-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EZyWBrvuDj4DOStTn6KmB4MDFw5eVhgLO3EKffEi+dkhzoJ2D1rGuwDJDtmVdLCd CeelQgK7zXhBN1wBe/uYCg== 0000798941-96-000003.txt : 19960517 0000798941-96-000003.hdr.sgml : 19960517 ACCESSION NUMBER: 0000798941-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST CITIZENS BANCSHARES INC /DE/ CENTRAL INDEX KEY: 0000798941 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 561528994 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16471 FILM NUMBER: 96565214 BUSINESS ADDRESS: STREET 1: 239 FAYETTEVILLE STREET MALL CITY: RALEIGH STATE: NC ZIP: 27601 BUSINESS PHONE: 9197557000 MAIL ADDRESS: STREET 1: PO BOX 27131 STREET 2: CTWO7 CITY: RALEIGH STATE: NC ZIP: 27611-7131 10-Q 1 FIRST CITIZENS BANCSHARES, INC. AND SUBSIDIARIES 10-Q 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 March 31, 1996 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-- 9,667,082 shares Class B Common Stock--$1 Par Value-- 1,766,414 shares (Number of shares outstanding, by class, as of May 14, 1996) INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Statements of Condition at March 31, 1996, December 31, 1995, and March 31, 1995 3-4 Consolidated Statements of Income for the three-month periods ended March 31, 1996, and March 31, 1995, 4-5 Consolidated Statements of Changes in Shareholders' Equity for the three-month periods ended March 31, 1996, and March 31, 1995 5 Consolidated Statements of Cash Flows for the three-month periods ended March 31, 1996, and March 31, 1995 6 Note to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-16 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 March 31, 1996, 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: May 14, 1996 By: Kenneth A. Black Vice President, Treasurer, and Chief Financial Officer First Citizens BancShares, Inc and Subsidiaries First Quarter 1996 Consolidated Balance Sheets First Citizens BancShares, Inc. and Subsidiaries
March 31 December 31 March 31 (thousands, except share data) 1996 1995 1995 (unaudited) (unaudited) Assets Cash and due from banks $428,612 $448,630 $370,436 Investment securities 2,005,645 1,983,148 1,323,683 Federal funds sold 90,160 40,445 196,430 Loans 4,837,073 4,580,719 4,362,969 Less reserve for loan losses 80,433 78,495 73,897 Net loans 4,756,640 4,502,224 4,289,072 Premises and equipment 213,832 208,240 196,165 Income earned not collected 59,127 58,237 39,286 Other assets 182,146 143,026 117,004 Total assets $7,736,162 $7,383,950 $6,532,076 Liabilities Deposits: Noninterest-bearing $956,846 $943,445 $859,819 Interest-bearing 5,787,067 5,444,637 4,863,821 Total deposits 6,743,913 6,388,082 5,723,640 Short-term borrowings 326,833 376,531 251,314 Long-term obligations 15,608 22,957 26,407 Other liabilities 79,550 75,543 53,748 Total liabilities 7,165,904 6,863,113 6,055,109 Shareholders' equity Common stock: Class A-$1 par value( 9,661,517; 8,949,703; and 8,816,313 shares issued, respectively) 9,662 8,950 8,816 Class B-$1 par value(1,766,464; 1,766,464; and 1,769,251 shares issued, respectively) 1,766 1,766 1,769 Surplus 141,402 106,954 100,124 Retained earnings 417,428 403,167 366,258 Total shareholders'equity 570,258 520,837 476,967 Total liabilities and shareholders' equity $7,736,162 $7,383,950 $6,532,076 See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc and Subsidiaries First Quarter 1996 Consolidated Statements of Income First Citizens BancShares, Inc. and Subsidiaries
Three Months Ended March 31 (thousands, except per share data, unaudited 1996 1995 Interest income Loans $100,112 $89,585 Investment securities: U. S. Government 27,740 15,297 State, county and municipal 90 88 Other 45 26 Total investment securities interest income 27,875 15,411 Federal funds sold 1,581 1,225 Total interest income 129,568 106,221 Interest expense Deposits 58,171 42,762 Short-term borrowings 3,866 3,085 Long-term obligations 387 454 Total interest expense 62,424 46,301 Net interest income 67,144 59,920 Provision for loan losses 1,544 534 Net interest income after provision for losses 65,600 59,386 Noninterest income Trust income 2,267 2,239 Service charges on deposit accounts 10,033 9,403 Credit card income 3,265 2,847 Other service charges and fees 5,790 4,899 Other 2,530 2,267 Total noninterest income 23,885 21,655 89,485 81,041 Noninterest expense Salaries and wages 27,302 25,753 Employee benefits 4,896 4,574 Occupancy expense 5,426 5,031 Equipment expense 