UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the period ended June 30, 1995
Commission File Number: 0-16471
First Citizens BancShares, Inc
(Exact name of Registrant as specified in its charter)
Delaware 56-1528994
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
239 Fayetteville Street, Raleigh, North Carolina 27601
(Address of principal executive offices) (zip code)
(919) 755-7000
(Registrant's telephone number, including area code)
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 twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No _____
Class A Common Stock--$1 Par Value--8,927,956 shares
Class B Common Stock--$1 Par Value--1,769,251 shares
(Number of shares outstanding, by class, as of August 14, 1995)
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Condition at
June 30, 1995, December 31, 1994, and June 30, 1994 4
Consolidated Statements of Income for the three-month periods ended
June 30, 1995,and June 30, 1994, and for the six-month periods ended
June 30, 1995, and June 30, 1994 5
Consolidated Statements of Changes in Shareholders' Equity
for the six-month periods ended June 30, 1995, and June 30, 1994 6
Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 1995, and June 30, 1994 7
Note to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition 9-16
and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. During the quarter ended June 30, 1995,
Registrant filed no Current Reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FIRST CITIZENS BANCSHARES, INC.
(Registrant)
Dated: August 14, 1995 By:
Kenneth A. Black
Vice President, Treasurer,
and Chief Financial Officer
First Citizens BancShares, Inc and Subsidiaries
Second Quarter 1995
Consolidated Statements of Condition
First Citizens BancShares, Inc. and Subsidiaries
June 30 December 31 June 30
(thousands,except share data) 1995 1994 1994
Assets
Cash and due from banks $ 402,949 $ 455,710 $ 377,540
Investment securities 1,554,180 1,458,969 1,581,245
Federal funds sold 166,425 6,750 20,750
Loans 4,480,235 4,148,133 3,781,407
Less reserve for loan losses 76,887 72,017 70,862
Net loans 4,403,348 4,076,116 3,710,545
Premises and equipment 203,654 188,824 186,677
Income earned not collected 49,909 45,194 45,587
Other assets 132,999 101,761 108,331
Total assets $6,913,464 $6,333,324 $6,030,675
Liabilities
Deposits:
Noninterest-bearing $921,945 $858,537 $790,460
Interest-bearing 5,108,940 4,659,052 4,502,346
Total deposits 6,030,885 5,517,589 5,292,806
Short-term borrowings 311,239 290,861 221,819
Long-term obligations 25,756 34,542 49,870
Other liabilities 53,236 40,921 53,213
Total liabilities 6,421,116 5,883,913 5,617,708
Shareholders' Equity
Common stock:
Class A - $1 par value (8,921,136;8,419,389;
and 8,094,976 shares issued, respectively) 8,921 8,419 8,095
Class B - $1 par value (1,769,251;1,769,451;
and 1,771,766 shares issued, respectively) 1,769 1,770 1,772
Surplus 104,912 82,631 67,036
Retained earnings 376,746 356,591 336,064
Total shareholders' equity 492,348 449,411 412,967
Total liabilities and shareholders' equity $6,913,464 $6,333,324 $6,030,675
See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
Consolidated Statements of Income
First Citizens BancShares, Inc. and Subsidiaries
Three Months Ended Six Months Ended
June 30 June 30
(thousands, except per share data) 1995 1994 1995 1994
Interest Income
Loans $95,723 $72,419 $185,308 $141,186
Investment securities:
U. S. Government 18,234 18,145 33,515 38,170
State, county and municipal 106 16 194 20
Other 51 - 93 -
Total investment securities interest income 18,391 18,161 33,802 38,190
Federal funds sold 2,168 771 3,393 1,172
Total interest income 116,282 91,351 222,503 180,548
Interest Expense
Deposits 51,546 32,885 94,308 65,441
Short-term borrowings 3,584 1,760 6,669 3,443
Long-term obligations 407 662 861 1,349
Total interest expense 55,537 35,307 101,838 70,233
Net interest income 60,745 56,044 120,665 110,315
Provision for loan losses 1,460 (947) 1,994 141
Net interest income after provision for loan losses 59,285 56,991 118,671 110,174
Noninterest Income
Trust income 2,239 2,062 4,478 4,131
Service charges on deposit accounts 9,996 9,921 19,399 19,632
Credit card income 3,220 2,926 6,067 5,631
Other service charges and fees 5,291 4,609 10,190 8,057
Other 2,311 999 4,578 3,440
Total Noninterest income 23,057 20,517 44,712 40,891
82,342 77,508 163,383 151,065
Noninterest Expense
Salaries and wages 27,160 24,472 52,913 49,151
Pension and other employee benefits 4,510 3,379 9,084 7,173
Occupancy expense 4,980 4,371 10,011 8,921
Equipment expense 6,183 5,918 12,290 11,564
Other 20,043 18,882 40,941 36,968
Total Noninterest expense 62,876 57,022 125,239 113,777
Income before income taxes 19,466 20,486 38,144 37,288
