-----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, L/VcaZvYtG3DgvS+nEAW7oeTuPKKpZCdPdq37K+8KjpRk2g+6pHIYFbPPI2omreX Wpg0CqkZn+868Hu9LN9IOA== 0000798941-96-000009.txt : 19961118 0000798941-96-000009.hdr.sgml : 19961118 ACCESSION NUMBER: 0000798941-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96666772 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 September 30, 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-- 9,651,900 shares Class B Common Stock--$1 Par Value-- 1,759,329 shares (Number of shares outstanding, by class, as of November 13, 1996) INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at September 30, 1996, December 31, 1995, and September 30, 1995 Consolidated Statements of Income for the nine-month periods ended September 30, 1996, and September 30, 1995, Consolidated Statements of Changes in Shareholders' Equity for the nine-month periods ended September 30, 1996, and September 30, 1995 Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 1996, and September 30, 1995 Note to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition 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 September 30, 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: November 13, 1996 By: Kenneth A. Black Vice President, Treasurer, and Chief Financial Officer First Citizens BancShares, Inc and Subsidiaries Third Quarter 1996 Consolidated Balance Sheets First Citizens BancShares, Inc. and Subsidiaries
September 30 December 31 September 30 (thousands,except share data) 1996 1995 1995 (unaudited) (unaudited) Assets Cash and due from banks $422,343 $448,630 $483,627 Investment securities 1,912,448 1,983,148 1,744,233 Federal funds sold 203,600 40,445 77,740 Loans 4,914,748 4,580,719 4,540,056 Less reserve for loan losses 81,192 78,495 77,986 Net loans 4,833,556 4,502,224 4,462,070 Premises and equipment 222,118 208,240 206,349 Income earned not collected 56,942 58,237 54,188 Other assets 175,111 143,026 140,565 Total assets $7,826,118 $7,383,950 $7,168,772 Liabilities Deposits: Noninterest-bearing $1,084,166 $943,445 $945,885 Interest-bearing 5,724,199 5,444,637 5,282,079 Total deposits 6,808,365 6,388,082 6,227,964 Short-term borrowings 332,448 376,531 343,101 Long-term obligations 6,715 22,957 23,593 Other liabilities 85,626 75,543 68,240 Total liabilities 7,233,154 6,863,113 6,662,898 Shareholders' Equity Common stock: Class A - $1 par value (9,668,576; 8,949,703; and 8,923,855 shares issued, respectively) 9,669 8,950 8,924 Class B - $1 par value (1,759,404; 1,766,464; and 1,766,464 shares issued, respectively) 1,759 1,766 1,767 Surplus 143,753 106,954 105,797 Retained earnings 437,783 403,167 389,386 Total shareholders'equity 592,964 520,837 505,874 Total liabilities and shareholders' equity $7,826,118 $7,383,950 $7,168,772 See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc and Subsidiaries Third Quarter 1996 Consolidated Statements of Income First Citizens BancShares, Inc. and Subsidiaries
Three Months Ended Nine Months Ended September 30 September 30 (thousands, except per share data, unaudited) 1996 1995 1996 1995 Interest income Loans $104,013 $97,380 $306,779 $282,688 Investment securities: U. S. Government 27,902 22,052 84,184 55,567 State, county and municipal 78 108 252 302 Other 43 48 131 141 Total investment securities income 28,023 22,208 84,567 56,010 Federal funds sold 2,234 2,646 5,194 6,039 Total interest income 134,270 122,234 396,540 344,737 Interest expense Deposits 57,090 55,155 172,712 149,463 Short-term borrowings 4,130 4,287 11,761 10,956 Long-term obligations 158 416 813 1,277 Total interest expense 61,378 59,858 185,286 161,696 Net interest income 72,892 62,376 211,254 183,041 Provision for loan losses 1,787 1,716 5,586 3,710 Net interest income after provision for loan 71,105 60,660 205,668 179,331 Noninterest income Trust income 2,269 2,178 6,792 6,656 Service charges on deposit accounts 10,072 10,249 30,497 29,648 Credit card income 4,505 3,773 11,652 9,840 Other service charges and fees 6,120 5,328 17,728 15,518 Other 3,111 2,032 8,553 6,610 Total other income 26,077 23,560 75,222 68,272 97,182 84,220 280,890 247,603 Noninterest expense Salaries and wages 29,203 26,578 86,186 79,491 Pension and other employee benefits 5,239 4,040 15,181 13,124 Occupancy expense 5,600 5,224 16,411 15,235 Equipment expense 6,881 6,286 19,699 18,576 Other 31,174 17,588 72,168 58,529 Total other expense 78,097 59,716 209,645 184,955 