6,004 6,107 Other 19,657 20,898 Total noninterest expense 63,285 62,363 Income before income taxes 26,200 18,678 Income taxes 9,374 6,500 Net income $16,826 $12,178 Per Share Net income $1.52 $1.17 Cash dividends 0.225 0.20 See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries First Quarter 1996 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, unaudited) Stock Stock Surplus Earnings Equity Balance at December 31, 1994 $8,419 $1,770 $82,631 $356,591 $449,411 Issuance of 399,424 shares of Class A common stock for acquisitions 399 17,260 17,659 Issuance of 2,068 shares of Class A common stock pursuant to the Dividend Reinvestment Plan 2 82 84 Issuance of 3,932 shares of Class A common stock pursuant to employee stock purchase plans 4 151 155 Redemption of 8,500 shares of Class A common stock and 200 shares of Class B common stock (8) (1) (383) (392) Net income 12,178 12,178 Cash dividends (2,128) (2,128) Balance at March 31, 1995 $8,816 $1,769 $100,124 $366,258 $476,967 Balance at December 31, 1995 $8,950 $1,766 $106,954 $403,167 $520,837 Issuance of 668,959 shares of Class A common stock for acquisition 669 32,734 33,403 Issuance of 8,746 shares of Class A common stock pursuant to the Dividend Reinvestment Plan 9 114 123 Issuance of 34,414 shares of Class A common stock pursuant to employee stock purchase plans 34 1,600 1,634 Net income 16,826 16,826 Cash dividends (2,565) (2,565) Balance at March 31, 1996 $9,662 $1,766 $141,402 $417,428 $570,258 See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries First Quarter 1996 Consolidated Statements of Cash Flows First Citizens BancShares, Inc. and Subsidiaries
Three Months Ended March 31 (thousands) 1996 1995 Operating Activities Net income $16,826 $12,178 Adjustments: Amortization of intangibles 1,787 1,119 Provision for loan losses 2,931 534 Deferred tax benefit (726) (218) Change in current taxes payable 9,484 6,615 Depreciation 4,187 4,104 Change in accrued interest payable (7,244) 4,582 Change in income earned not collected 186 6,779 Origination of loans held for sale (26,893) (3,589) Proceeds from sale of loans 21,244 3,852 (Gain) loss on sale of mortgage loans (222) (39) Net amortization of premiums and discounts 4,378 5,126 Net change in other assets (4,304) (1,360) Net change in other liabilities (5,941) 815 Net cash provided by operating activities 15,693 40,498 Investing Activities Dispositions of premises and equipment 1,680 1,671 Additions to premises and equipment (9,472) (8,325) Net increase in loans outstanding (46,341) (103,145) Purchases of investment securities (269,164) (77,118) Proceeds from maturities of investment securiti 260,533 230,700 Net change in federal funds sold (49,715) (185,983) Purchase of institutions, net of cash acquired 7,584 (280) Net cash used by investing activities (104,895) (142,480) Financing Activities Repurchases of common stock - (392) Proceeds from issuance of stock, net of related (1,558) 239 Cash dividends paid (2,565) (2,128) Net change in time deposits 123,970 251,503 Net change in demand and other interest-bearing 23,467 (180,838) Net change in short-term borrowings (74,130) (51,676) Net cash provided by financing activities 69,184 16,708 Change in cash and due from banks (20,018) (85,274) Cash and due from banks at beginning of period 448,630 455,710 Cash and due from banks at end of period $428,612 $370,436 Cash payments for: Interest $69,668 $41,719 Income taxes 960 83 Supplemental disclosure of noncash investing and financing activities: Common stock issued for acquisitions $36,718 $17,659 Long-term obligations issued for acquisitions 1,468 2,494 See accompanying Notes to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries First Quarter 1996 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. 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 1995 First Citizens BancShares Annual Report, which is incorporated by reference on Form 10-K. Financial Summary
