determined by its contractual term. A debt is well secured if
it is secured (1) by collateral in the form of liens or pledges or real
or personal property, including securities that have a realizable
value sufficient to discharge the debt (including accrued interest) in
full, or (2) by the guaranty of a financially responsible party. A debt
is considered to be proceeding in due course either through legal
action, including judgement enforcement procedures, or, in appropriate
circumstances, through collection efforts not involving legal action
which are reasonably expected to result in repayment of the debt or in
its restoration to a current status. Loans that represent a potential
loss to First Citizens are adequately reserved for in the provision for
loan losses.
Interest income on loans is recorded on an accrual basis. The accrual
of interest is discontinued on all loans, except consumer loans, which
become 90 days past due, unless the loan is well secured and in the
process of collection. Consumer loans which become past due 90 to 120
days are charged to the allowance for loan losses. The gross interest
income that would have been recorded for the six months ending 6/30/96
if all loans reported as non-accrual had been current in accordance with
their original terms and had been outstanding throughout the period is
$83,000. Interest income on loans reported as ninety days past due and
on interest accrual status was $6,000 for year-to-date 1996. Loans on
which terms have been modified to provide for a reduction of either
principal or interest as a result of deterioration in the financial
20
position of the borrower are considered to be Restructured Loans.
Restructured loan total at June 30, 1996 was zero.
Loans classified by regulatory examiners and not reported under non-accrual,
past due or restructured pose no significant credit problems.
Loan Officers are required to develop a "Plan of Action" for each
problem loan within their portfolio. Adherence to each established plan
is monitored by Loan Administration and reevaluated at regular intervals
for effectiveness.
The following table sets forth the balance of non-performing loans as of
June 30, for the years indicated:
Non-Performing Loans
June 30
(in thousands)
90 Days Past Due
Year Non-Accrual Accruing Interest Total
1996 $1,725 $ 116 $1,841
1995 $ 869 $ 490 $1,359
1994 $ 889 $ 520 $1,409
1993 $1,466 $ 142 $1,608
1992 $2,239 $ 801 $3,040
LOAN LOSS EXPERIENCE AND
RESERVES FOR LOAN LOSSES
During the quarter just ended activity to the Reserve Account consisted
of (1) loan charge-offs - $96,000 (2) recovery of loans previously
charged off - $32,000 and (3) additions to Reserve - $134,000. Recovery
of loans previously charged off continues to be a priority to the bank.
One full time employee is assigned the responsibility for recovery of
charged off loans and deposit accounts.
An analysis of the allocation of the allowance for Loan Losses is made
on a fiscal quarter at the end of the month, (February, August, and
November) and reported to the Board at its meeting immediately preceding
quarter-end. Requirements of FASB 114 & 118 have been incorporated into
the policy for Accounting by Creditor for Impairment of a Loan. A loan
is impaired when it is probable that a creditor will be unable to
collect all amounts due of principal and interest according to the
original contractional terms of the loan. First Citizens adopted the
following as a measure of impairment: (1) Impairment of a loan at First
Citizens shall exist when the present value of expected future cash
flows discounted at the loans effective interest rate impede full
collection of the contract; and (2) Fair Value of the collateral, if the
loan is collateral dependent, indicates unexpected collection of full
contract value. The Impairment decision will be reported to the Board
of Directors and other appropriate regulatory agencies as specified in
FASB 114 and 118. The bank will continue to follow regulatory
guidelines for income recognition for purposes of generally accepted
accounting principles, as well as regulatory accounting principles.
21
An annual review of the loan portfolio to identify risks will cover a
minimum of 70% of the gross portfolio less installment loans. In
addition, any single note or series of notes directly or indirectly
related to one borrower which equals 25% of the bank's legal lending
limit will be included in the review.
For analysis purposes loans reviewed will be separated into five
classifications:
1. Pass - Loans that have been reviewed and graded high quality or
no major deficiencies.
2. Watch - Loans which, because of unusual circumstances, need to be
supervised with slightly more attention than is customary.
3. Problem - Loans which require additional collection effort to
liquidate both principal and interest.
4. Specific Allocation - Impaired loans, in total or in part, in which
a future loss is possible.