Income before income taxes 19,085 24,504 71,245 62,648 Income taxes 6,647 8,686 25,596 22,028 Net income $12,438 $15,818 $45,649 $40,620 Per Share Net income $1.08 $1.49 $4.03 $3.85 Cash dividends 0.225 0.20 0.675 0.60 See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries Third 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 39,412 shares of Class A common stock pursuant to the Employee Stock Purchase Plan 39 1,508 1,547 Issuance of 6,839 shares of Class A common stock pursuant to the Dividend Reinvestment Plan 7 298 305 Issuance of 484,821 shares of Class A common stock in connection with various acquisitions 485 21,360 21,845 Redemption of 26,606 shares of Class A common stock and 2,987 shares of Class B common stock (26) (3) (1,421) (1,450) Net income 40,620 40,620 Cash dividends (6,404) (6,404) Balance at September 30, 1995 $8,924 $1,767 $105,797 $389,386 $505,874 Balance at December 31, 1995 $8,950 $1,766 $106,954 $403,167 $520,837 Issuance of 87,992 shares of Class A common stock pursuant to the Employee Stock Purchase Plan 87 3,951 4,038 Issuance of 8,746 shares of Class A common stock pursuant to the Dividend Reinvestment Plan 9 114 123 Issuance of 668,654 shares of Class A common stock in connection with various acquisitions 669 32,734 33,403 Redemption of 46,520 shares of Class A common stock and 7,060 shares of Class B common stock (46) (7) (3,321) (3,374) Net income 45,649 45,649 Cash dividends (7,712) (7,712) Balance at September 30, 1996 $9,669 $1,759 $143,753 $437,783 $592,964 See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries Third Quarter 1996 Consolidated Statements of Cash Flows First Citizens BancShares, Inc. and Subsidiaries
Nine Months Ended September 30 (thousands, unaudited) 1996 1995 Operating Activities Net income $45,649 $40,620 Adjustments: Amortization of intangibles 6,032 4,235 Provision for loan losses 5,586 3,710 Deferred tax (benefit) expense (1,966) (21) Change in current taxes payable 874 4,298 Depreciation 12,700 12,619 Change in accrued interest payable (3,815) 18,843 Change in income earned not collected 2,371 (7,697) Origination of loans held for sale (124,649) (28,771) Proceeds from sale of loans 77,465 24,095 Loss (gain) on sale of mortgage loans 69 (431) Net amortization of premiums and discounts 9,705 14,873 Net change in other assets (3,442) (11,536) Net change in other liabilities 6,556 3,271 Net cash provided by operating activities 33,135 78,108 Investing Activities Net increase in loans outstanding (86,055) (217,425) Purchases of investment securities (624,374) (883,303) Proceeds from maturities of investment securities 703,613 624,929 Net change in federal funds sold (163,155) (62,318) Dispositions of premises and equipment 4,263 2,940 Additions to premises and equipment (28,854) (24,488) Purchase of institutions, net of cash acquired 7,584 106,092 Net cash used by investing activities (186,978) (453,573) Financing Activities Net change in time deposits 44,550 461,154 Net change in demand and other interest-bearing deposits 167,339 (88,832) Net change in short-term borrowings (77,408) 37,198 Repurchases of common stock (3,374) (1,450) Proceeds from issuance of stock 4,161 1,716 Cash dividends paid (7,712) (6,404) Net cash provided by financing activities 127,556 403,382 Change in cash and due from banks (26,287) 27,917 Cash and due from banks at beginning of period 448,630 455,710 Cash and due from banks at end of period $422,343 $483,627 Cash payments for: Interest $189,101 $142,853 Income taxes 27,569 20,115 Supplemental disclosure of noncash investing and financing activities: Common stock issued for acquisitions $33,403 $21,981 Long-term obligations issued for acquisitions 1,468 2,494 See accompanying Note to Consolidated Financial Statements