Table 1 1996 1995 First Fourth Third Second First (thousands, except per share data and ratios) Quarter Quarter Quarter Quarter Quarter Summary of Operations Interest income $129,568 $126,372 $122,234 $116,282 $106,221 Interest income - taxable equivalent 130,159 126,950 122,801 116,845 106,774 Interest expense 62,424 62,968 59,858 55,537 46,301 Net interest income - taxable equivalent 67,735 63,982 62,943 61,308 60,473 Taxable equivalent adjustment 591 578 567 563 553 Net interest income 67,144 63,404 62,376 60,745 59,920 Provision for loan losses 1,544 1,654 1,716 1,460 534 Net interest income after provision for loan losses 65,600 61,750 60,660 59,285 59,386 Noninterest income 23,885 23,856 23,560 23,057 21,655 Noninterest expense 63,285 60,925 59,716 62,876 62,363 Income before income taxes 26,200 24,681 24,504 19,466 18,678 Income taxes 9,374 8,395 8,686 6,842 6,500 Net income $16,826 $16,286 $15,818 $12,624 $12,178 Selected Quarterly Averages Total assets $7,462,756 $7,280,893 $7,053,579 $6,702,692 $6,323,537 Investment securities 1,984,027 1,871,272 1,694,776 1,493,415 1,380,424 Loans 4,679,692 4,552,018 4,500,192 4,424,724 4,253,117 Interest-earning assets 6,779,461 6,599,377 6,376,273 6,061,732 5,716,572 Deposits 6,477,795 6,282,111 6,124,360 5,858,280 5,533,654 Interest-bearing liabilities 5,934,180 5,753,538 5,569,496 5,299,570 5,009,276 Long-term obligations 23,763 23,365 24,595 26,174 32,564 Shareholders' equity $545,774 $512,768 $498,108 $482,885 $460,695 Shares outstanding 11,072,395 10,700,435 10,688,019 10,618,902 10,376,351 Profitability Ratios (averages) Rate of return(annualized) on: Total average assets 0.91 % 0.89 % 0.89 % 0.76 % 0.78 Average shareholders' equity 12.40 12.60 12.60 10.49 10.72 Dividend payout ratio 14.80 14.80 13.42 16.81 17.09 Liquidity and Capital Ratios (averages) Loans to deposits 72.24 % 72.46 % 73.48 % 75.53 % 76.86 Shareholders' equity to total assets 7.31 7.04 7.06 7.20 7.29 Time certificates of $100,000 or more to total 9.59 9.27 8.61 8.04 7.30 Per Share of Stock Net income $1.52 $1.52 $1.49 $1.19 $1.17 Cash dividends 0.225 0.225 0.20 0.20 0.20 Book value at period-end 50.19 48.60 47.32 46.06 45.06 Tangible book value at period-end 41.13 41.75 40.32 39.10 39.50
First Citizens BancShares, Inc. and Subsidiaries First Quarter 1996 Significant Acquisitions Table 2
(thousands) Total Total Date Institution and Location Assets Deposits February 1996 Allied Bank Capital, Inc. $248,998 $208,394 Sanford, North Carolina June 1995 Bank of White Sulphur Springs 64,589 59,174 White Sulphur Springs, West Virginia May 1995 9 NationsBank of Virginia bran 133,175 143,494 Southern Virginia March 1995 State Bank 49,700 41,238 Fayetteville, North Carolina February 1995 Pace American Bank 58,660 53,303 Lawrenceville, Virginia February 1995 First Investors Savings Bank, Inc., SSB 44,426 40,846 Whiteville, North Carolina
First Citizens BancShares, Inc. and Subsidiaries First Quarter 1996 Outstanding Loans by Type
Table 3 1996 1995 First Fourth Third Second First (thousands) Quarter Quarter Quarter Quarter Quarter Real estate: Construction and land development: $110,520 $104,540 $109,597 $111,285 $107,197 Mortgage: 1-4 family residential 1,604,954 1,438,655 1,456,076 1,399,023 1,357,256 Commercial 799,800 770,246 744,811 743,367 741,948 Equity Line 401,501 397,225 394,088 395,412 385,581 Other 134,128 129,292 130,952 124,682 116,444 Commercial and industrial 483,245 466,462 455,781 459,446 415,968 Consumer 1,222,243 1,199,400 1,173,740 1,171,441 1,163,348 Lease financing 63,943 59,899 58,013 58,464 58,364 Other 16,739 15,000 16,998 17,115 16,863 Total loans 4,837,073 4,580,719 4,540,056 4,480,235 4,362,969 Less reserve for loan losses 80,433 78,495 77,986 76,887 73,897 Net loans $4,756,640 $4,502,224 $4,462,070 $4,403,348 $4,289,072
First Citizens BancShares, Inc. and Subsidiaries First Quarter 1996 Investment Securities
Table 4 March 31, 1996 March 31, 1995 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 $890,553 $893,026 0/6 5.72 % $870,684 $861,189 0/7 4.26 % One to five years 1,093,492 1,088,506 2/0 5.68 437,239 430,312 1/4 5.29 Five to ten years 2,454 2,423 7/0 6.17 1,621 1,536 6/2 6.13 Over 10 years 9,289 9,380 18/8 7.51 2,185 2,144 13/4 6.33 Total 1,995,788 1,993,335 1/5 5.70 1,311,729 1,295,181 0/10 4.61 State, county and municipal: Within one year 666 668 0/4 6.84 1,711 1,720 0/5 7.99 One to five years 3,989 4,249 2/9 6.62 3,812 3,807 2/11 6.59 Five to ten years 2,025 2,091 5/11 7.56 2,979 2,990 6/6 7.31 Over 10 years 195 195 21/5 9.14 205 205 22/5 9.00 Total 6,875 7,203 3/11 6.99 8,707 8,722 4/1 7.17 Other Within one year 1,059 1,060 0/5 5.66 250 251 0/2 9.32 One to five years 1,878 1,865 2/0 10.25 2,942 2,853 2/7 8.67 Five to ten years 45 45 6/2 8.00 55 55 6/11 8.00 Total 2,982 2,970 1/8 8.58 3,247 3,159 2/5 8.71 Total investment securities $2,005,645 $2,003,508 1/5 5.71 % $1,323,683 $1,307,062 0/10 4.63 %