5. Charged-Off
Examples of factors taken into consideration during the review are:
Industry or geographic economic problems, sale of business, change of or
disagreement among management, unusual growth or expansion of the
business, past due for either principal or interest 90 days, placed on
non-accrual or renegotiated status, renewed four times without principal
reduction, declining financial condition, adverse change in personal
life, frequent overdrafts, lack of cooperation by borrower, decline in
marketability or market value of collateral, insufficient cash flow, and
inadequate collateral values.
22
LOAN LOSS ALLOWANCE ANALYSIS
DATE
AVERAGE AVERAGE PERCENT CURRENT RESERVE
LOSS 3 YRS. BALANCE 3 YRS. BALANCE REQUIRED
I. CREDIT $ GROSS $ % $ $
CARDS
II. INSTALL. $ NET $ % $ $
LOANS
III. IMPAIRED WITH ALLOCATIONS $ $
IMPAIRED WITHOUT ALLOCATIONS $ $
ALLOWANCE
IV. DOUBTFUL 50% $ $
SUBSTANDARD 10%
WATCH 5%
OTHER LOANS NOT LISTED PREVIOUSLY .75%
LESS SBA/FMHA GUARANTEED PORTIONS
TOTAL LOANS $
V. LETTERS OF CREDIT .75% $ $
VI. OTHER REAL ESTATE OWNED $
RESERVE REQUIRED $
RESERVE BALANCE $
EXCESS (DEFICIT) $
RESERVE AS % OF TOTAL LOANS %
PEER GROUP %
LOSS EXPERIENCE III & IV AVERAGE LAST 3 YEARS
.% OR $
Management estimates the approximate amount of charge-offs for the 12
month period ending 12/31/96 to be as follows:
Domestic Amount
Commercial, Financial & Agricultural $200,000
Real Estate-Construction -0-
Real Estate-Mortgage 100,000
Installment Loans to individuals &
credit cards 100,000
Lease financing -0-
Foreign N/A
01/01/96 through 12/31/96 Total $400,000
The book value of repossessed real property held by Bancshares and First
Citizens National Bank is $853,000 at 6/30/96 compared to $941,000 at
6/30/95. Property held on the books of Bancshares is a strip shopping
center valued at $655,000 and a parcel of land purchased for expansion
of the Midtown Branch in 1988. Expansion plans were abandoned after a
decision was made to construct the Industrial Park Branch. This
property valued at $164,000 has been classified as ORE and is being
offered for sale. The remaining balance represents other real estate
held by First Citizens National Bank. Efforts to market the property
held by the Holding Company are on-going.
23
Accounting for adjustments to the value of other Real Estate when
recorded subsequent to foreclosure is accomplished on the basis of an
independent appraisal. The asset is recorded at the lesser of its
appraised value or the loan balance. Any reduction in value is charged
to the allowance for possible loan losses.
All other real estate parcels are appraised annually and the carrying
value adjusted to reflect the decline, if any, in its realizable value.
Such adjustments are charged directly to expense.
The following table summarizes the monthly average of net loans
outstanding; changes in the reserve for loan losses arising from loans
charged off and recoveries on loans previously charged off; additions to
the reserve which have been charged to operating expense; and the ratio
of net loans charged off to average loans outstanding.
Loan Loss Experience and Reserve for Loan Losses
Quarter ending June 30
(in thousands)
1996 1995 1994 1993 1992
Average Net Loans
Outstanding $201,924 $178,924 $156,658 $140,410 $135,014
Balance of Reserve
for Loan Losses
at Beginning of
Period $ 2,289 $ 2,115 $ 1,795 $ 1,832 $ 1,798
Loan Charge-Offs $ (96) $ (56) $ (50) $ (69) $ (271)
Recovery of Loans
Previously Charged Off $ 32 $ 41 $ 34 $ 38 $ 100
Net Loans Charged Off $ (64) $ (15) $ (16) $ (31) $ (171)
Additions to Reserve
Charged to Operating
Expense $ 134 $ 86 $ 100 $ 119 $ 130
Balance at End of
Period $ 2,359 $ 2,186 $ 1,879 $ 1,920 $ 1,757
Ratio of Net Charge-
Offs during quarter
to Average Net Loans
Outstanding (.04%) (.01%) (.01%) (.02%) (.13%)
The following table will identify charge-offs by category for the period
ending 6/30/96.