Income taxes 6,842 7,128 13,342 12,933
Net income $12,624 $13,358 $24,802 $24,355
Per Share
Net income $1.19 $1.36 $2.36 $2.49
Cash dividends 0.20 0.175 0.40 0.35
See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
Consolidated Statements of Changes in Shareholders' Equity
First Citizens BancShares, Inc. and Subsidiaries
Class A Class B
Common Common Retained Total
(thousands,except share data) Stock Stock Surplus Earnings Equity
Balance at December 31, 1993 $7,986 $1,780 $61,717 $317,567 $389,050
Issuance of 75,235 shares of Class A
common stock in connection with an acquisition 75 3,110 3,185
Issuance of 3,116 shares of Class A common
stock pursuant to the Dividend Reinvestment
Plan 3 124 127
Issuance of 68,206 shares of Class A common
stock pursuant to the 1992 Employee Stock
Purchase Plan 69 2,085 2,154
Redemption of 37,650 shares of Class A
common stock and 8,302 shares of Class B
common stock (38) (8) (1,932) (1,978)
Net income 24,355 24,355
Cash dividends (3,424) (3,424)
Other (502) (502)
Balance at June 30, 1994 $8,095 $1,772 $67,036 $336,064 $412,967
Balance at December 31, 1994 $8,419 $1,770 $82,631 $356,591 $449,411
Issuance of 489,742 shares of Class A
common stock in connection with an acquisitions 490 21,491 21,981
Issuance of 4,174 shares of Class A common
stock pursuant to the Dividend Reinvestment
Plan 4 173 177
Issuance of 16,331 shares of Class A common
stock pursuant to the 1994 Employee Stock
Purchase Plan 16 617 633
Redemption of 8,500 shares of Class A
common stock and 200 shares of Class B
common stock (8) (1) (383) (392)
Net income 24,802 24,802
Cash dividends (4,264) (4,264)
Balance at June 30, 1995 $8,921 $1,769 $104,912 $376,746 $492,348
See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS
First Citizens BancShares, Inc. and Subsidiaries
Six months ended June 30
(thousands) 1995 1994
Operating Activities
Net income $24,802 $24,355
Adjustments:
Amortization of intangibles 2,604 1,893
Provision for loan losses 1,994 141
Deferred tax expense (benefit) 208 (637)
Change in current taxes payable 401 943
Depreciation 8,312 7,658
Change in accrued interest payable 10,303 1,174
Change in income earned not collected (3,418) 614
Origination of loans held for sale (8,397) (63,030)
Proceeds from sale of mortgage loans 7,598 105,733
(Gain) loss on sale of mortgage loans (125) 788
Net amortization of premiums and discounts 9,998 14,161
Net change in other assets (2,937) 19,512
Net change in other liabilities 475 (5,230)
Net periodic pension cost 598 324
Net cash provided by operating activities 52,416 108,399
Investing Activities
Disposition of premises and equipment 2,006 2,023
Addition to premises and equipment (16,552) (11,374)
Net increase in loans outstanding (161,170) (227,873)
Purchase of investment securities (473,075) (122,529)
Proceeds from maturities of investment securities 409,629 347,700
Net change in federal funds sold (151,003) (750)
Purchase of institutions, net of cash acquired 106,092 2,243
Net cash used by investing activities (284,073) (10,560)
Financing Activities
Repurchase of common stock (392) (1,978)
Proceeds from issuance of stock, net of related costs 810 2,281
Cash dividends paid (4,264) (3,424)
Net change in time deposits 349,416 (44,700)
Net change in demand and other interest-bearing deposits (174,173) (40,196)
Net change in short-term borrowings 18,779 (13,678)
Repayment of long-term obligations (11,280) (11,456)
Net cash provided (used) by financing activities 178,896 (113,151)
Change in cash and due from banks (52,761) (15,312)
Cash and due from banks at beginning of period 455,710 392,852
Cash and due from banks at end of period $402,949 $377,540
Cash payments for:
Interest $91,535 $69,059
Income taxes 13,098 12,572
Supplemental disclosure of noncash investing and financing activities:
Common stock issued for acquisitions $21,981 $3,185
Long-term obligations issued for acquisitions 2,494 -
See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
NOTE A
ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
statements. Certain amounts for prior periods have been reclassified to conform
with statement presentation for the current period. These reclassifications had
no effect on shareholders' equity or net income. In the opinion of management,
the consolidated statements contain all material adjustments necessary to
present fairly the financial position of First Citizens BancShares, Inc.
("BancShares") as of and for each of the periods presented, and all such
adjustments are of a normal recurring nature. These financial statements should
be read in conjunction with the financial statements and notes included in the
1994 First Citizens BancShares Annual Report, which is incorporated by reference
on Form 10-K.