First Citizens BancShares, Inc. and Subsidiaries First Quarter 1996 Consolidated Taxable Equivalent Rate/Volume Variance Analysis - First Quarter Table 5
1996 1995 Increase (decrease) Interest Interest Average Income Yield Average Income Yield Yield (thousands) Balance Expense /Rate Balance Expense /Rate Volume /Rate Total Interest Income Loans: Secured by real estate $2,921,551 $61,041 8.32 % $2,631,235 $54,149 8.28 % $6,304 $588 $6,892 Commercial and industrial 475,654 10,758 8.70 397,959 8,982 9.14 1,995 (219) 1,776 Consumer 1,204,973 27,317 9.03 1,147,139 25,507 8.92 1,389 421 1,810 Lease financing 61,286 1,222 7.98 59,714 1,099 7.36 30 93 123 Other 16,228 316 7.82 17,070 354 8.42 (15) (23) (38) Total loans 4,679,692 100,654 8.63 4,253,117 90,091 8.53 9,703 860 10,563 Investment securities: U. S. Government 1,973,763 27,740 5.65 1,371,490 15,296 4.52 7,680 4,764 12,444 State, county and municipal 7,290 139 7.67 6,761 136 8.16 11 (8) 3 Other 2,974 45 6.09 2,173 26 4.85 11 8 19 Total investment securities 1,984,027 27,924 5.66 1,380,424 15,458 4.54 7,702 4,756 12,466 Federal funds sold 115,742 1,581 5.49 83,031 1,225 5.98 472 (116) 356 Total interest-earning assets $6,779,461 $130,159 7.71 % $5,716,572 $106,774 7.53 % $17,877 $5,500 $23,385 Interest Expense Deposits: Checking with Interest $855,162 $2,983 1.40 % $786,940 $3,365 1.73 % $279 ($661) ($382) Savings 703,574 3,783 2.16 677,737 3,765 2.25 157 (139) 18 Money market accounts 808,401 7,125 3.54 748,517 5,925 3.21 532 668 1,200 Other time deposits 3,204,344 44,280 5.56 2,521,864 29,707 4.78 8,897 5,676 14,573 Total interest-bearing deposits 5,571,481 58,171 4.20 4,735,058 42,762 3.66 9,865 5,544 15,409 Federal funds purchased 54,033 751 5.59 21,898 314 5.82 457 (20) 437 Repurchase agreements 21,229 233 4.41 21,610 264 4.95 (3) (28) (31) Master notes 240,322 2,604 4.36 171,348 2,128 5.04 815 (339) 476 U. S. Treasury tax and loan accounts 14,123 182 5.18 18,020 260 5.85 (52) (26) (78) Other short-term borrowings 9,229 96 4.18 8,778 119 5.50 6 (29) (23) Long-term obligations 23,763 387 6.55 32,564 454 5.65 (132) 65 (67) Total interest-bearing liabilities $5,934,180 $62,424 4.23 % $5,009,276 $46,301 3.75 % $10,956 $5,167 $7,262 Interest rate spread 3.48 % 3.78 % Net interest income and net yield on interest-earning assets $67,735 4.02 % $60,473 4.29 % $6,921 $333 $7,262
First Citizens BancShares, Inc. and Subsidiaries First Quarter 1996 Summary of Loan Loss Experience and Risk Elements
Table 6 1996 1995 First Fourth Third Second First (thousands, except ratios) Quarter Quarter Quarter Quarter Quarter Reserve balance at beginning of period $78,495 $77,965 $76,860 $73,897 $72,017 Reserve of acquired institution 1,387 - - 1,959 1,272 Provision for loan losses 1,544 1,654 1,716 1,460 534 Net charge-offs: Charge-offs (2,433) (2,575) (1,783) (1,670) (1,234) Recoveries 1,440 1,451 1,172 1,214 1,308 Net charge-offs (993) (1,124) (611) (456) 74 Reserve balance at end of period $80,433 $78,495 $77,965 $76,860 $73,897 Historical Statistics Balances Average total loans $4,679,692 $4,433,517 $4,500,192 $4,424,724 $4,253,117 Total loans at period-end 4,837,073 4,580,719 4,540,056 4,480,235 4,362,969 Risk Elements Nonaccrual loans $13,489 $13,208 $14,296 $16,406 $19,953 Restructured loans Other real estate acquired through forclosure 2,555 2,154 2,739 3,590 4,296 Total nonperforming assets $16,044 $15,362 $17,035 $19,996 $24,249 Accruing loans 90 days or more past due $5,300 $4,230 $4,874 $3,524 $5,020 Ratios Net charge-offs (annualized) to average 0.09% 0.10% 0.05% 0.04% -0.01% Reserve for loan losses to total loans a 1.66 1.71 1.72 1.72 1.69 Nonperforming assets to total loans plus foreclosed real estate at period-end 0.33 0.34 0.37 0.45 0.56
First Citizens BancShares, Inc. and Subsidiaries First Quarter 1996 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 presented on pages 3 through 7 of this report. The focus of this discussion concerns BancShares' three banking subsidiaries, because BancShares itself made an insignificant contribution to the consolidated totals. First-Citizens Bank & Trust Company ("FCB") operates branches in North Carolina and Virginia, while Bank of Marlinton ("Marlinton") and Bank of White Sulphur Springs ("WSS") operate in West Virginia. Certain changes discussed herein result from various acquisitions. During the first quarter of 1996, BancShares acquired Allied Bank Capital, Inc. ("Allied") and its two banking