24
Charge-Offs:
Domestic
Commercial, Financial and Agricultural $ 42
Real Estate - Construction 0
Real Estate - Mortgage 10
Installment Loans to Individuals 40
Lease Financing 0
Credit Cards 4
Total $(96)
Recoveries:
Domestic:
Commercial, Financial and Agricultural $ 6
Real Estate - Construction 0
Real Estate - Mortgage 1
Installment Loans to Individuals 21
Lease Financing 0
Credit Cards 4
Total $ 32
Net $(64)
Management estimates charge-offs for period ending 12/31/96 to be as
follows:
Domestic Amount
Commercial, Financial & Agricultural $200,000
Real Estate-Construction -0-
Real Estate-Mortgage 100,000
Installment Loans to individuals & credit cards 100,000
Lease financing -0-
Foreign N/A
01/01/96 through 12/31/96 Total $400,000
INVESTMENT SECURITIES
The book value of listed investment securities as of the dates
indicated are summarized as follows:
Composition of Investment Securities
June 30
(in thousands)
1996 1995 1994 1993 1992
U. S. Treasury &
Government Agencies $63,154 $53,754 $46,480 $53,792 $56,452
State & Political
Subdivisions $10,756 $10,019 $14,093 $ 8,496 $ 6,143
All Others $ 3,435 $ 4,151 $ 6,021 $ 5,144 $ 4,769
TOTALS $77,345 $67,924 $66,594 $67,432 $67,364
A major goal of the bank's investment portfolio management is to maximize
returns from investments while controlling the basic elements of risk.
The second goal is to provide liquidity and meet financial needs of the
community. Investment Securities also serve as collateral for government
and public fund deposits. Investments for the second quarter, 1996
increased approximately $9.4 million when compared to the same time
period in 1995. Securities contained within the portfolio consist
primarily of U. S. Treasury and Government Agencies ($63,154,000).
25
Tax Free Investments total approximately $10 million. Book value of
$75,045,583 compared to market value of $73,923,550 results in an
unrealized loss of $1,122,332, a direct result of declining interest
rates. It is projected that investments will be held to maturity,
therefore no loss should be incurred. The average life of the portfolio
is 3.92 years compared to peer banks of 3.5 years. The average yield on
the investment portfolio at quarter end was 6.76% compared to peer bank
yield of 6.50%.
Security purchases for the quarter totaled $8,465,396 consisting of
government backed securities primarily with call features. Securities
purchased were placed in the Available for Sale Account. Security sales
made during the quarter ending 6/30/96 totaled $4.5 million at a net
profit of $8,988. All sales were made from the Available for Sale
Account. There was no trading account activity during the quarter.
Fixed rate holdings currently have an expected average life of 4.0 years.
It is estimated that this average life would extend to 5.1 years should
rates rise 100 basis points and 5.4 years should rates increase 200 basis
points. This is a result of some extension occurring in the callable
bonds and mortgage-backed holdings as rates rise. For rates down 100
basis points the average life would decrease to 2.3 years.
In terms of price sensitivity, we estimate that if rates were to increase
100 basis points, the market value of the portfolio would fall by 1.8%,
while at rates up 200 basis points the market value would fall by 5.7
percent. This equates to the price sensitivity of the 3 to 4 year
Treasury bond, consistent with the current average life of the portfolio.
For rates down 100 basis points we estimate that the market value would
increase by approximately 2.1 percent.
The adjustable rate holdings all reprice on an annual or more frequent
basis and currently have an average life of 4.9 years. Due to the
structure of these holdings, we would expect very little extension to
occur in average life should interest rates rise, but could see some
shortening should rates fall. We estimate that the adjustable rate
holdings also have the price sensitivity of about a 3-year Treasury,
although this is more difficult to project on adjustable rate holdings
than on fixed rate holdings.
FASB 115 required banks to maintain separate investment portfolio
accounts for Held-To-Maturity, Available-For-Sale, and Trading Account
Investments.
As of June 30, 1996 approximately 59.47% of the total portfolio was
placed in the Available-for-Sale account. The remaining 40.53% was
booked in the Held-to-Maturity account. FASB 115 also required banks to
Mark to Market the Available for Sale and Trading Account Investments at
the end of each calendar quarter. Held-To-Maturity Account Investments
are stated at amortized cost on the balance sheet. Mark to Market,
requirements of FASB 115 resulted in a negative capital entry of
$830,292.