Financial Summary
Table 1
1995 1994
Second First Fourth Third Second
(thousands, except per share data and ratios) Quarter Quarter Quarter Quarter Quarter
Summary of Operations
Interest Income $116,282 $106,221 $100,203 $95,254 $91,351
Interest income - taxable equivalent 116,845 106,774 100,693 95,731 91,806
Interest expense 55,537 46,301 40,628 37,265 35,307
Net interest income-taxable equivalent 61,308 60,473 60,065 58,466 56,499
Taxable equivalent adjustment 563 553 490 477 455
Net interest income 60,745 59,920 59,575 57,989 56,044
Provision for loan losses 1,460 534 1,486 1,159 (947)
Net interest income after provision for loan losses 59,285 59,386 58,089 56,830 56,991
Noninterest income 23,057 21,655 21,080 21,354 20,517
Noninterest expense 62,876 62,363 59,444 57,361 57,022
Income before income taxes 19,466 18,678 19,725 20,823 20,486
Income taxes 6,842 6,500 6,796 7,138 7,128
Net income $12,624 $12,178 $12,929 $13,685 $13,358
Selected Average Balances
Total assets $6,702,692 $6,326,537 $6,227,704 $6,102,964 $6,061,930
Investment securities 1,493,415 1,380,424 1,498,143 1,543,548 1,641,857
Loans 4,424,724 4,253,117 3,999,377 3,854,738 3,712,429
Interest-earning assets 6,061,732 5,716,572 5,590,432 5,480,912 5,434,768
Deposits 5,858,280 5,533,654 5,422,018 5,338,095 5,303,041
Interest-bearing liabilities 5,299,570 5,009,276 4,895,564 4,818,665 4,810,625
Long-term obligations 26,174 32,564 43,854 48,908 57,534
Shareholders' equity $482,885 $460,695 $443,833 $423,982 $406,002
Shares outstanding 10,618,902 10,376,351 10,192,150 9,980,530 9,828,295
Profitability Ratios (averages)
Rate of return (annualized) on:
Total assets 0.76% 0.78% 0.82% 0.89% 0.88%
Shareholders' equity 10.49 10.72 11.56 12.81 13.20
Dividend payout ratio 16.81 17.09 15.75 12.77 12.87
Liquidity and Capital Ratios (averages)
Loans to deposits 75.53% 76.86% 73.76% 72.21% 70.01%
Shareholders' equity to total assets 7.20 7.28 7.13 6.95 6.70
Time certificates of $100,000 or more to total
deposits 8.04 7.30 6.63 6.41 6.28
Per Share of Stock
Net income $1.19 $1.17 $1.27 $1.37 $1.36
Cash dividends 0.20 0.20 0.20 0.175 0.175
Book Value at period end 46.06 45.06 44.11 43.05 41.85
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
Financial Summary
Table 1
Six Months Ended
June 30
(thousands, except per share data and ratios) 1995 1994
Summary of Operations
Interest Income $222,503 $180,548
Interest income - taxable equivalent 223,619 181,434
Interest expense 101,838 70,233
Net interest income-taxable equivalent 121,781 111,201
Taxable equivalent adjustment 1,116 886
Net interest income 120,665 110,315
Provision for loan losses 1,994 141
Net interest income after provision for loan losses 118,671 110,174
Noninterest income 44,712 40,891
Noninterest expense 125,239 113,777
Income before income taxes 38,144 37,288
Income taxes 13,342 12,933
Net income $24,802 $24,355
Selected Average Balances
Total assets $6,515,649 $6,049,963
Investment securities 1,437,231 1,679,583
Loans 4,339,395 3,665,751
Interest-earning assets 5,890,106 5,410,997
Deposits 5,696,864 5,289,396
Interest-bearing liabilities 5,155,267 4,820,077
Long-term obligations 28,672 58,719
Shareholders' equity $471,050 $400,331
Shares outstanding 10,498,296 9,799,295
Profitability Ratios (averages)
Rate of return (annualized) on:
Total assets 0.77% 0.81%
Shareholders' equity 10.62 12.27
Dividend payout ratio 16.95 14.06
Liquidity and Capital Ratios (averages)
Loans to deposits 76.17% 69.30%
Shareholders' equity to total assets 7.23 6.62
Time certificates of $100,000 or more to total
deposits 7.67 6.61
Per Share of Stock
Net income $2.36 $2.49
Cash dividends 0.40 0.35
Book Value at period end 46.06 41.85
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
Acquisitions
Table 2
(thousands)
Total Total
Date Institution/Location Assets Deposits
June 1995 Bank of White Sulphur Springs $64,589 $59,174
White Sulphur Springs, West Virginia
May 1995 9 NationsBank of Virginia branches 25,482 143,494
Southern Virginia
March 1995 State Bank 49,700 41,238
Fayetteville, North Carolina
February 1995 First-Citizens Bank & Trust Company 58,660 53,303
(formerly Pace American Bank)
Lawrenceville, Virginia
February 1995 First Investors Savings Bank, Inc. SSB 44,426 40,846
Whiteville, North Carolina
December 1994 First Rebublic Savings Bank, FSB 53,661 42,998
Roanoke Rapids, North Carolina
September 1994 Bank of Marlinton 51,646 46,647
Marlinton, West Virginia
August 1994 Edgecombe Homestead Savings Bank 39,181 30,195
Tarboro, North Carolina
March 1994 Bank of Bladenboro 21,316 19,515
Bladenboro, North Carolina
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
Outstanding Loans by Type
Table 3
1995 1994
Second First Fourth Third Second
(thousands) Quarter Quarter Quarter Quarter Quarter