First Citizens BancShares, Inc. and Subsidiaries Third 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 Nine Months Ended Third Second First Fourth Third September 30 (thousands, except per share data and ratios) Quarter Quarter Quarter Quarter Quarter 1996 1995 Summary of Operations Interest Income $134,270 $132,702 $129,568 $123,372 $122,234 $396,540 $344,737 Interest income - taxable equivalent 134,837 133,283 130,159 126,950 122,801 398,279 346,420 Interest expense 61,378 61,484 62,424 62,968 59,858 185,286 161,696 Net interest income-taxable equivalent 73,459 71,799 67,735 63,982 62,943 212,993 184,724 Taxable equivalent adjustment 567 581 591 578 567 1,739 1,683 Net interest income 72,892 71,218 67,144 63,404 62,376 211,254 183,041 Provision for loan losses 1,787 2,255 1,544 1,654 1,716 5,586 3,710 Net interest income after provision for loan losses 71,105 68,963 65,600 61,750 60,660 205,668 179,331 Other income 26,077 25,260 23,885 23,856 23,560 75,222 68,272 Other expense 78,097 68,263 63,285 60,925 59,716 209,645 184,955 Income before income taxes 19,085 25,960 26,200 24,681 24,504 71,245 62,648 Income taxes 6,647 9,575 9,374 8,395 8,686 25,596 22,028 Net income $12,438 $16,385 $16,826 $16,286 $15,818 $45,649 $40,620 Selected Average Balances Total assets $7,670,538 $7,658,682 $7,462,756 $7,280,893 $7,053,579 $7,595,760 $6,700,778 Investment securities 1,919,935 1,990,346 1,984,027 1,871,272 1,694,776 1,964,606 1,524,023 Loans 4,907,435 4,884,818 4,679,692 4,552,018 4,500,192 4,824,286 4,393,583 Interest-earning assets 6,989,109 6,975,341 6,779,461 6,599,377 6,376,273 6,913,094 6,053,942 Deposits 6,641,427 6,660,204 6,477,795 6,282,111 6,124,360 6,593,327 5,840,928 Interest-bearing liabilities 6,017,476 6,043,119 5,934,180 5,753,538 5,569,496 5,997,428 5,294,890 Long-term obligations 7,762 15,676 23,763 23,365 24,595 15,705 27,298 Shareholders' equity $589,618 $576,742 $546,603 $512,768 $498,108 $569,400 $479,744 Shares outstanding 11,441,007 11,432,661 11,072,395 10,700,435 10,688,019 11,315,813 10,562,232 Profitability Ratios (averages) Rate of return (annualized) on: Total assets 0.65% 0.86% 0.91% 0.89% 0.89% 0.80% 0.81% Shareholders' equity 8.39 11.43 12.38 12.60 12.60 10.71 11.32 Dividend payout ratio 19.57 15.73 14.80 14.80 13.42 16.75 15.58 Liquidity and Capital Ratios (averages) Loans to deposits 73.89% 73.34% 72.24% 72.46% 73.48% 73.17% 75.22% Shareholders' equity to total assets 7.69 7.53 7.32 7.04 7.06 7.50 7.16 Time certificates of $100,000 or more to total deposits 8.56 9.23 9.59 9.27 8.61 9.03 8.00 Per Share of Stock Net income $1.15 $1.43 $1.52 $1.52 $1.49 $4.03 $3.85 Cash dividends 0.225 0.225 0.225 0.225 0.20 0.675 0.60 Book Value at period end 51.89 51.03 50.19 48.60 47.32 51.89 47.32 Tangible book value at period end 43.03 42.19 41.13 41.75 40.32 43.03 40.32
First Citizens BancShares, Inc. and Subsidiaries Third 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 Third Quarter 1996 Outstanding Loans by Type
Table 3 1996 1995 Third Second First Fourth Third (thousands) Quarter Quarter Quarter Quarter Quarter Real estate: Construction and land development $107,651 $110,162 $110,520 $104,540 $109,597 Mortgage: 1-4 family residential 1,587,352 1,615,712 1,604,954 1,438,655 1,456,076 Commercial 850,358 833,733 799,800 770,246 744,811 Equity Line 411,893 409,121 401,501 397,225 394,088 Other 135,241 137,463 134,128 129,292 130,952 Commercial and industrial 516,857 506,913 483,245 466,462 455,781 Consumer 1,218,605 1,223,871 1,222,243 1,199,400 1,173,740 Lease financing 69,984 67,647 63,943 59,899 58,013 Other 16,807 17,152 16,739 15,000 16,998 Total loans 4,914,748 4,921,774 4,837,073 4,580,719 4,540,056 Less reserve for loan losses 81,192 81,026 80,433 78,495 77,986 Net loans $4,833,556 $4,840,748 $4,756,640 $4,502,224 $4,462,070
First Citizens BancShares, Inc. and Subsidiaries Third Quarter 1996 Investment Securities
Table 4 September 30, 1996 September 30, 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 $749,731 $750,814 0/6 5.97% $950,133 $947,448 0/6 4.86% One to five years 1,142,458 1,133,318 1/9 5.78 773,616 774,519 1/8 6.01 Five to ten years 3,251 2,175 6/10 5.76 2,403 2,330 7/8 5.95 Over ten years 7,733 7,752 18/7 7.43 6,736 6,718 19/3 7.24 Total 1,903,173 1,894,059 1/4 5.85 1,732,888 1,731,015 1/2 5.39 State, county and municipal: Within one year 777 781 0/9 6.32 1,326 1,333 0/6 7.27 One to five years 4,067 4,332 2/11 6.95 4,058 4,109 2/7 6.67 Five to ten years 1,271 1,293 5/1 6.29 2,776 2,868 5/8 7.35 Over ten years 185 185 20/11 9.14 195 195 12/11 9.00 Total 6,300 6,591 3/9 6.99 8,355 8,505 3/11 7.05 Other: Within one year 1,553 1,552 0/6 6.48 One to five years 1,377 1,631 1/10 11.08 2,935 2,905 2/8 8.63 Five to ten years 45 45 5/8 5.43 55 55 6/5 8.00 Total 2,975 2,958 11/9 8.62 2,990 2,960 2/2 8.62 Total investment securities $1,912,448 $1,903,608 1/4 5.97% $1,744,233 $1,742,480 1/2 5.40%
First Citizens BancShares, Inc. and Subsidiaries Third Quarter 1996 Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Second Quarter
