-----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, OmL7SgLIujvFf/DSTsgXtqewquW1aBo0MTohsuA6FEWaeXK/eEr9RmHP8RLJ2H3c iYmCYzXGwP6umtaNaRpLLA== 0000798941-97-000007.txt : 19970815 0000798941-97-000007.hdr.sgml : 19970815 ACCESSION NUMBER: 0000798941-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97660952 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 June 30, 1997 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) 716-7000 (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-- 9,634,333 shares Class B Common Stock--$1 Par Value-- 1,756,229 shares (Number of shares outstanding, by class, as of August 13, 1997) INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at June 30, 1997, December 31, 1996, and June 30, 1996 Consolidated Statements of Income for the three-month and six-month periods ended June 30, 1997, and June 30, 1996 Consolidated Statements of Changes in Shareholders' Equity for the three-month and six-month periods ended June 30, 1997, and June 30, 1996 Consolidated Statements of Cash Flows for the six-month periods ended June 30, 1997, and June 30, 1996 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 June 30, 1997, 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 13, 1997 By:/s/Kenneth A. Black Kenneth A. Black Vice President, Treasurer, and Chief Financial Officer First Citizens BancShares, Inc and Subsidiaries Second Quarter 1997 Consolidated Balance Sheets First Citizens BancShares, Inc. and Subsidiaries
Consolidated Balance Sheets First Citizens BancShares, Inc. and Subsidiaries June 30* December 31# June 30* (thousands, except share data) 1997 1996 1996 Assets Cash and due from banks $463,079 $437,029 $400,694 Investment securities (fair values of $2,269,676, 2,271,282 2,138,831 1,888,476 $1,873,142, respectively) Federal funds sold 199,200 156,000 50,010 Loans 4,996,770 4,930,508 4,921,774 Less reserve for loan losses 81,902 81,439 81,026 Net loans 4,914,868 4,849,069 4,840,748 Premises and equipment 248,956 229,496 217,556 Income earned not collected 63,833 60,175 58,601 Other assets 190,760 184,972 175,202 Total assets $8,351,978 $8,055,572 $7,631,287 Liabilities Deposits: Noninterest-bearing $1,125,673 $1,087,474 $986,801 Interest-bearing 6,001,609 5,866,554 5,645,470 Total deposits 7,127,282 6,954,028 6,632,271 Short-term borrowings 488,012 392,006 338,538 Long-term obligations 12,150 6,922 7,893 Other liabilities 80,324 87,109 68,302 Total liabilities 7,707,768 7,440,065 7,047,004 Shareholders' Equity Common stock: Class A - $1 par value (9,635,711; 9,651,900; and 9,688,017 shares issued, respectively) 9,636 9,652 9,688 Class B - $1 par value (1,756,374; 1,758,980; and 1,761,261 shares issued, respectively) 1,756 1,759 1,761 Surplus 143,760 143,760 143,567 Retained earnings 480,688 453,640 429,267 Unrealized gains on marketable equity securities, 8,370 6,696 _ Total shareholders' equity 644,210 615,507 584,283 Total liabilities and shareholders' equity $8,351,978 $8,055,572 $7,631,287 * Unaudited # Derived from the Consolidated Balance Sheets included in the 1996 Annual Report on Form 10-K. See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc and Subsidiaries Second Quarter 1997 Consolidated Statements of Income First Citizens BancShares, Inc. and Subsidiaries