Maturities in the portfolio are made up of 7% within one year, 50% after
one year and within five years, 30% after five years and within 10 years,
and 13% after 10 years. Policy provides for 20% maturities on an annual
basis. Maturities were extended from 5 to 10 years on most securities
purchased since the latter half of 1995. Management made a conscious
effort to extend maturities for a higher yield on the portfolio.
Securities purchased with extended maturities bear call features ranging
from 1 to 3 years.
26
First Citizens National Bank has not engaged in derivative activities as
defined by paragraph 5 thru 7 of FASB 119 (reference footnote 7).
Investment Securities
Held to Maturity Available for Sale
June 30, 1996
(in thousands)
Amortized Fair Amortized Fair
Cost Value Cost Value
U.S. Treasury Securities $ 3,013 $ 2,988 $ 7,444 $ 7,432
U.S. Government agency
and corporation obligations
(exclude mortgage-backed
securities):
Issued by U.S. Government
agencies (2) 150 149 0 0
Issued by U.S. Government-
sponsored agencies (3) 18,521 18,320 25,234 24,551
Securities issued by states
and political subdivisions
in the U.S.:
General obligations 3,750 3,740 3,678 3,622
Revenue obligations 2,497 2,477 901 889
Industrial development and
similar obligations 0 0 0 0
Mortgage-backed securities (MBS):
Pass-through securities:
Guaranteed by GNMA 353 357 3,024 2,959
Issued by FNMA and FHLMC 903 893 404 431
Other pass-through securities 0 0 0 0
Other mortgage-backed securities-
(Include CMOs, REMICs, and
Stripped MBS):
Issued or guaranteed by FNMA,
FHLMC, or GNMA 1,142 1,125 3,752 3,709
Collateralized by MBS issued
or guaranteed by FNMA, FHLC,
or GNMA 0 0 0 0
All other mortgage-backed
securities 0 0 0 0
Other debt securities:
Other domestic debt securities 998 998 0 0
Foreign debt securities 0 0 0 0
Equity securities:
Investments in mutual funds 0 0 0 0
Other equity securities with
readily determinable fair
values 0 0 763 761
All other equity securities (1) 0 0 1,664 1,664
Total (4) 31,327 31,047 46,864 46,018
(1) Includes equity securities without readily determinable fair values
at historical cost.
(2) Includes Small Business Administration "Guaranteed Loan Pool
Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage back securitites) issued
by the Farm Credit System, the Federal Home Loan Bank System, the
Federal Home Loan Mortgage Corporation, the Federal National
Mortgage Association, the Financing Corporation, Resolution Funding
Corporation, the Student Loan Marketing Association, and the
Tennessee Valley Authority.
(4) Includes Parent and Subsidiary.
27
Investment Securities
Unrealized Gains/(Losses)
June 30, 1996
Unrealized Unrealized Net
Gains Losses Gains/Losses
U.S. Treasury Securities 77 116 (39)
Obligations of U.S. Government
Agencies and Corp 320 1,309 (989)
Obligations of States and
Political Subdivisions 26 123 (97)
Fed Reserve & Corp Stock 1 2 (1)
Totals 424 1,550 1,126
Maturity and Portfolio Percentages June 30, 1996
(in thousands)
After One Year After Five Years After
Within One Year Within Five Years Within Ten Years Ten Years
Amount % Amount % Amount % Amount %
6/30/96 $ 5,329 (7%) $38,620 (50%) $22,895 (30%) $10,501 (13%)
6/30/95 $ 3,279 (5%) $49,381 (73%) $11,609 (17%) $ 3,655 (5%)
6/30/94 $16,058 (24%) $31,208 (47%) $13,604 (20%) $ 5,724 (9%)
6/30/93 $17,023 (25%) $41,179 (61%) $ 1,407 (2%) $ 7,823 (12%)
6/30/92 $21,115 (31%) $33,229 (49%) $11,901 (18%) $ 1,119 (2%)
Maturity and Yield on Securities June 30, 1996
(in thousands)
Maturing
After One Year After Five Years After
Within One Year Within Five Years Within Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
U.S. Treasury and
Government Agencies $4,551 6.62% $30,064 6.61% $18,563 6.88% $ 9,976 7.18%
State and Political
Subdivisions* $ 280 5.54% $ 8,055 7.16% $ 1,896 7.17% $ 525 7.63%
All Others $ 498 6.31% $ 501 6.00% $ 2,436 5.60% $ - -
TOTALS $5,329 6.54% $38,620 6.72% $22,895 6.77% $10,501 7.20%
<FN>
*Yields on tax free investments are stated herein on a taxable
equivalent basis.