Table 5 1996 1995 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 $3,089,270 $63,442 8.17% $2,795,987 $59,992 8.47% $5,901 ($2,451) $3,450 Commercial and industrial 513,849 11,616 8.56 462,375 10,821 9.26 1,403 (608) 795 Consumer 1,218,164 27,734 9.00 1,166,488 25,494 8.73 1,290 950 2,240 Lease financing 69,089 1,393 8.07 57,906 1,117 7.58 208 68 276 Other 17,063 352 8.19 17,436 464 8.46 (54) (58) (112) Total loans 4,907,435 104,537 8.43 4,500,192 97,888 8.64 8,748 (2,099) 6,649 Investment securities: U. S. Government 1,910,705 27,902 5.81 1,683,096 22,052 5.20 3,122 2,728 5,850 State, county and municipal 6,253 121 7.70 8,688 168 7.67 (47) 0 (47) Mortgage-backed 2,977 43 5.75 2,992 47 6.23 0 (4) (4) Total investment securities 1,919,935 28,066 5.82 1,694,776 22,267 5.21 3,075 2,724 5,799 Federal funds sold 161,739 2,234 5.49 181,305 2,646 5.79 (280) (132) (412) Total interest-earning assets $6,989,109 $134,837 7.64% $6,376,273 $122,801 7.65% $11,543 $493 $12,036 Liabilities Deposits: Checking With Interest $867,218 $2,549 1.17% $825,813 $3,324 1.60% $142 ($917) ($775) Savings 724,255 3,769 2.07 705,058 4,045 2.28 103 (379) (276) Money market accounts 821,078 7,371 3.57 737,178 6,058 3.26 713 600 1,313 Time deposits 3,246,938 43,401 5.32 2,937,613 41,728 5.64 4,211 (2,538) 1,673 Total interest-bearing deposits 5,659,489 57,090 4.01 5,205,662 55,155 4.20 5,169 (3,234) 1,935 Federal funds purchased 14,534 273 7.47 65,637 955 5.77 (852) 170 (682) Repurchase agreements 20,933 227 4.31 22,021 264 4.76 (13) (24) (37) Master notes 280,947 3,142 4.45 216,337 2,610 4.79 747 (215) 532 U. S. Treasury tax and loan account 17,117 219 5.09 18,831 262 5.52 (23) 0 (43) Other short-term borrowings 16,694 269 6.41 16,413 197 4.76 4 68 72 Long-term obligations 7,762 158 8.10 24,595 415 6.69 (314) 57 (257) Total interest-bearing liabilities $6,017,476 $61,378 4.06% $5,569,496 $59,858 4.26% $4,718 ($3,198) $1,520 Interest rate spread 3.58% 3.39% Net interest income and net yield on interest-earning assets $73,459 4.18% $62,943 3.92% $6,825 $3,691 $10,516
First Citizens BancShares, Inc. and Subsidiaries Third Quarter 1996 Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Nine Months
Table 6 1996 1995 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 $3,032,058 $187,243 8.17% $2,727,870 $172,573 8.44% $19,702 ($5,032) $14,670 Commercial and industrial 496,365 33,706 8.56 430,158 30,128 9.33 5,341 (1,763) 3,578 Consumer 1,213,816 82,514 9.00 1,159,949 77,099 8.87 3,934 1,481 5,415 Lease financing 65,337 3,906 8.07 58,424 3,322 7.58 381 203 584 Other 16,710 1,013 8.19 17,182 1,087 8.46 (35) (39) (74) Total loans 4,824,286 308,382 8.53 4,393,583 284,209 8.62 29,323 (5,150) 24,173 Investment securities: U. S. Government 1,954,881 84,184 5.75 1,513,309 55,567 4.91 17,666 10,951 28,617 State, county and municipal 6,748 388 7.68 7,951 465 7.82 (70) (7) (77) Mortgage-backed 2,977 131 5.88 2,763 140 6.77 10 (19) (9) Total investment securities 1,964,606 84,703 5.76 1,524,023 56,172 4.93 17,606 10,925 28,531 Federal funds sold 124,202 5,194 5.59 136,336 6,039 5.92 (523) (322) (845) Total interest-earning assets $6,913,094 $398,279 7.69% $6,053,942 $346,420 7.63% $46,406 $5,453 $51,859 Liabilities Deposits: Checking With Interest $865,771 $8,207 1.27% $804,391 $10,213 1.70% $682 ($2,688) ($2,006) Savings 719,184 11,309 2.10 690,376 11,698 2.27 490 (879) (389) Money market accounts 814,794 21,524 3.53 734,353 18,081 3.29 2,052 1,391 3,443 Time deposits 3,247,178 131,672 5.42 2,752,719 109,471 5.32 19,917 2,284 22,201 Total interest-bearing deposits 5,646,927 172,712 4.09 4,981,839 149,463 4.01 23,141 108 23,249 Federal funds purchased 28,015 1,357 6.47 39,369 1,721 5.84 (523) 159 (364) Repurchase agreements 21,424 697 4.35 22,928 846 4.93 (52) (97) (149) Master notes 257,752 8,547 4.43 191,723 7,134 4.97 2,322 (909) 1,413 U. S. Treasury tax and loan account 14,814 574 5.18 17,468 752 5.76 (108) (70) (178) Other short-term borrowings 12,791 586 6.12 14,265 504 4.72 (60) 142 82 Long-term obligations 15,705 813 6.91 27,298 1,276 6.25 (570) 107 (463) Total interest-bearing liabilities $5,997,428 $185,286 4.13% $5,294,890 $161,696 4.08% $24,150 ($560) $23,590 Interest rate spread 3.56% 3.55% Net interest income and net yield on interest-earning assets $212,993 4.12% $184,724 4.08% $22,256 $6,013 $28,269
First Citizens BancShares, Inc. and Subsidiaries Third Quarter 1996 Summary of Loan Loss Experience and Risk Elements