Three Months Six Months Ended June 30 Ended June 30 (thousands, except per share data, unaudited) 1997 1996 Interest income Loans $106,049 $102,654 $209,856 $202,766 Investment securities: U. S. Government 31,655 28,542 61,729 56,282 State, county and municipal 73 84 150 174 Other 25 43 59 88 Total investment securities interest income 31,753 28,669 61,938 56,544 Federal funds sold 2,316 1,379 4,763 2,960 Total interest income 140,118 132,702 276,557 262,270 Interest expense Deposits 59,338 57,451 116,715 115,622 Short-term borrowings 4,968 3,765 9,155 7,631 Long-term obligations 236 268 378 655 Total interest expense 64,542 61,484 126,248 123,908 Net interest income 75,576 71,218 150,309 138,362 Provision for loan losses 2,097 2,255 3,664 3,799 Net interest income after provision for loan 73,479 68,963 146,645 134,563 Noninterest income Trust income 2,775 2,256 5,553 4,523 Service charges on deposit accounts 10,320 10,392 20,250 20,425 Credit card income 4,550 3,882 8,616 7,147 Other service charges and fees 6,340 5,818 12,787 11,608 Other 4,909 2,912 5,102 5,442 Total noninterest income 28,894 25,260 52,308 49,145 102,373 94,223 198,953 183,708 Noninterest expense Salaries and wages 31,476 29,681 61,852 56,983 Employee benefits 5,978 5,046 11,916 9,942 Occupancy expense 5,768 5,385 11,505 10,811 Equipment expense 8,283 6,814 15,234 12,818 Other 23,312 21,337 44,894 40,994 Total noninterest expense 74,817 68,263 145,401 131,548 Income before income taxes 27,556 25,960 53,552 52,160 Income taxes 9,972 9,575 19,376 18,949 Net income $17,584 $16,385 $34,176 $33,211 Per Share Net income $1.54 $1.43 $3.00 $2.95 Cash dividends 0.250 0.225 0.50 0.45 See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 1997 Consolidated Statements of Changes in Shareholders' Equity First Citizens BancShares, Inc. and Subsidiaries
Class A Class B Unrealized Gain Common Common Retained on Marketable Total (thousands, except share data, unaudited) Stock Stock Surplus Earnings Equity Securit Equity Balance at December 31, 1995 $8,950 $1,766 $106,954 $403,167 $520,837 Issuance of 668,654 shares of Class A common stock for various acquisitions 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 87,992 shares of Class A common stock pursuant to employee stock purchase plans 87 3,765 3,852 Redemption of 27,079 shares of Class A common stock and 5,203 shares of Class B common stock (27) (5) (1,974) (2,006 Net income 33,211 33,211 Cash dividends (5,137) (5,137 Balance at June 30, 1996 $9,688 $1,761 $143,567 $429,267 $584,283 Balance at December 31, 1996 $9,652 $1,759 $143,760 $453,640 $6,696 $615,507 Redemption of 16,189 shares of Class A common stock and 2,606 shares of Class B common stock (16) (3) (1,440) (1,459 Net income 34,176 34,176 Unrealized gain on marketable equity securities, net of taxes 1,674 1,674 Cash dividends (5,688) (5,688 Balance at June 30, 1997 $9,636 $1,756 $143,760 $480,688 $8,370 $644,210 See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 1997 Consolidated Statements of Cash Flows First Citizens BancShares, Inc. and Subsidiaries
Six Months Ended June 30 (thousands, unaudited) 1997 1996 Operating Activities Net income $34,176 $33,211 Adjustments: Amortization of intangibles 4,281 3,904 Provision for loan losses 3,664 3,799 Deferred tax benefit (246) (1,375) Change in current taxes payable (437) (657) Depreciation 9,151 8,455 Change in accrued interest payable (6,527) (8,226) Change in income earned not collected (3,658) 712 Origination of loans held for sale (238,745) (52,881) Proceeds from sale of loans 250,471 34,093 (Gain) loss on mortgage loans 1,307 168 Net amortization of premiums and discounts 3,306 7,211 Net change in other assets 3,137 (1,405) Net change in other liabilities (454) (5,417) Net cash provided by operating activities 59,426 21,592 Investing Activities Net increase in loans outstanding (77,584) (119,955) Purchases of investment securities (499,527) (396,748) Proceeds from maturities of investment securities 363,770 502,453 Net change in federal funds sold (43,200) (9,565) Dispositions of premises and equipment 1,036 3,563 Additions to premises and equipment (28,441) (19,347) Purchase of institutions, net of cash acquired 114,667 7,584 Net cash used by investing activities (169,279) (32,015) Financing Activities Net change in time deposits 58,756 40,096 Net change in demand and other interest-bearing deposits (16,940) (4,301) Net change in short-term borrowings 101,234 (70,140) Repurchases of common stock (1,459) (2,006) Proceeds from issuance of stock - 3,975 Cash dividends paid (5,688) (5,137) Net cash provided by financing activities 135,903 (37,513) Change in cash and due from banks 26,050 (47,936) Cash and due from banks at beginning of period 437,029 448,630 Cash and due from banks at end of period $463,079 $400,694 Cash payments for: Interest $132,976 $132,134 Income taxes 19,223 21,069 Supplemental disclosure of noncash investing and financing activities: Common stock issued for acquisitions - $33,403 Long-term obligations issued for acquisitions - 1,468 Unrealized gain on marketable equity securities $2,754 - See accompanying Note to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 1997 Financial Summary
1997 1996 Six Months Ended Second First Fourth Third Second June 30 (thousands, except per share data and ratios) Quarter Quarter Quarter Quarter Quarter 1997 1996 S> Summary of Operations Interest Income $140,118 $136,439 $137,655 $134,270 $132,702 $276,557 $262,270 Interest income - taxable equivalent 140,634 136,961 138,222 134,837 133,283 277,595 263,442 Interest expense 64,542 61,706 62,964 61,378 61,484 126,248 123,908 Net interest income-taxable equivalent 76,092 75,255 75,258 73,459 71,799 151,347 139,534 Taxable equivalent adjustment 516 522 567 567 581 1,038 1,172 Net interest income 75,576 74,733 74,691 72,892 71,218 150,309 138,362 Provision for loan losses 2,097 1,567 3,321 1,787 2,255 3,664 3,799 Net interest income after provision for loan los 73,479 73,166 71,370 71,105 68,963 146,645 134,563 Noninterest income 28,894 23,414 28,082 26,077 25,260 52,308 49,145 Noninterest expense 74,817 70,584 69,023 78,097 68,263 145,401 131,548 Income before income taxes 27,556 25,996 30,429 19,085 25,960 53,552 52,160 Income taxes 9,972 9,404 10,611 6,647 9,575 19,376 18,949 Net income $17,584 $16,592 $19,818 $12,438 $16,385 $34,176 $33,211 Selected Average Balances Total assets $8,099,236 $7,903,566 $7,935,197 $7,670,538 $7,658,682 $8,001,938 $7,557,959 Investment securities 2,166,362 2,094,376 2,097,690 1,919,935 1,990,346 2,130,568 1,987,187 Loans 5,023,409 4,921,346 4,895,815 4,907,435 4,884,818 4,972,659 4,782,255 Interest-earning assets 7,368,645 7,196,138 7,209,982 6,989,109 6,975,341 7,282,868 6,874,669 Deposits 6,952,848 6,823,697 6,831,926 6,641,427 6,660,204 6,888,629 6,569,012 Interest-bearing liabilities 6,341,125 6,203,598 6,185,161 6,017,476 6,043,119 6,272,742 5,987,291 Long-term obligations 11,545 6,809 6,866 7,762 15,676 9,190 19,720 Shareholders' equity $635,680 $619,956 $599,953 $589,618 $576,742 $627,611 $559,973 Shares outstanding 11,394,965 11,398,246 11,415,943 11,441,007 11,432,661 11,396,596 11,252,528 Profitability