subsidiaries, Summit Savings Bank of Sanford, North Carolina and Peoples Savings Bank of Wilmington, North Carolina. Allied had total assets of $249 million and total deposits of $208.4 million. The acquisition was accounted for as a purchase, with BancShares acquiring all of Allied's outstanding capital stock for a combination of its Class A common stock, cash and debentures. During the first quarter of 1995, BancShares completed three acquisitions. Pace American Bank, subsequently merged into FCB, was a $59 million state-chartered bank located in Lawrenceville, Virginia. BancShares later acquired Fayetteville, North Carolina-based State Bank, a $50 million bank, and Whiteville, North Carolina-based First Investors Savings Bank, which had $44 million in assets at the time of its acquisition. Both of these institutions were immediately merged with and into FCB. All of these acquisitions were recorded using the purchase method of accounting. Accordingly, results of operations from these merged entities have only been included after the date of purchase. SUMMARY BancShares realized an increase in earnings of 38.2 percent during the first quarter of 1996 compared to the first quarter of 1995. Consolidated net income during the first quarter of 1996 was $16.8 million, compared to $12.2 million earned during the corresponding period of 1995. The improved earnings resulted from higher net interest and noninterest income. Net income per share during the first quarter of 1996 totaled $1.52, compared to $1.17 during the first quarter of 1995. Return on average assets was 0.91 percent for the first quarter of 1996 compared to 0.78 percent during the same period of 1995. 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 Table 5. INTEREST-EARNING ASSETS Average interest-earning assets for the first quarter of 1996 totaled $6.78 billion, an increase of $1.06 billion or 18.6 percent from the first quarter of 1995. Most of this increase results from growth in the investment and loan portfolios. Loans. At March 31, 1996, and 1995, gross loans totaled $4.84 billion and $4.36 billion, respectively. As of December 31, 1995, gross loans were $4.58 billion. The $256.4 million increase from December 31, 1995 to March 31, 1996, is largely due to $205.1 million in acquired loans. The $474.1 million growth in loans from March 31, 1995 to March 31, 1996 results from acquisitions and growth within BancShares' commercial loan products during late 1995. Table 2 details outstanding loans by type for the past five quarters. During the first quarter of 1996, average total loans were $4.68 billion, an increase of $426.6 million or 10 percent from the comparable period of 1995. Consumer loans averaged $1.20 billion during the first quarter of 1996, compared to $1.15 billion during the same period of 1995, an increase of $57.8 million or 5 percent. Average loans secured by real estate increased $290.3 million between the two periods, an 11 percent increase. While some of this growth has resulted from acquisitions, loan demand within the branch network remains at modest levels. As of March 31, 1996, $21.3 million in fixed-rate residential mortgage loans are 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. Management's loan growth projections for 1996 are all dependent on interest rates, as any upward pressure on interest rates will likely deter retail borrowers and may also impair commercial loan growth. Investment securities. At March 31, 1996, and 1995, the investment portfolio totaled $2.01 billion and $1.32 billion, respectively. At December 31, 1995, the investment portfolio was $1.98 billion. The 51.5 percent increase in the investment portfolio in one year resulted from the liquidity generated by FCB's strong emphasis on retail relationship banking during 1995. This focus generated deposit growth that has in turn resulted in excess liquidity being invested in the investment securities portfolio. 