Table 7 1996 1995 Nine Months Ended Third Second First Fourth Third September 30 Quarter Quarter Quarter Quarter Quarter 1996 1995 (thousands, except ratios) Reserve balance at beginning of period $81,026 $80,433 $78,495 $77,965 $76,887 $78,495 $72,017 Reserve of acquired institution - - 1,387 - (6) 1,387 3,252 Provision for loan losses 1,787 2,255 1,544 1,654 1,716 5,586 3,710 Net charge-offs: Charge-offs (2,697) (2,663) (2,433) (2,575) (1,783) (7,793) (4,687) Recoveries 1,076 1,001 1,440 1,451 1,172 3,517 3,694 Net (charge-offs) recoveries (1,621) (1,662) (993) (1,124) (611) (4,276) (993) Reserve balance at end of period $81,192 $81,026 $80,433 $78,495 $77,986 $81,192 $77,986 Historical Statistics Balances Average total loans $4,907,435 $4,884,818 $4,679,692 $4,433,517 $4,500,192 $4,824,286 $4,393,583 Total loans at period-end 4,914,748 4,921,774 4,837,073 4,580,719 4,540,056 4,914,748 4,540,056 Risk Elements Nonaccrual loans $14,213 $14,695 $13,489 $13,208 $14,296 $14,213 $14,296 Other real estate acquired through foreclosure 1,634 1,436 2,555 2,154 2,739 1,634 2,739 Total nonperforming assets $15,847 $16,131 $16,044 $15,362 $17,035 $15,847 $17,035 Accruing loans 90 days or more past due $5,601 $4,928 $5,300 $4,230 $4,874 $5,601 $4,874 Ratios Net charge-offs (annualized) to average total loans 0.13% 0.14% 0.09% 0.10% 0.05% 0.12% 0.03% Reserve for loan losses to total loans at period-end 1.65 1.65 1.66 1.71 1.72 1.65 1.72 Nonperforming assets to total loans plus foreclosed real estate at period-end 0.32 0.33 0.33 0.34 0.37 0.32 0.37
First Citizens BancShares, Inc. ans Subsidiaries Third 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 note presented within 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 in exchange for a combination of its Class A common stock, cash and debentures. During the first nine months of 1995, BancShares completed four 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. BancShares also acquired WSS, which had assets of $64.6 million and deposits of $59.2 million at the time of its acquisition. 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 a decrease in earnings of 21.4 percent during the third quarter of 1996 compared to the third quarter of 1995. Consolidated net income during the third quarter of 1996 was $12.4 million, compared to $15.8 million earned during the corresponding period of 1995. The lower earnings were due to a one-time deposit insurance assessment. Net income per share during the third quarter of 1996 totaled $1.08, compared to $1.49 during the third quarter of 1995. Return on average assets was 0.65 percent for the third quarter of 1996 compared to 0.89 percent during the same period of 1995. For the first nine months of 1996, BancShares recorded net income of $44.5 million , compared to $40.6 million earned during the first nine months of 1995. The 12.4 percent increase was the net result of beneficial increases in net interest income and noninterest income that more than offset the impact of the special assessment. Net income per share for the first nine months of 1996 was $4.03, compared to $3.85 during the same period of 1995. BancShares returned 0.80 percent on average assets during the first nine months of 1996 compared to 0.81 percent during the corresponding 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 balance sheets presented in Table 5 for the third quarter and Table 6 for the first nine months of 1996 and 1995. INTEREST-EARNING ASSETS Average interest-earning assets for the third quarter of 1996 totaled $6.99 billion, an increase of $612.8 million or 9.6 percent from the third quarter of 1995. For the first nine months of 1996, earning assets have averaged $6.91 billion, an increase of $859.2 million over the same period of 1995. These increases result from growth in the investment and loan portfolios, growth resulting in part from the various acquisitions. Loans. At September 30, 1996 and 1995, gross loans totaled $4.91 billion and $4.54 billion, respectively. As of December 31, 1995, gross loans were $4.58 billion. The $334 million increase from December 31, 1995 to September 30, 1996, is partially due to $205.1 million in acquired loans. The $374.7 million growth in loans from September 30, 1995 to September 30, 1996 results from acquisitions and growth within BancShares' commercial loan products during late 1995. Table 3 details outstanding loans by type for the past five quarters. During the third quarter of 1996, average