Ratios (averages) Rate of return (annualized) on: Total assets 0.87% 0.85% 0.99% 0.65% 0.86% 0.86% 0.88% Shareholders' equity 11.10 10.85 13.14 8.39 11.43 10.92 11.93 Dividend payout ratio 16.23 17.12 14.37 19.57 15.73 16.67 15.25 Liquidity and Capital Ratios (averages) Loans to deposits 72.25% 72.12% 71.66% 73.89% 73.34% 72.19% 72.80% Shareholders' equity to total assets 7.85 7.84 7.56 7.69 7.53 7.84 7.41 Time certificates of $100,000 or more to total deposits 9.36 9.30 8.79 8.61 9.23 8.95 9.39 Per Share of Stock Net income $1.54 $1.46 $1.74 $1.15 $1.43 $3.00 $2.95 Cash dividends 0.250 0.250 0.250 0.225 0.225 0.50 0.45 Book Value at period end 56.55 55.22 53.94 51.89 51.03 56.55 51.03 Tangible book value at period end 48.10 46.89 45.42 43.03 42.19 45.42 42.19
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 1997 Outstanding Loans by Type
Table 2 1997 1996 Second First Fourth Third Second First (thousands) Quarter Quarter Quarter Quarter Quarter Real estate: Construction and land development $109,125 $103,361 $109,806 $107,651 $110,162 Mortgage: 1-4 family residential 1,383,250 1,529,972 1,542,836 1,587,352 1,615,712 Commercial 942,637 906,408 882,067 850,358 833,733 Equity Line 510,067 430,924 411,856 411,893 409,121 Other 134,793 134,852 132,954 135,241 137,463 Commercial and industrial 569,327 533,812 514,535 516,857 506,913 Consumer 1,258,330 1,230,501 1,251,704 1,218,605 1,223,871 Lease financing 73,861 69,496 68,694 69,984 67,647 Other 15,380 15,809 16,056 16,807 17,152 Total loans 4,996,770 4,955,135 4,930,508 4,914,748 4,921,774 Less reserve for loan losses 81,902 81,459 81,439 81,192 81,026 Net loans $4,914,868 $4,873,676 $4,849,069 $4,833,556 $4,840,748
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 1997 Investment Securities
Table 3 June 30, 1997 June 30, 1996 Average Taxable Average Taxable Book Fair Maturity Equivalent Book Fair Maturity Equivalent (thousands) Value Value (Yrs./Mos.) Yield Value Value (Yrs./Mos.) Yield U. S. Government: Within one year $1,015,038 $1,014,279 0/7 5.94 % $787,440 $788,350 0/6 5.91 % One to five years 1,240,895 1,239,630 1/9 5.71 1,081,130 1,064,690 1/11 5.71 Five to ten years 3,072 3,106 6/3 5.65 2,383 2,344 7/0 6.28 Over ten years 5,096 5,188 12/7 7.50 7,990 7,982 18/11 7.43 Total 2,264,101 2,262,203 1/3 8.86 1,878,943 1,863,366 1/5 5.80 State, county and municipal: Within one year 961 1,166 0/4 6.39 537 539 0/6 6.49 One to five years 3,617 3,679 2/9 6.87 4,551 4,808 2/11 6.88 Five to ten years 934 965 8/3 7.93 1,272 1,281 6/1 7.21 Over ten years - 195 195 21/2 9.14 Total 5,512 5,810 3/3 6.92 6,555 6,823 3/11 6.98 Other: Within one year 500 500 0/1 2.52 1,306 1,306 0/6 5.74 One to five years 1,159 1,153 1/4 11.99 1,627 1,602 1/11 10.84 Five to ten years 10 10 5/7 0.85 45 45 5/11 5.43 Total 1,669 1,663 0/6 4.92 2,978 2,953 1/5 8.52 Total investment securities $2,271,282 $2,269,676 1/5 5.87 % $1,888,476 $1,873,142 1/5 5.81 %
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 1997 Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Second Quarter