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 $130.2 million during the first quarter of 1996, a 21.9 percent increase over the first quarter of 1995. Taxable equivalent interest income benefitted from favorable volume and yield variances, as balance sheet growth and higher interest rates both contributed to higher interest income in the first quarter of 1996 when compared to the same period of 1995. The average yield on total interest-earning assets for the first quarter of 1996 was 7.71 percent, compared to 7.53 percent for the corresponding period of 1995, an 18 basis point improvement resulting from higher yields on interest-earning assets. Taxable equivalent loan interest income for the first quarter of 1996 was $100.7 million, an increase of $10.6 million or 11.7 percent from first quarter of 1995, primarily due to growth in the loan portfolio. The taxable equivalent yield on the loan portfolio was 8.63 percent during the first quarter of 1996, compared to 8.53 percent during the same period of 1995. Taxable equivalent income earned on the investment securities portfolio amounted to $27.9 million during the first quarter of 1996 and $15.5 million during the same period of 1995, an increase of $12.4 million or 80.6 percent resulting from an average portfolio increase of $603.6 million. Additionally, the securities portfolio experienced a 112 basis point increase in the taxable equivalent yield, increasing from 4.54 percent for the quarter ended March 31, 1995, to 5.66 percent for the quarter ended March 31, 1996. INTEREST-BEARING LIABILITIES. At March 31, 1996 and 1995, interest-bearing liabilities totaled $6.13 billion and $5.14 billion, respectively, compared to $5.84 billion as of December 31, 1995. Average interest-bearing liabilities for the first quarter of 1996 totaled $5.93 billion, an increase of 18.5 percent from the first quarter of 1995. Interest-bearing deposits account for much of the growth, with balances increasing from acquisitions as well as an expanding deposit base among existing customers. Deposits. At March 31, 1996, total deposits were $6.74 billion, an increase of $1.02 billion or 17.8 percent over March 31, 1995. Compared to the December 31, 1995 balance of $6.39 billion, total deposits have increased $355.8 million. Acquisitions during 1996 have generated $209 million in deposit liabilities. The remaining increase in deposits since December 31, 1995 has resulted from growth generated within the existing branch network. Average interest-bearing deposits were $5.57 billion during the first quarter of 1996 compared to $4.74 billion during the first quarter of 1995, an increase of 17.7 percent. Much of the increase is attributed to average time deposits, which increased $682.5 million from the first quarter of 1995 to the first quarter of 1996. Average Checking With Interest accounts increased $68.2 million from the first quarter of 1995 to the first quarter of 1996, while average money market accounts increased $59.9 million between the two periods. Time deposits of $100,000 or more averaged 9.6 percent of total average deposits during the first quarter of 1996, compared to 7.3 percent during the same period of 1995. Although this represents a greater reliance of funds typically viewed as volatile, management does not consider the current level as excessive. Borrowed Funds. At March 31, 1996, short-term borrowings totaled $326.8 million compared to $376.5 million at December 31, 1995 and $251.3 million at March 31, 1995. For the quarters ended March 31, 1996 and 1995, short-term borrowings averaged $338.9 million and $241.7 million, respectively. The increase is largely due to a $69 million increase in average Master Note borrowings and a $32.1 million increase in average federal funds purchased, all of which are overnight borrowings. Long-term obligations averaged $23.8 million during the first quarter of 1996, compared to $32.6 million during the first quarter of 1995. The 27 percent reduction results from the Bank's repayment of Federal Home Loan Bank borrowings. Expense on Interest-Bearing Liabilities. BancShares' interest expense amounted to $62.4 million during the first quarter of 1996, an $16.1 million or 34.8 percent increase from the first quarter of 1995. The higher interest expense resulted from the $924.9 million increase in average interest-bearing liabilities and a 48 basis point increase in the aggregate rate on interest bearing liabilities. The rate on these liabilities was 4.23 percent during the first quarter of 1996, compared to 3.75 percent during the first quarter of 1995. NET INTEREST INCOME Taxable equivalent net interest income totaled $67.7 million during the first quarter of 1996, an increase of 12 percent from the first quarter of 1995. The average net yield on interest-earning assets was 4.02 percent for the first quarter of 1996, 27 basis points below the net yield recorded during the first quarter of 1995. The taxable equivalent interest rate spread for the first quarter of 1996 was 3.48 compared to 3.78 percent for the same period of 1995. The lower net yield and interest rate spreads resulted from a quicker increase in interest rates paid on interest-bearing liabilities than was earned from higher yields on interest-earning assets. Continued upward pressure on deposit interest rates may result in further reduction in the net yield. 