Parent Company's investments are included in the table.
28
Return on Equity and Assets
Improved earnings are reflected when reviewing financial
ratios for the years 1992 thru 1996. Management has made an
ongoing effort to control expenses and maximize earnings to
achieve earnings comparable to peer group banks. An
analysis of return on assets at June 30, 1996 reflects a
upward swing when compared to 6/30/95, after declining
slightly. Accelerated asset growth coupled with rising
rates paid on interest bearing deposits had a significant
impact on earnings in the first quarter of 1995. A
comparison of total assets at 6/30/96 and 6/30/95 reflects
an average growth rate in excess of 6 percent. Assets
continue to grow at an accelerated rate in 1996. However,
interest margins have expanded to achieve a ROA in excess of
1995.
Increased expenses during the 1st quarter of 1995 can be
attributed to the addition of two branch banks opened in
November, 1994 and January, 1995 and the installation cost
of POD, Statement Imaging and a Teller Platform System.
The company's strategic plan addresses objectives to sustain
improved earnings, maintain a quality loan and investment
portfolio and to maintain market share by providing quality
customer service. The Bank's management and employees are
rewarded with incentive compensation based on the level of
ROA achieved at year end. A return on assets of 1.25% is
required if maximum benefits are to be realized. 1996
strategic planning resulted in a decision to investigate the
establishment of a bank owned finance and insurance company.
The strategic goal was set to offer additional services in
the market place and to increase fee and interest income.
Total shareholder's equity (including Loan Loss Reserve) of
First Citizens Bancshares as of 6/30/96 was $27,728,000
compared to $27,103,000 at 12/31/95.
Percentage of Dividends declared per common share to net
income per common share increased when comparing 6/30/96 to
6/30/95. Number of shares outstanding continues to increase
due to shares of stock issued on a quarterly basis to
service the Dividend Reinvestment Program. A stock
repurchase program, approved by the Board of Directors in
1994 for the purpose of acquiring shares to service the
program has been ineffective. Shareholders continue to
express an interest in buying additional stock rather than
selling shares. Under the terms of the repurchase program,
the company will repurchase up to $200,000 of Bancshares'
stock in a calendar quarter on a first come, first served
basis. A 10% stock dividend was declared October 21, 1992
payable to shareholders of record December 15, 1992, thereby
increasing outstanding shares. Earnings per share have been
adjusted accordingly. During the third quarter of 1993, a
2.5 for 1 stock split was declared to holders of record as
of October 15, 1993 on the common capital stock of
Bancshares. The numbers of shares outstanding increased
proportionately with no effect on capital. An amendment to
the Company's Charter by the shareholders in April, 1994
approved an increase in the number of shares authorized from
750,000 to 2,000,000.
29
The table below presents for First Citizens Bancshares, Inc.
certain operating ratios year-to-date as of June 30: (not
annualized)
1996 1995 1994 1993
Percentage of Net Income to:
Average Total Assets .65% .50% .65% .62%
Average Shareholders Equity 7.09% 5.51% 7.06% 7.24%
Percentage of Dividends Declared
Per Common Share to Net Income
Per Common Share 24.95% 32.28% 23.81% 23.36%
**Percentage of Average
Shareholders' Equity to
Average Total Assets 9.87% 9.98% 9.92% 8.53%
**Represents primary capital - including reserve for loan
losses account
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is the ability to meet the needs of our customer
base for loans and deposit withdrawals by maintaining assets
which are convertible to cash equivalents with minimal
exposure to interest rate risks. Liquidity is determined by
a comparison of net liquid assets to net liabilities and
consistently remains between 10 and 15 percent. The
stability of our deposit base, sound/asset liability
management, a strong capital base and quality assets assure
adequate liquidity. Strong loan demand and seasonal growth
in agricultural lines of credit will place the bank in a
tight liquidity position May through October, 1996. Loan to
deposit ratio including repurchase agreements and Federal
Home Loan Bank borrowings is 76.41% at 6/30/96. Deposit
growth at quarter end was slightly over 7%, while loan
growth exceeded 12 percent.