loans totaled $4.91 billion, an increase of $407.2 million or 9 percent from the comparable period of 1995. Consumer loans averaged $1.22 billion during the third quarter of 1996, compared to $1.17 billion during the same period of 1995, an increase of $51.7 million or 4.4 percent. Average loans secured by real estate increased $293.3 million between the two periods, a 10.5 percent increase. This growth has resulted from both acquisitions and continuing loan demand within the existing branch network. As of September 30, 1996, $62.5 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. Management's loan growth projections for 1996 remain dependent on interest rates, as any upward pressure on interest rates will likely deter retail borrowers and may also impair commercial loan growth. Stability of market rates should allow continued modest expansion within the loan portfolio. Investment securities. At September 30, 1996, and 1995, the investment portfolio totaled $1.91 billion and $1.74 billion, respectively. At December 31, 1995, the investment portfolio was $1.98 billion. The 9.6 percent increase in the investment portfolio since September 30, 1995 resulted from the liquidity generated by FCB's continued emphasis on retail relationship banking. 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 $134.8 million during the third quarter of 1996, a 9.8 percent increase over the third quarter of 1995. Balance sheet growth contributed to higher taxable-equivalent interest income in the third quarter of 1996 when compared to the same period of 1995. The average yield on total interest-earning assets for the third quarter of 1996 was 7.64 percent, compared to 7.65 percent for the corresponding period of 1995. Taxable equivalent loan interest income for the third quarter of 1996 was $104.5 million, an increase of $6.6 million or 6.8 percent from the third quarter of 1995, due to growth in the loan portfolio. The taxable equivalent yield on the loan portfolio was 8.43 percent during the third quarter of 1996, compared to 8.64 percent during the same period of 1995. Lower market rates during 1996 have resulted in lower loan yields. Taxable equivalent income earned on the investment securities portfolio amounted to $28.1 million during the third quarter of 1996 and $22.3 million during the same period of 1995, an increase of $5.8 million or 26 percent. This increase is the combined result of a $225.2 million increase in the average securities portfolio and a 61 basis point increase in the taxable equivalent yield. The securities portfolio taxable-equivalent yield increased from 5.21 percent for the quarter ended September 30, 1995, to 5.82 percent for the quarter ended September 30, 1996. INTEREST-BEARING LIABILITIES At September 30, 1996 and 1995, interest-bearing liabilities totaled $6.06 billion and $5.65 billion, respectively, compared to $5.84 billion as of December 31, 1995. During the third quarter of 1996, interest-bearing liabilities averaged $6.02 billion, an increase of 8 percent from the third quarter of 1995. Interest-bearing deposits account for much of the growth, with balances increasing from acquisitions as well as new deposits from existing customers. Deposits. At September 30, 1996, total deposits were $6.81 billion, an increase of $580.4 million or 9.3 percent over September 30, 1995. Compared to the December 31, 1995 balance of $6.39 billion, total deposits have increased $420.3 million. Acquisitions during 1996 have generated $208.4 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 $5.66 billion during the third quarter of 1996 compared to $5.2 billion during the third quarter of 1995, an increase of 8.7 percent. Much of the increase is attributed to average time deposits, which increased $309.3 million from the third quarter of 1995 to the third quarter of 1996. Average money market accounts increased $83.9 million from the third quarter of 1995 to the third quarter of 1996, while average Checking With Interest accounts increased $41.4 million between the two periods. Time deposits of $100,000 or more averaged 8.56 percent of total average deposits during the third quarter of 1996, compared to 8.61 percent during the same period of 1995. Management does not consider the current level of high dollar deposits to be excessive. Borrowed Funds. At September 30, 1996, short-term borrowings totaled $332.4 million compared to $376.5 million at December 31, 1995 