Table 4 1997 1996 Increase (decrease) due to: Interest Interest Average Income Yield Average Income Yield Yield (thousands) Balance Expense /Rate Balance Expense /Rate Volume /Rate Total Assets Loans: Secured by real estate $3,136,593 $64,085 8.22 % $3,080,093 $62,748 8.15 % $974 $363 $1,337 Commercial and industrial 554,599 12,387 8.49 499,499 11,344 8.70 1,250 (207) 1,043 Consumer 1,245,235 28,270 8.98 1,222,653 27,462 8.89 517 291 808 Lease financing 71,725 1,535 8.56 65,594 1,290 7.87 126 119 245 Other 15,257 247 6.49 16,979 347 8.18 (32) (68) (100) Total loans 5,023,409 106,524 8.42 4,884,818 103,191 8.40 2,835 498 3,333 Investment securities: U. S. Government 2,158,676 31,656 5.88 1,980,659 28,542 5.80 2,647 467 3,114 State, county and municipal 5,981 113 7.58 6,706 128 7.68 (14) (1) (15) Other 1,705 25 5.88 2,981 43 5.80 (19) 1 (18) Total investment securities 2,166,362 31,794 5.89 1,990,346 28,713 5.80 2,614 467 3,081 Federal funds sold 178,875 2,316 5.19 100,177 1,379 5.54 1,056 (119) 937 Total interest-earning assets $7,368,646 $140,634 7.60 % $6,975,341 $133,283 7.62 % $6,505 $846 $7,351 Liabilities Deposits: Checking With Interest $918,690 $2,430 1.06 % $874,917 $2,675 1.23 % $130 ($375) ($245) Savings 711,094 3,666 2.07 729,667 3,757 2.07 (93) 2 (91) Money market accounts 889,107 8,275 3.73 814,833 7,028 3.47 681 566 1,247 Time deposits 3,401,564 44,967 5.30 3,290,255 43,991 5.38 1,563 (587) 976 Total interest-bearing deposits 5,920,455 59,338 4.02 5,709,672 57,451 4.05 2,281 (394) 1,887 Federal funds purchased 18,100 101 2.24 21,090 333 6.35 (32) (200) (232) Repurchase agreements 24,837 270 4.36 22,156 237 4.30 29 4 33 Master notes 287,786 3,400 4.74 251,730 2,801 4.48 419 180 599 U. S. Treasury tax and loan accounts 9,646 218 9.06 13,175 173 5.28 (63) 108 45 Other short-term borrowings 68,756 979 5.71 12,407 221 7.16 904 (146) 758 Long-term obligations 11,545 236 8.20 12,889 268 8.36 (27) (5) (32) Total interest-bearing liabilities $6,341,125 $64,542 4.08% $6,043,119 $61,484 4.09 % $3,511 ($453) $3,058 Interest rate spread 3.52 % 3.53 % Net interest income and net yield on interest-earning assets $76,092 4.14 % $71,799 4.14 % $2,994 1,299 $4,293
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 1997 Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Six Months
Table 5 1997 1996 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 $3,106,942 $127,035 8.21%$3,001,645 $123,801 8.27% $4,223 ($989) $3,234 Commercial and industrial 538,578 23,688 8.40 487,950 22,090 8.69 2,253 (655) 1,598 Consumer 1,241,614 56,544 9.02 1,212,642 54,779 8.96 1,346 419 1,765 Lease financing 70,075 2,995 8.55 63,440 2,513 7.92 272 210 482 Other 15,449 551 7.19 16,578 662 8.05 (43) (68) (111) Total loans 4,972,658 210,813 8.51 4,782,255 203,845 8.55 8,051 (1,083) 6,968 Investment securities: U. S. Government 2,122,537 61,729 5.86 1,977,212 56,282 5.72 4,098 1,349 5,447 State, county and municipal 6,061 231 7.69 6,998 267 7.67 (36) 0 (36) Other 1,971 59 6.04 2,977 88 5.94 (30) 1 (29) Total investment securities 2,130,569 62,019 5.87 1,987,187 56,637 5.73 4,032 1,350 5,382 Federal funds sold 179,641 4,763 5.35 105,227 2,960 5.66 2,027 (224) 1,803 Total interest-earning assets $7,282,868 $277,595 7.66%$6,874,669 $263,442 7.69%$14,110 $43 $14,153 Liabilities Deposits: Checking With Interest $910,275 $4,845 1.07% $865,039 $5,658 1.32% $278 ($1,091) ($813) Savings 710,803 7,287 2.07 716,621 7,540 2.12 (68) (185) (253) Money market accounts 883,852 16,069 3.67 811,617 14,153 3.51 1,265 651 1,916 Time deposits 3,370,397 88,514 5.30 3,247,300 88,271 5.47 3,160 (2,917) 243 Total interest-bearing deposits 5,875,327 116,715 4.01 5,640,577 115,622 4.12 4,635 (3,542) 1,093 Federal funds purchased 27,219 671 4.97 34,829 1,084 6.26 (213) (200) (413) Repurchase agreements 23,987 508 4.27 21,672 470 4.36 49 (11) 38 Master notes 286,570 6,414 4.51 246,026 5,405 4.42 894 115 1,009 U. S. Treasury tax and loan accounts 11,254 442 7.92 13,649 355 5.23 (79) 166 87 Other short-term borrowings 39,196 1,120 5.76 10,818 317 5.89 819 (16) 803 Long-term obligations 9,190 378 8.29 19,720 655 6.68 (392) 115 (277) Total interest-bearing liabilities $6,272,743 $126,248 4.06%$5,987,291 $123,908 4.16% $5,713 ($3,373) $2,340 Interest rate spread 3.60% 3.53% Net interest income and net yield on interest-earning assets $151,347 4.19% $139,534 4.08% $8,397 $3,416 $11,813