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. Such factors as the financial condition of the borrower, fair market value of collateral and other considerations are recognized in estimating possible credit losses. At March 31, 1996, the reserve for loan losses amounted to $80.4 million or 1.66 percent of loans outstanding. This compares to $78.5 million or 1.71 percent at December 31, 1995, and $73.9 million or 1.69 percent at March 31, 1995. Management considers the established reserve adequate to absorb losses that relate to loans outstanding at March 31, 1996. 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 or other factors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the reserve for loan losses. Such agencies may require the recognition of additions to the reserve based on their judgments of information available to them at the time of their examination. The provision for loan losses charged to operations during the first quarter of 1996 was $1.5 million, compared to $534,000 during the first quarter of 1995. Net charge-offs for the quarter ended March 31, 1996 totalled $993,000, compared to net recoveries of $74,000 during the same period of 1995. The net recoveries recorded during the first quarter of 1995 resulted from non-recurring commercial recoveries. Table 5 provides details concerning the reserve and provision for loan losses over the past five quarters. Nonperforming assets. At March 31, 1996, BancShares' nonperforming assets amounted to $16 million or 0.33 percent of gross loans plus foreclosed properties, compared to $15.4 million at December 31, 1995, and $24.2 million at March 31, 1995. Management continues to closely monitor nonperforming assets, taking necessary actions to minimize potential exposure. NONINTEREST INCOME Noninterest income increased 10.3 percent during the first quarter of 1996 to $23.9 million. This compares to $21.7 million for the first quarter of 1995. Service charges remain the principal source of noninterest income, representing $10 million during the first quarter of 1996 and $9.4 million during the same period of 1995. The 6.7 percent increase results from growth in the number of accounts. Other service charges and fees contributed $5.8 million during the first quarter of 1996, compared to $4.9 million during the same period of 1995. This 18.2 percent increase between the two periods resulted from earnings generated by services provided to affiliate banks as well as higher fee income generated by First Citizens Investor Services. Credit card income amounted to $3.3 million, an increase of 14.7 percent over 1995 due to higher merchant income. Other income increased 11.6 percent, primarily due gains recognized on the sale of mortgage loans during the first quarter . NONINTEREST EXPENSE Noninterest expense for the first quarter of 1996 amounted to $63.3 million. This was a 1.5 percent increase over the first quarter of 1995. Salaries and wages increased 6 percent between the periods, primarily the result of merit raises. Occupancy expense increased 7.9 percent during the first quarter of 1996, compared to the corresponding period of 1995 due to increased depreciation expense resulting from new and renovated branch facilities. Other expenses decreased by $1.2 million or 5.9 percent. Contributing to this decrease were a $2 million reduction in deposit insurance, the result of lower rates. This reduction was partially offset by higher intangible amortization expense, the result of the Allied acquisition. INCOME TAXES Income tax expense amounted to $9.4 million during the first quarter of 1996, compared to $6.5 million during the first quarter of 1995, a 44.2 percent increase due to higher pre-tax income. The effective tax rates for these periods were 35.8 percent and 34.8 percent, respectively. The increase in the effective tax rate from 1995 to 1996 results from an increase in nondeductible goodwill amortization and higher North Carolina state income tax expense. 