Real estate:
Construction and land development $ 111,285 $ 107,197 $ 100,708 $ 106,206 $ 103,100
Mortgage:
1-4 family residential 1,399,023 1,357,256 1,296,713 1,223,687 1,146,193
Commercial 743,367 741,948 720,407 601,887 597,163
Equity Line 395,412 385,581 349,092 302,478 291,519
Other 124,682 116,444 109,069 80,612 73,940
Commercial and industrial 459,446 415,968 373,947 469,145 469,316
Consumer 1,171,441 1,163,348 1,119,994 1,076,256 1,023,768
Lease financing 58,464 58,364 60,598 53,835 53,455
Other 17,115 16,863 17,605 25,158 22,953
Total loans 4,480,235 4,362,969 4,148,133 3,939,264 3,781,407
Less reserve for loan losses 76,887 73,897 72,017 71,537 70,862
Net loans $4,403,348 $4,289,072 $4,076,116 $3,867,727 $3,710,545
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
Investment Securities
Table 4
June 30, 1995 June 30, 1994
Average Taxable Average Taxable
Book Market Maturity Equivalent Book Market Maturity Equivalent
(thousands) Value Value (Yrs./Mos.) Yield Value Value (Yrs./Mos.) Yield
U. S. Government:
Within one year $ 977,274 $ 972,324 0/6 4.52% $ 615,431 $ 612,373 0/7 4.50%
One to five years 555,295 555,060 1/5 5.97 963,370 939,718 1/7 4.31
Five to ten years 3,159 3,108 7/3 5.78 - - - -
Over ten years 6,968 6,944 19/6 7.25 992 992 18/2 8.03
Total 1,542,696 1,537,436 0/11 5.06 1,579,793 1,553,083 1/2 4.39
State, county and municipal:
Within one year 1,208 1,218 0/7 7.52 426 433 0/6 8.67
One to five years 4,301 4,338 2/9 6.66 711 727 2/10 7.75
Five to ten years 2,777 2,845 6/4 6.84 - - - -
Over ten years 205 205 22/2 6.19 - - - -
Total 8,491 8,606 5/0 7.06 1,137 1,160 2/0 8.10
Other:
Within one year - - - - - - - --
One to five years 2,938 2,911 2/3 8.65 260 260 3/3 8.75
Five to ten years 55 55 6/8 8.00 55 55 7/8 8.00
Total 2,993 2,966 2/5 8.64 315 315 3/5 8.74
Total investment securities $1,554,180 $1,549,008 1/0 5.08% $1,581,245 $1,554,558 1/2 4.39%
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Second Quarter
Table 5
1995 1994 Increase (decrease) due to:
Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Yield/ Total
(thousands) Balance Expense Rate Balance Expense Rate Volume Rate Change
Assets
Loans:
Secured by real estate $2,738,350 $58,435 8.42% $2,193,641 $42,490 7.72% $11,300 $4,645 $15,945
Commercial and industrial 436,627 10,318 9.41 455,798 8,698 7.60 (400) 2,020 1,620
Consumer 1,174,422 26,102 8.86 988,372 20,310 8.22 4,017 1,775 5,792
Lease financing 58,362 1,106 7.58 49,501 937 9.78 328 (159) 169
Other 16,963 269 6.36 25,117 431 6.89 (134) (28) (162)
Total loans 4,424,724 96,230 8.69 3,712,429 72,866 7.86 15,111 8,253 23,364
Investment securities:
U. S. Government 1,481,917 18,219 4.93 1,639,653 18,127 4.48 (1,755) 1,847 92
State, county and municipal 8,382 161 7.70 1,889 36 7.73 125 0 125
Other 3,116 67 8.62 315 6 7.72 18 43 61
Total investment securities 1,493,415 18,447 4.95 1,641,857 18,169 4.49 (1,612) 1,890 278
Federal funds sold 143,593 2,168 6.06 80,482 771 3.84 778 619 1,397
Total interest-earning assets $6,061,732 116,845 7.71% $5,434,768 91,806 6.78% $14,277 $10,762 $25,039
Liabilities
Deposits:
Checking With Interest 799,992 3,524 1.77% 779,314 3,313 1.71% $91 120 211
Savings 688,033 3,888 2.27 686,704 3,827 2.24 9 52 61
Money market accounts 717,488 6,098 3.41 779,405 4,548 2.34 (445) 1,995 1,550
Time deposits 2,794,111 38,036 5.46 2,271,461 21,197 3.74 5,986 10,853 16,839
Total interest-bearing deposits 4,999,624 51,546 4.14 4,516,884 32,885 2.92 5,641 13,020 18,661
Federal funds purchased 30,091 452 6.02 17,162 166 3.88 160 126 286
Repurchase agreements 25,148 318 5.07 22,833 148 2.60 22 148 170
Master notes 186,819 2,396 5.14 158,594 1,066 2.70 278 1,052 1,330
U. S. Treasury tax and loan accounts 15,545 230 5.93 29,332 268 3.66 (165) 127 (38)
Other short-term borrowings 16,169 188 4.66 8,286 112 5.42 99 (23) 76
Long-term obligations 26,174 407 6.24 57,534 662 4.62 (424) 169 (255)
Total interest-bearing liabilities $5,299,570 $55,537 4.20% $4,810,625 $35,307 2.94% $5,611 $14,619 $20,230
Interest rate spread 3.51% 3.84%
Net interest income and net yield
on interest-earning assets $61,308 4.06% $56,499 4.17% $8,666 ($3,857) $4,809
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Six Months
Table 6
1995 1994 Increase (decrease) due to
Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Yield/ Total
(thousands) Balance Expense Rate Balance Expense Rate Volume Rate Change
Assets
Loans:
Secured by real estate $2,689,550 $112,584 8.42 % $2,202,000 $83,812 7.62 % $19,230 $9,542 $28,772
Commercial and industrial 416,144 19,300 9.27 439,364 16,186 7.38 (947) 4,061 3,114
Consumer 1,157,978 51,609 8.89 952,547 39,434 8.30 8,922 3,253 12,175
Lease financing 58,687 2,205 7.51 47,510 1,834 9.75 724 (353) 371
Other 17,036 623 7.38 24,330 795 6.59 (254) 82 (172)