30
To address liquidity concerns the bank has the following
sources available: (1) Approved lines of credit with the
Federal Home Loan Bank totaling $11.5 million and
correspondent banks totaling $9 million; (2) Loans in excess
of $68 million maturing in one year or less; and (3)
Investment Securities of $21 million with maturity dates of
one year or less. At June 30, 1996 Federal Home Loan
Borrowings (short and long term) totaled $11.3 million.
These borrowings are maturity matched with specific loans
and investments on the books of the bank. In May, 1996, the
bank purchased $5 million in State of Tennessee Certificates
of Deposits. $2 million was purchased at 5.30% for a period
of 6 months and $3 million was purchased at 5.50% for l
year.
Interest rate sensitivity varies with different types of
interest-earning assets and interest-bearing liabilities.
Overnight federal funds, on which rates change daily, and
loans which are tied to the prime rate are more interest
rate sensitive than long-term investment securities and
fixed rate loans. The shorter term interest sensitive
assets and liabilities are the key to measurement of the
interest sensitivity gap. Minimizing this gap is a
continual challenge and is a primary objective of the
Asset/Liability Management Program.
The following condensed gap report provides an analysis of
interest rate sensitivity of earning assets and costing
liabilities. First Citizens Asset/Liability Management
Policy provides that the cumulative gap as a percent of
assets shall not exceed 10% for categories up to 12 months
and one to two year categories and 20% for categories in
excess of two years. As evidenced by the following table,
our current position is significantly below this level, with
annual income exposure determined to be less than the
$150,000 exposure limitation set by policy.
31
CONDENSED GAP REPORT
FIRST CITIZENS NATIONAL BANK
DYERSBURG, TN --------------------
CURRENT BALANCES
--------------------
06/30/96
(in thousands)
DAILY 0-1 1-2 2-3 3-6 6-12 1-2 2+
TOTAL FLOATING MONTH MONTHS MONTHS MONTHS MONTHS YEARS YEARS
----------------------------------------------------------------------------------
CASH AND DUE FROM
CURRENCY AND COIN 3,305 - - - - - - - 3,305
DUE FROM BANKS 2,340 - - - - - - - 2,340
CASH ITEMS 5,029 - - - - - - - 5,029
MONEY MARKET 135 135 - - - - - - -
TOTAL CASH & DUE FROM 10,809 135 - - - - - - 10,674
INVESTMENTS 76,667 7,468 - - 1,332 1,332 8,515 12,492 45,528
TOTAL INVESTMENTS 76,667 7,468 - - 1,332 1,332 8,515 12,492 45,528
LOANS
COMMERCIAL FIXED 156,065 - 5,563 2,521 2,627 10,442 18,859 25,459 90,594
COMMERCIAL VARIABLE 44,294 44,294 - - - - - - -
HOME EQUITY LOANS 4,760 4,760 - - - - - - -
SEC MORTGAGE 161 161 - - - - - - -
CREDIT CARDS 1,679 - - - - - 1,679 - -
FACTORING REC 287 - 287 - - - - - -
OVERDRAFTS 284 - 284 - - - - - -
NON-ACCRUAL LOANS 1,725 - - - - - - - 1,725
TOTAL LOANS 209,255 49,215 6,134 2,521 2,627 10,442 20,538 25,459 92,319
LOAN LOSS RESERVE 2,359 - - - - - - - 2,359
NET LOANS 206,896 49,215 6,134 2,521 2,627 10,442 20,538 25,450 89,960
FED FUNDS SOLD - - - - - - - - -
TOTAL EARNING ASSETS 283,563 56,683 6,134 2,521 3,959 11,774 29,053 37,951 135,488
OTHER ASSETS
BUILDING, F&F AND LAND 8,492 - - - - - - - 8,492