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 branch network has enabled management to fund asset growth and maintain liquidity. These sources have allowed limited dependence on short-term borrowed funds for liquidity or for asset expansion. In the event additional liquidity is needed, BancShares does maintain readily available sources to borrow funds as needed through its correspondent network. SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY BancShares maintains an adequate capital position and exceeds all minimum regulatory capital requirements. At March 31, 1996, and 1995, the leverage capital ratio of BancShares was 6.2 percent and 6.5 percent, respectively, surpassing the minimum level of 3 percent. As a percentage of risk-adjusted assets, BancShares' core capital ratio was 9.7 percent at March 31, 1996, and 1995. The minimum ratio allowed is 4 percent of risk-adjusted assets. The total risk-adjusted capital ratio was 11 percent for both periods, above the minimum 8 percent level. CURRENT ACCOUNTING AND REGULATORY ISSUES The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for Impairment of Long-Lived Assets to be Disposed Of ("Statement 121"), which BancShares was required to adopt for 1996. Statement 121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for those to be disposed of. Adoption of Statement 121 should not have a material effect on BancShares' consolidated financial statements currently, although events or changes in circumstances in future periods could require a review by management for impairment. Such a review could result in an adjustment to recorded asset values. SFAS No. 122, Accounting for Mortgage Servicing Rights, an amendment of SFAS No. 65 ("Statement 122"), became effective for BancShares during 1996. Statement 122 requires an entity engaging in mortgage banking activities to record assets to reflect the value of rights to service mortgage loans for others. Statement 122 also requires the periodic assessment of capitalized mortgage servicing rights for impairment based on the fair values of those rights. The adoption of Statement 122 should not have a material effect on BancShares' consolidated financial statements currently, although changes in market conditions could result in an increase in mortgage banking activities or the recognition of impaired asset values. SFAS No. 123, Accounting for Stock-Based Compensation ("Statement 123") became effective during 1996. Statement 123 provides an alternative treatment for the previously-recognized treatment for stock compensation set forth in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"). The adoption of Statement 123 will not effect BancShares' consolidated financial statements currently, as no stock-based compensation plans are envisioned during 1996. Should any such plans be adopted in the future, BancShares has elected to continue to measure compensation cost using APB 25. Therefore, as required by Statement 123, BancShares would make supplemental disclosures showing the financial impact that would result if the accounting treatment outlined in Statement 123 had been applied. Various proposals have been considered by the United States Congress concerning a possible merger of the FDIC's Bank Insurance Fund ("BIF") and Savings Association Insurance Fund ("SAIF"). Central to that discussion is the recapitalization of the SAIF prior to such a merger, and most of the proposals that have been offered contemplate a special one-time assessment of SAIF-insured deposits. At this time, it is unclear if there will be a special assessment, at what rate an assessment will be made, and upon what date the assessment will be effective. However, the earlier proposals suggested an assessment rate of 85 basis points be applied to total SAIF-insured deposits. As of March 31, 1996, BancShares had total SAIF-insured deposits of $2.07 billion. Other than the SAIF assessment under consideration, management is not aware of any current recommendations by the regulatory authorities that, if implemented, would have or would be reasonably likely to have a material effect on liquidity, capital ratios or results of operations. EX-27 2 EXHIBIT 27
5 1,000 3-MOS DEC-31-1996 MAR-31-1996 428,612 2,005,645 2,259 80,433 0 2,434,257 328,146 114,314 7,736,162 6,743,913 0 0 0 11,428 558,830 7,736,162 129,568 153,453 0 0 63,285 1,544 62,424 26,200 9,374 16,826 0 0 0 16,826 1.52 1.52
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