Total loans 4,339,395 186,321 8.62 3,665,751 142,061 7.78 27,675 16,585 44,260
Investment securities:
U. S. Government 1,427,008 33,515 4.74 1,678,540 38,162 4.58 (5,846) 1,199 (4,647)
State, county and municipal 7,576 297 7.91 728 30 8.31 275 (8) 267
Other 2,647 93 7.09 315 9 5.76 74 10 84
Total investment securities 1,437,231 33,905 4.76 1,679,583 38,201 4.59 (5,497) 1,201 (4,296)
Federal funds sold 113,480 3,393 6.03 65,663 1,172 3.60 1,142 1,079 2,221
Total interest-earning assets $5,890,106 $223,619 7.63 % $5,410,997 $181,434 6.74 % $23,320 $18,865 $42,185
Liabilities
Deposits:
Checking With Interest $793,502 $6,889 1.75 % $773,077 $6,551 1.71 % $179 159 338
Savings 682,914 7,653 2.26 672,013 7,451 2.24 128 74 202
Money market accounts 732,916 12,023 3.31 796,589 8,956 2.27 (879) 3,946 3,067
Time deposits 2,658,740 67,743 5.14 2,279,845 42,483 3.76 8,362 16,898 25,260
Total interest-bearing deposits 4,868,072 94,308 3.91 4,521,524 65,441 2.92 7,790 21,077 28,867
Federal funds purchased 26,017 766 5.94 23,557 394 3.37 56 316 372
Repurchase agreements 23,389 582 5.02 21,813 276 2.55 29 277 306
Master notes 179,168 4,524 5.09 156,779 2,062 2.65 430 2,032 2,462
U. S. Treasury tax and loan accounts 16,776 490 5.89 29,446 491 3.36 (291) 290 (1)
Other short-term borrowings 13,173 307 4.70 8,239 220 5.38 123 (36) 87
Long-term obligations 28,672 861 6.06 58,719 1,349 4.63 (797) 309 (488)
Total interest-bearing liabilities $5,155,267 $101,838 3.98 % $4,820,077 $70,233 2.94 % $7,340 $24,265 $31,605
Interest rate spread 3.65 % 3.80 %
Net interest income and net yield
on interest-earning assets $121,781 4.17 % $111,201 4.14 % $15,980 ($5,400) $10,580
First Citizens BancShares, Inc. and Subsidiaries
Second Quarter 1995
Summary of Loan Loss Experience and Risk Elements
Table 7
1995 1994
Second First Fourth Third Second
(thousands, except ratios) Quarter Quarter Quarter Quarter Quarter
Reserve balance at beginning of period $73,897 $72,017 $71,537 $70,862 $70,662
Reserve of acquired institutions 1,986 1,272 436 360 -
Provision for loan losses 1,460 534 1,486 1,159 (947)
Net charge-offs:
Charge-offs (1,670) (1,234) (3,022) (2,276) (1,432)
Recoveries 1,214 1,308 1,580 1,432 2,579
Net (charge-offs) recoveries (456) 74 (1,442) (844) 1,147
Reserve balance at end of period $76,887 $73,897 $72,017 $71,537 $70,862
Historical Statistics
Balances
Average total loans $4,424,724 $4,253,117 $3,999,377 $3,854,738 $3,712,429
Total loans at period-end 4,480,235 4,362,969 4,148,133 3,939,264 3,781,407
Risk Elements
Nonaccrual loans $16,406 $19,953 $21,069 $22,720 $21,508
Restructured debt - - - - 199
Other real estate acquired through foreclosure 3,590 4,296 5,926 7,614 $10,948
Total nonperforming assets $19,996 $24,249 $26,995 $30,334 $32,655
Accruing loans 90 days or more past due $3,524 $5,020 $5,326 $5,177 $4,443
Ratios
Net charge-offs (annualized) to average total loans 0.04% -0.01% 0.14% 0.09% -0.12%
Reserve for loan losses to total loans 1.72 1.69 1.74 1.82 1.87
Nonperforming assets to total loans plus foreclosed
real estate at period-end 0.45 0.56 0.65 0.77 0.86
First Citizens BancShares, Inc and Subsidiaries
Second Quarter 1995
Summary of Loan Loss Experience and Risk Elements
Table 7
Six Months Ended
June 30
(thousands, except ratios) 1995 1994
Reserve balance at beginning of period $72,017 $70,049
Reserve of acquired institutions 3,258 213
Provision for loan losses 1,994 141
Net charge-offs:
Charge-offs (2,904) (3,182)
Recoveries 2,522 3,641
Net (charge-offs) recoveries (382) 459
Reserve balance at end of period $76,887 $70,862
Historical Statistics
Balances
Average total loans $4,339,395 $3,665,751
Total loans at period-end 4,480,235 3,781,407
Risk Elements
Nonaccrual loans $16,406 $21,508
Restructured debt - 199
Other real estate acquired through foreclosure 3,590 10,948
Total nonperforming assets $19,996 $32,655
Accruing loans 90 days or more past due $3,524 $4,443
Ratios
Net charge-offs (annualized) to average total loans 0.02% -0.03%
Reserve for loan losses to total loans 1.72 1.87
Nonperforming assets to total loans plus foreclosed
real estate at period-end 0.45 0.86
First Citizens BancShares, Inc and Subsidiaries
Second Quarter 1995
INTRODUCTION
Management's discussion and analysis of earnings and related financial data are
presented to assist in understanding the financial condition and results
of operations of First Citizens BancShares, Inc. and Subsidiaries
("BancShares"). It should be read in conjunction with the unaudited
Consolidated Financial Statements and related notes contained elsewhere
in this report. The focus of this discussion concerns BancShares' four
banking subsidiaries (collectively, the "Banks"), because BancShares
itself made an insignificant contribution to the consolidated totals.