OTHER REAL ESTATE 19 - - - - - - - 19
OTHER ASSETS 5,419 - - - - - - - 5,419
TOTAL OTHER ASSETS 13,930 - - - - - - - 13,930
TOTAL ASSETS 308,302 56,818 6,134 2,521 3,959 11,774 29,053 37,951 160,092
DEMAND DEPOSITS
BANKS 39 - - - - - - - 39
DEMAND DEPOSITS 27,038 - - - - - - - 27,038
TOTAL DEMAND 27,077 - - - - - - - 27,077
32
CONDENSED GAP REPORT
--------------------
CURRENT BALANCES
--------------------
06/30/96
(in thousands)
DAILY 0-1 1-2 2-3 3-6 6-12 1-2 2+
TOTAL FLOATING MONTH MONTHS MONTHS MONTHS MONTHS YEARS YEARS
- ----------------------------------------------------------------------------------------------
SAVINGS ACCOUNTS
REGULAR SAVINGS 19,270 - - - - - - - 19,270
NOW ACCOUNT 24,111 - - - - - - - 24,111
BUSINESS CHECKING 85 - - - - - - - 85
IMF-MMDA 11,275 11,275 - - - - - - -
FIRST RATE ACCOUNT 12,795 12,795 - - - - - - -
DOGWOOD CLUB 4,883 - - - - - - - 4,883
TOTAL SAVINGS 72,419 24,070 - - - - - - 48,349
TIME DEPOSITS
FLEX-CD 92,260 - 8,166 5,014 5,749 23,920 29,726 15,772 3,913
LARGE CD-FLEX 32,922 - 2,171 1,983 1,893 10,019 9,718 6,038 1,100
IRA-FLOATING 159 159 - - - - - - -
IRA-FIXED 21,119 - 584 403 470 1,792 5,324 4,552 7,994
CHRISTMAS CLUB 286 - - - - 286 - - -
TOTAL TIME 146,746 159 10,921 7,400 8,112 36,017 44,768 26,362 13,007
TOTAL DEPOSITS 246,242 24,229 10,921 7,400 8,112 36,017 44,768 26,362 88,433
SHORT TERM BORROWINGS
TT&L 1,000 1,000 - - - - - - -
SECURITIES SOLD-SWEEP 14,385 14,385 - - - - - - -
SECURITIES SOLD-FIXED 7,568 - 1,299 1,662 3,044 100 1,070 393 -
FHLB-SHORT TERM 7,300 7,300 - - - - - - -
FHLB-LIBOR INVESTMENT 1,907 - 1,907 - - - - - -
FHLB-LONG TERM 2,154 - - - - - - - 2,154
TOTAL SHORT TERM BORR. 34,314 22,685 3,206 1,662 3,044 100 1,070 393 2,154
OTHER LIABILITIES
ACCRUED INT PAYABLE 2,011 - - - - - - - 2,011
OTHER LIABILITIES 243 - - - - - - - 243
TOTAL OTHER LIABILITIES 2,254 - - - - - - - 2,254
TOTAL LIABILITIES 282,810 46,914 14,127 9,062 11,156 36,117 45,838 26,755 92,841
CAPITAL
COMMON STOCK 2,000 - - - - - - - 2,000
SURPLUS 4,000 - - - - - - - 4,000
UNREALIZED GAIN(LOSSES) (498) - - - - - - - (498)
UNDIVIDED PROFITS 19,990 - - - - - - - 19,990
TOTAL CAPITAL 25,492 - - - - - - - 25,492
TOTAL LIAB. & CAPITAL 308,302 46,914 14,127 9,062 11,156 36,117 45,838 26,755 118,333
GAP (SPREAD) - 9,904 -7,993 -6,541 -7,197 -24,343 -16,785 11,196 41,759
GAP % TOTAL ASSETS - 3.21 -2.59 -2.12 -2.33 -7.90 -5.44 3.63 13.54
CUMULATIVE GAP - 9,904 1,911 -4,630 -11,827 -36,170 -52,955 -41,759 -
CUMM. GAP % TOTAL ASSETS - 3.21 0.62 -1.50 -3.84 -11.73 -17.18 -13.54 -
SENSITIVITY RATIO - 1.21 1.03 0.93 0.85 0.69 0.68 0.78 1.00
33
NOTES TO THE GAP REPORT
1. The gap report reflects interest sensitivity positions during a
flat rate environment. These time frames could change if rates
rise or fall.
2. Repricing over-rides maturity in various time frames.
3. Demand deposits, considered to be core deposits, are placed in the
last time frame due to lack of interest sensitivity.
4. Savings accounts, also considered to be core deposits, are placed
into the +2 year time frame. In a flat rate environment, saving
accounts tend not to reprice or liquidate. Savings deposits become
price sensitive after a major increase in the 6 month CD rate.