and $343.1 million at September 30, 1995. For the quarters ended September 30, 1996 and 1995, short-term borrowings averaged $350.2 million and $339.2 million, respectively. Long-term obligations averaged $7.8 million during the third quarter of 1996, compared to $24.6 million during the third quarter of 1995. The 68.4 percent reduction results from the Bank's reclassification of borrowings with scheduled maturities within the next twelve months to short-term borrowings. Expense on Interest-Bearing Liabilities. BancShares' interest expense amounted to $61.4 million during the third quarter of 1996, a $1.5 million or 2.5 percent increase from the third quarter of 1995. The higher interest expense was the net result of the $448 million increase in average interest-bearing liabilities and a 20 basis point reduction in the aggregate rate on interest bearing liabilities. The rate on these liabilities was 4.06 percent during the third quarter ebb of 1996, compared to 4.26 percent during the third quarter of 1995. NET INTEREST INCOME Taxable equivalent net interest income totaled $73.5 million during the third quarter of 1996, an increase of 16.7 percent from the third quarter of 1995. The average net yield on interest-earning assets was 4.18 percent for the third quarter of 1996, 26 basis points above the net yield recorded during the third quarter of 1995. The taxable equivalent interest rate spread for the third quarter of 1996 was 3.58 percent compared to 3.39 percent for the same period of 1995. The higher net yield and interest rate spreads reflect the positive rate and volume variances recorded during the third quarter of 1996 over the third quarter of 1995. A principal objective of BancShares' asset/liability management 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. Management is aware of the potential negative impact that movements in market interest rates may have on net interest income. 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 September 30, 1996, the reserve for loan losses amounted to $81.2 million or 1.65 percent of loans outstanding. This compares to $78.5 million or 1.71 percent at December 31, 1995, and $78 million or 1.72 percent at September 30, 1995. Management considers the established reserve adequate to absorb losses that relate to loans outstanding at September 30, 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 third quarter of 1996 was $1.8 million, compared to $1.7 million during the third quarter of 1995. Net charge-offs for the nine months ended September 30, 1996 totaled $4.3 million, compared to net charge-offs of $993,000 during the same period of 1995. The higher level of net charge-offs during 1996 have resulted from retail loans charge-offs, a trend that management attributes to the rapid growth in the installment portfolio during 1994 and 1995. However, while net charge-offs have increased from 1995 to 1996, the annualized net charge-offs represent only 0.12 percent of loans outstanding for the nine months ending September 30, 1996. Management remains committed to maintaining high levels of credit quality. Table 7 provides details concerning the reserve and provision for loan losses over the past five quarters. Nonperforming assets. At September 30, 1996, BancShares' nonperforming assets amounted to $15.8 million or 0.32 percent of gross loans plus foreclosed properties, compared to $15.4 million at December 31, 1995, and $17 million at September 30, 1995. Management continues to closely monitor nonperforming assets, taking necessary actions to minimize potential exposure. NONINTEREST INCOME During the first nine months of 1996, noninterest income was $75.2 million, compared to $68.3 million during the same period of 1995. The 10.2 percent increase was due to growth in the credit card operation, higher fee income from First Citizens Investor Services, and higher fee income from affiliate banks for processing services. As a result of continued growth in merchant income and a surge in the number of cardholders, credit card fee income increased 18.4 percent from the first nine months of 1995 to the same period of 1996. Fees earned by First Citizens Investor Services during the first nine months of 1996 were $3.2 million compared to $2.1 million during the same period of 1995. The 57.7 percent increase in fees resulted from growth in the subsidiary's sales of mutual fund and annuity products. Fee income also benefitted from