Banks operate under the name First-Citizens Bank & Trust Company in
North Carolina and Virginia, while Bank of Marlinton and Bank of White
Sulphur Springs operate in West Virginia. Certain changes discussed
herein result from various acquisitions that were consummated during
1995 and 1994. Table 2 describes the various business combinations, all
of which were accounted for as purchases.
SUMMARY
BancShares realized an earnings decrease of 5.5 percent during
the second quarter of 1995 compared to the second quarter of 1994.
Consolidated net income during the second quarter of 1995 was $12.6
million, compared to $13.4 million earned during the corresponding
period of 1994. The decrease was the result of higher noninterest
expense. Net income per share during the second quarter of 1995 totaled
$1.19, compared to $1.36 during the second quarter of 1994. Return on
average assets was 0.76 percent for the second quarter of 1995 compared
to 0.88 percent during the same period of 1994. For the six-month period
ended June 30, consolidated net income increased from $24.4 million in
1994 to $24.8 million in 1995. This increase was the result of
increases in net interest income and noninterest income, with such
increases offsetting the increase in noninterest expense. Net income
per share during 1995 totaled $2.36, compared to $2.49 during the same
period of 1994. The reduction in net income per share despite an
increase in consolidated net income reflects the higher number of
average shares outstanding during 1995, the result of shares of Class A
common stock being issued for certain business combinations. Return on
average assets was 0.77 percent for 1995 compared to 0.81 percent during
the same period of 1994. Other profitability, liquidity and capital
ratios are presented in Table 1. To understand the changes and trends
in interest-earning assets and interest-bearing liabilities, refer to
the average balances, interest income and expense, and yields and rates
presented in Tables 5 and 6.
INTEREST-EARNING ASSETS
Interest-earning assets averaged $6.06 billion for the second quarter of 1995,
an increase of $627 million or 11.5 percent from the second quarter of 1994, the
result of growth in the loan portfolio. For the six-month period ended June 30,
1995, earning assets averaged $5.89 billion, compared to $5.41 billion during
the same period of 1994, an increase of 8.9 percent. Loans. At June 30, 1995,
and 1994, gross loans totaled $4.48 billion and $3.78 billion, respectively. As
of December 31, 1994, gross loans were $4.15 billion. The $332.1 million
increase from December 31, 1994 to June 30, 1995, is the combined result of the
$166.4 million in acquired loans and growth among consumer and commercial and
industrial loans. The $698.8 million growth in loans from June 30, 1994 to June
30, 1995 results from acquisitions, which have added $265.6 million in loans,
and strong growth within various loan products. Table 3 details outstanding
loans by type for the past five quarters. During the second quarter of 1995,
average loans were $4.42 billion, an increase of $712.3 million or 19.2 percent
from the comparable period of 1994. Consumer loans averaged $1.17 billion
during the second quarter of 1995, compared to $988.4 million during the same
period of 1994, an increase of $186.1 million or 18.8 percent. This results
from sustained demand for automobile financing. Loans secured by real estate
averaged $2.17 billion during the second quarter of 1995, an increase of $544.7
million between the two periods, a 24.8 percent increase. Home equity loans
contributed to much of the growth, expanding by 35.3 percent from the second
quarter of 1994 to the same period of 1995. As of June 30, 1995, $6.3 million in
fixed-rate residential mortgage loans were held for sale. All loans held for
sale are carried at the lower of cost or market, and it is anticipated that
these loans will be sold during the next quarter. Growth in the consumer
portfolio is expected to continue throughout 1995. However, higher market rates
during 1995 are likely to diminish demand, and management does not expect loans
to display the growth rate seen during 1994. Growth among loans secured by real
estate is expected to continue at moderate levels. Management anticipates
stronger growth among commercial and industrial loans throughout the remainder
of 1995. Investment securities. At June 30, 1995, and 1994, the investment
portfolio totaled $1.55 billion and $1.58 billion, respectively. At December
31, 1994, the investment portfolio was $1.46 billion. All securities are
classified as held-to-maturity, as BancShares has the ability and the positive
intent to hold its investment portfolio until maturity. Table 4 presents
detailed information relating to the investment portfolio. Income on
Interest-Earning Assets. Taxable equivalent interest income amounted to $116.8
million during the second quarter of 1995, a 27.3 percent increase over the
second quarter of 1994. The average yield on interest-earning assets for the
second quarter of 1995 was 7.71 percent, compared to 6.78 percent for the
corresponding period of 1994, a 93 basis point improvement resulting from higher
market rates. Taxable equivalent loan income for the second quarter of 1995
increased $23.4 million or 32.1 percent from second quarter of 1994 due to
growth in the loan portfolio and higher loan yields. The taxable equivalent
yield on the loan portfolio was 8.69 percent during the second quarter of 1995,
compared to 7.86 percent during the same period of 1994. Taxable equivalent
loan income for the six-month period ended June 30 was $186.3 million, a 31.2
percent increase over the same period of 1994, the combined result of the volume
increases and an 84 basis point yield increase. Taxable equivalent income earned
on the investment portfolio amounted to $18.5 million during the second quarter
of 1995 and $18.2 million during the same period of 1994. Although the average
investment portfolio experienced a $148.4 million reduction between the second
quarter of 1994 and the second quarter of 1995, the portfolio's taxable
equivalent yield increased from 4.49 percent for the quarter ended June 30,
1994, to 4.95 percent for the quarter ended June 30, 1995. For the six-month
period ended June 30, 1995, and 1994, investment securities taxable-equivalent
interest income fell 11.2 percent, the result of a 14.4 percent reduction in the
average portfolio, a decrease of $242.4 million.