Accounts are placed in this category instead of the variable
position due to history and characteristics.
5. Policy for cumulative gap positions at FCNB are established at less
than 15 percent. Seasonality is factored in the gap statements due
to short term borrowing situations which exist March through
October. As a result, the core December statement will be the most
meaningful. Approximately 40% - 50% of CD customers have
maturities of 6 months or less. The banks net interest income
exposure limit is $.065% of total assets. The net interest income
exposure or limit as a percent of unimpaired capital is .76
percent. Currently, the bank's exposure is less than established
limits.
6. FCNB would benefit from a flat rate environment. If interest rates
rise rapidly, net interest income could be adversely impacted.
First Citizens Liquidity would be negatively impacted should
interest rates drop prompting an increase in loan demand. Adequate
lines of credit are available to handle liquidity needs.
Capital Resources
Total shareholders' equity of First Citizens Bancshares as of June 30,
1996, was $27,728,000. Capital as a percentage of total assets for the
quarter ending June 30, is presented in the following table for the
years indicated (excluding Loan Loss Reserves):
1996 1995 1994 1993 1992
8.93% 9.09% 9.14% 8.82% 7.92%
Increasing the capital base of the Company is a vital part of strategic
planning. Although the present capital to asset ratio remains well in
excess of the level required by regulators for banks our size,
management is aware of the importance of this base.
Risk-based capital focuses primarily on broad categories of credit risk
and incorporates elements of transfer, interest rate and market risks.
The calculation of risk-based capital ratio is accomplished by dividing
qualifying capital by weighted risk assets. The minimum risk-based
capital ratio established by the Federal Reserve is 8 percent. At least
one-half or 4% must consist of core capital (Tier 1), and the remaining
4% may be in the form of core (Tier 1) or supplemental capital (Tier 2).
Tier 1 capital/core capital consists of common stockholders equity,
qualified perpetual stock and minority interests in consolidated
subsidiaries. Tier 2 Capital/Supplementary Capital consists of the
allowance for loan and lease losses, perpetual preferred stock, term
subordinated debt, and other debt and stock instruments. Bancshares'
capital consists entirely of Tier 1 components, with the exception of
the allowance for loan and lease losses.
34
Bancshares has historically maintained capital in excess of minimum
levels established by the Federal Reserve Board. The risk-based capital
ratio reflects continuous improvement when reviewing the years included
in the above table. Risk-based capital ratio as of 6/30/96 was 13.07%,
significantly in excess of the 8% mandated by the Regulatory
Authorities. Growth in capital will be maintained through retained
earnings. There is no reason to assume that income levels will not be
sufficient to maintain an adequate capital ratio.
Effects of Inflation
Inflation has a significant impact on the growth of total assets in
the banking industry, resulting in a need to increase equity capital in
order to maintain an appropriate equity to asset ratio.
Operating expenses are directly affected by increases in salaries and
employee benefits, supplies, legal, audit and professional fees,
utilities, advertising and insurance. Now that interest rates have been
deregulated, inflation is a major key to the cost of acquiring and
retaining deposits.
A well managed asset/liability management program can maximize net
interest income; and at the same time, reduce the impact of inflation on
earnings.
Part II - Other Information
Item 1. Changes in Securities
Dividends paid to Shareholders of First Citizens Bancshares, Inc. are
funded by dividends to the Bank Holding Company from First Citizens National
Bank. Federal Reserve Bank regulators would be critical of a bank holding
company that pays cash dividends not covered by earnings or that are funded
from borrowings or unusual or non-recurring gains, such as the sale of
property or assets. Under rules set forth by the Comptroller of the Currency
in Interpretive Ruling 7.6100, the board of directors of a national bank may
declare dividends as it may judge to be expedient, subject to statutory
limitations which deal with the balance of the surplus account, sufficiency
of net profits, dividend payments on preferred stock, and default of any
assessment due to the Federal Deposit Insurance Corporation.
Item 6(b) No reports on Form 8-K were filed for the quarter ended 6/30/96.
35
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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 Bancshares, Inc.
(Registrant)
Date: August 13, 1996 /s/Katie Winchester
Katie Winchester, President & CEO
Date: August 13, 1996 /s/Jeff Agee
Jeff Agee, Senior Vice President &
Chief Financial Officer
First Citizens National Bank
(Principal Subsidiary)