a 9.5 percent increase in income generated from processing services provided to affiliate banks. These fees contributed $7.2 million during the first nine months of 1996. NONINTEREST EXPENSE Noninterest expense was $209.6 million for the first nine months of 1996, a 13.3 percent increase over the $185 million recorded during the same period of 1995. The $24.7 million increase includes a $10.3 million assessment that was recorded during the third quarter for the recapitalization of the FDIC's Savings Association Insurance Fund ("SAIF"). All financial institutions with SAIF-insured deposits were subject to the assessment during the third quarter based on the volume of SAIF-insured deposits as of the measurement date. Additional increases in noninterest expense resulted from higher personnel-related expenses. Salaries and wages were $86.2 million during the first nine months of 1996, an increase of 8.4 percent or $6.7 million over the same period of 1995. This increase is due to merit increases, incentives paid to sales associates and the centralization of various loan-related functions. Employee benefits expense increased 15.7 percent from 1995 to 1996, the res growth in health insurance expense. Occupancy expense increased 7.7 percent during the first nine months of 1996, compared to the corresponding period of 1995 due to increased depreciation expense resulting from new and renovated branch facilities. Equipment expense increased 6 percent during the first nine months of 1996, the result of higher equipment rent and maintenance expenses. The $13.6 million increase in other expenses includes the $10.3 million SAIF assessment as well as increases in education and consultant expenses and intangible amortization. INCOME TAXES Income tax expense amounted to $25.6 million during the first nine months of 1996, compared to $22 million during the same period of 1995, a 16.2 percent increase resulted from higher pre-tax income. The effective tax rates for these periods were 35.9 percent and 35.2 percent, respectively. The increase in the effective tax rate from 1995 to 1996 results from an increase in nondeductible goodwill amortization expense. LIQUIDITY Management relies on the investment portfolio as a source of liquidity, with aturities designed to provide needed cash flows. Further, retail eposits generated throughout the branch network has enabled management o fund asset growth and maintain liquidity. These sources have allowed imited dependence on short-term borrowed funds for liquidity or for sset expansion. In the event additional liquidity is needed, ancShares 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 September 30, 1996, and 1995, the leverage capital ratio of BancShares was 6.4 percent and 6.1 percent, respectively, surpassing the minimum level of 3 percent. As a percentage of risk-adjusted assets, BancShares' core capital ratio was 9.9 percent at September 30, 1996, and 9.6 percent as of September 30, 1995. The minimum ratio allowed is 4 percent of risk-adjusted assets. The total risk-adjusted capital ratio was 11.1 percent at September 30, 1996 and 10.9 percent as of September 30, 1995. The minimum total capital ratio is 8 percent. 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 on January 1, 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 did 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. SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("Statement 125") was issued in June 1996. Statement 125 provides accounting and reporting guidance for these activities based on the consistent application of a financial-components approach that focuses on control. Statement 125 is effective for those activities occurring after December 31, 1996, and is to be applied prospectively. Earlier or retroactive adoption of Statement 125 is not permitted. BancShares has not determined what effect, if any, this statement will have on its consolidated financial statements. The FASB also issues exposure drafts for proposed statements of financial accounting standards. These exposure drafts are subject to comment from the public, and to revisions and final issuance by the FASB. Management considers the effect of the proposed statements on the consolidated financial statements and monitors the status of changes to issued exposure drafts and to proposed effective dates. 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. -----END PRIVACY-ENHANCED MESSAGE-----