INTEREST-BEARING LIABILITIES.
At June 30, 1995, and 1994, interest-bearing liabilities totaled $5.45 billion
and $4.77 billion, respectively, compared to $4.98 billion as of December 31,
1994. Average interest-bearing liabilities for the second quarter of 1995
totaled $5.3 billion, an increase of 10.2 percent from the second quarter of
1994. Deposits. At June 30, 1995, total deposits were $6.03 billion, an increase
of $738.1 million or 13.9 percent over June 30, 1994. Compared to the December
31, 1994 balance of $5.52 billion, total deposits have increased $513.3 million.
Acquisitions during 1995 have generated $338.1 million in deposit liabilities.
The remaining increase in deposits since December 31, 1994 has resulted from
growth generated within the existing branch network, largely the result of a
promotion of the one year certificate of deposit during the first quarter.
Average interest-bearing deposits were $5 billion during the second quarter of
1995 compared to $4.52 billion during the second quarter of 1994, an increase of
10.7 percent. Much of the increase is attributed to average time deposits,
which increased $522.7 million from the second quarter of 1994 to the second
quarter of 1995. Average money market accounts decreased $61.9 million between
the second quarter of 1994 and the same period of 1995. The migration of
deposits from transaction accounts into time accounts results from higher market
rates which have renewed customer interest in time deposit products. Time
deposits of $100,000 or more averaged 8 percent of total average deposits during
the second quarter of 1995, compared to 6.3 percent during the same period of
1994. Although this represents a greater reliance of funds typically viewed as
volatile, management does not consider the current level to be excessive.
Borrowed Funds. At June 30, 1995, short-term borrowings totaled $311.2 million
compared to $290.9 million at December 31, 1994 and $221.8 million at June 30,
1994. For the quarters ended June 30, 1995, and 1994, short-term borrowings
averaged $273.8 million and $236.2 million, respectively, a 15.9 percent
increase resulting from higher levels of overnight borrowings. Long-term
obligations averaged $26.2 million during the second quarter of 1995, compared
to $57.5 million during the second quarter of 1994. The 54.5 percent reduction
results from the repayment of Federal Home Loan Bank borrowings during 1994.
Expense on Interest-Bearing Liabilities. Interest expense amounted to $55.5
million during the second quarter of 1995, a $20.2 million or 57.3 percent
increase from the second quarter of 1994. The higher interest expense resulted
from a 126 basis point increase in the aggregate rate on interest bearing
liabilities, which was 4.2 percent during the second quarter of 1995, compared
to 2.94 percent during the second quarter of 1994. The $488.9 million growth in
average interest-bearing liabilities also contributed to the higher level of
interest expense during 1995. For both the three-month and the six-month
periods ended June 30, increases in interest expense also resulted from the
shifting mix of deposits. Since time deposits typically carry higher rates than
transaction accounts, the higher ratios of time deposits to total
interest-bearing deposits in 1995 over 1994 contributed to the increase in
interest expense. Interest expense for the six-month period ended June 30, 1995,
was $101.8 million, a 45 percent increase over the comparable period of 1994.
The increase resulted from a 104 basis point increase in the rate on
interest-bearing liabilities and a $335.2 million increase in average
interest-bearing liabilities.
NET INTEREST INCOME
Taxable equivalent net interest income totaled $61.3 million during the second
quarter of 1995, an increase of 8.5 percent from the second quarter of 1994.
The average net yield on interest-earning assets was 4.06 percent for the second
quarter of 1995, 11 basis points below the net yield recorded during the second
quarter of 1994. The taxable equivalent interest rate spread was 3.51 percent
for the second quarter of 1995, compared to 3.84 percent for the second quarter
of 1994. Management anticipates continued compression of the net yield in the
coming quarters due to current market conditions. Although management views the
ratio of interest-earning assets to interest-bearing liabilities within one year
to be at an acceptable level, within the 12-month period, certain short-term
repricing differences exist. Management is aware of the potential negative
impact changes in interest rates may have on net interest income. A principal
objective of BancShares' asset liability function is to manage interest rate
risk or the exposure to changes in interest rates. Management maintains
portfolios of interest-earning assets and interest-bearing liabilities with
maturities or repricing opportunities that will protect against wide interest
rate fluctuations, thereby limiting, to the extent possible, the ultimate
interest rate exposure.
ASSET QUALITY
Reserve for loan losses. Management continuously analyzes the growth
and risk characteristics of the total loan portfolio under current and
projected economic conditions in order to evaluate the adequacy of the
reserve for loan losses. At June 30, 1995, the reserve for loan losses
amounted to $76.9 million or 1.72 percent of loans outstanding. This
compares to $70.9 million or 1.87 percent at June 30, 1994. Lower
levels of nonperforming assets during 1995 have allowed a slight
reduction in the reserve ratio. Management considers the established
reserve adequate to absorb future losses that relate to loans
outstanding at June 30, 1995. While management uses available
information to establish provisions for loan losses, future additions to
the reserve may be necessary based on changes in economic conditions.
In addition, various regulatory agencies may require the recognition of
additions to the reserve based on their examinations. The provision for
loan losses charged to operations during the six months ended June 30,
1995 was $1,994,000, compared to $141,000 during the same period of
1994. Net charge-offs for the six months ended June 30, 1995 totalled
$382,000, compared to net recoveries of $459,000 during the same period
of 1994. Table 7 provides details concerning the reserve and provision
for loan losses over the past five quarters. Nonperforming assets. At
June 30, 1995, BancShares' nonperforming assets amounted to $20 million
or 0.45 percent of gross loans plus foreclosed properties, compared to
$27 million at December 31, 1994, and $32.7 million at June 30, 1994.
The $12.7 million reduction in nonperforming assets since June 30, 1994
was primarily the result of the disposition of foreclosed real estate.
Management continues to closely monitor nonperforming assets, taking
necessary actions to minimize potential exposure.
NONINTEREST INCOME
Noninterest income was $23.1 million for the second quarter of 1995,
compared to $20.5 million for the second quarter of 1994. The $2.5
million increase was the result of a $1.3 million increase in other
income from the second quarter of 1994 to the same period of 1995. Much
of this is attributable to gains on loan sales. During the second
quarter of 1994, BancShares recorded losses of $973,000 on the sale of
mortgage loans, compared to a gain of $113,000 during the same period of
1995. Shifting market rates during 1995 caused the fair value of loans
sold to increase. Fee income increased $682,000 between the two
periods. The strongest growth was in revenues from operational services
provided to affiliate banks and fee income generated by First Citizens
Investor Services, a subsidiary providing mutual fund and annuity
products. For the six-month period ended June 30, 1995, noninterest
income totaled $44.7 million, an increase of $3.8 million from the same
period of 1994. The 9.3 percent increase was the combined result of
higher affiliate fee income. Other income improved $1.1 million during
the first six months of 1995. Loan sales generated gains of $125,000
during 1995, compared to losses of $788,000 recorded during the same
period of 1994.
NONINTEREST EXPENSE
Noninterest expense for the second quarter of 1995 amounted to $62.9
million. This was a 10.3 percent increase over the second quarter of
1994. Salaries and wages increased 11 percent between the periods,
primarily the result of merit raises. Employee benefits expense
increased 33.5 percent during the second quarter of 1995. While some
personnel-related costs are the result of new employees, certain changes
during 1995 have contributed to the increases. During 1995,
substantially all employees received merit increases simultaneously
during the second quarter, where such increases were distributed
throughout 1994. Health care costs increased during 1995 following the
introduction of a new plan for associates. While such an increase
generally follows the introduction of a new plan, costs typically fall
in subsequent periods. Occupancy expense increased 13.9 percent during
the second quarter of 1995, compared to the corresponding period of
1994. For the six month period ended June 30, occupancy expense during
1995 was 12.2 percent above the 1994 level. Increases for both the
quarters and the six month periods ended June 30, 1995 and 1994 resulted
from increased operating costs, including higher rent expense and
depreciation expense resulting from new and renovated branch facilities.
Other expenses increased 6.1 percent and 10.7 percent, respectively, for
the quarters and six-month periods ending June 30, 1995 and 1994.
Contributing to these increases were higher levels of postage expense,
credit card processing costs, and losses sustained from non-credit
losses. INCOME TAXES Income tax expense amounted to $6.8 million during
the second quarter of 1995, compared to $7.1 million during the second
quarter of 1994. The effective tax rates for these periods were 35.1
percent and 34.8 percent, respectively.
LIQUIDITY
Management relies on the investment portfolio as a source of
liquidity, with maturities designed to provide needed cash flows.
Further, retail deposits generated throughout the extensive branch
network has enabled management to fund asset growth and maintain
liquidity. BancShares also maintains readily available sources to
borrow funds as needed through its correspondent network. Loans to
deposits averaged 75.5 percent during the second quarter of 1995 versus
70 percent for the same period of 1994. Although the strong loan growth
during 1994 caused this ratio to increase, management continues to view
liquidity as a key financial objective.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
BancShares maintains an adequate capital position and exceeds all
minimum regulatory capital requirements. At June 30, 1995, and 1994,
the leverage capital ratio of BancShares was 6.1 percent and 6.5
percent, respectively, surpassing the minimum level of 3 percent. The
reduction experienced during 1995 has resulted from intangible assets
resulting from business combinations. As a percentage of risk-adjusted
assets, BancShares' core capital ratio was 9.3 percent and 10.3 percent,
respectively at June 30, 1995, and 1994. The minimum ratio allowed is 4
percent of risk-adjusted assets. The total capital ratio was 10.6
percent and 11.5 percent of risk-adjusted assets, above the minimum 8
percent level. The reduction in these capital ratios reflect the impact
of the acquisition-related intangibles.