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 1997 Summary of Loan Loss Experience and Risk Elements
Table 6 1997 1996 Six Months Ended Second First Fourth Third Second June 30 (thousands, except ratios) Quarter Quarter Quarter Quarter Quarter 1997 1996 Reserve balance at beginning of period $81,459 $81,439 $81,192 $81,026 $80,433 $81,439 $78,495 Reserve of acquired loans 123 - - - - 123 1,387 Provision for loan losses 2,107 1,557 3,321 1,787 2,255 3,664 3,799 Net charge-offs: Charge-offs (3,774) (3,538) (3,860) (2,697) (2,663) (7,312) (5,096) Recoveries 1,987 2,001 786 1,076 1,001 3,988 2,441 Net (charge-offs) recoveries (1,787) (1,537) (3,074) (1,621) (1,662) (3,324) (2,655) Reserve balance at end of period $81,902 $81,459 $81,439 $81,192 $81,026 $81,902 $81,026 Historical Statistics Balances Average total loans $5,023,409 $4,921,346 $4,895,815 $4,907,435 $4,884,818 $4,972,658 $4,782,255 Total loans at period-end 4,996,770 4,955,135 4,930,508 4,914,748 4,921,774 4,996,770 4,921,774 Risk Elements Nonaccrual loans $14,589 $14,628 $12,810 $14,213 $14,695 $14,589 $14,695 Other real estate acquired through foreclosure 1,152 1,337 1,160 1,634 1,436 1,152 1,436 Total nonperforming assets $15,741 $15,965 $13,970 $15,847 $16,131 $15,741 $16,131 Accruing loans 90 days or more past due $4,503 $5,748 $4,983 $5,601 $4,928 $4,503 $4,928 Ratios Net charge-offs (annualized) to average total loans 0.14 % 0.13 % 0.25 % 0.13 % 0.14 % 0.13 % 0.11 Reserve for loan losses to total loans at period-end 1.64 1.64 1.65 1.65 1.65 1.64 1.65 Nonperforming assets to total loans plus foreclosed real estate at period-end 0.31 0.32 0.28 0.32 0.33 0.32 0.33
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 1997 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' four 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, Bank of Marlinton ("Marlinton") and Bank of White Sulphur Springs ("WSS") operate in West Virginia, and Atlantic States Bank operates in Georgia and North Carolina. During the second quarter of 1997, First-Citizens Bank, A Virginia Corporation ("FCB-VA") began operation. FCB-VA is a subsidiary of FCB and is the lending bank for all retail credit cards for N rolina customers. This company was established to allow BancShares to participate more fully in the very competitive credit card market. SUMMARY BancShares realized an increase in earnings of 7.3 percent during the second quarter of 1997 compared to the second quarter of 1996. Consolidated net income during the second quarter of 1997 was $17.6 million, compared to $16.4 million earned during the corresponding period of 1996. The higher earnings resulted from improved net interest income and growth in noninterest income offset by higher levels of noninterest expense. Net income per share during the second quarter of 1997 totaled $1.54, compared to $1.43 during the second quarter of 1996. Return on average assets was 0.87 percent for the second quarter of 1997 compared to 0.86 percent during the same period of 1996. For the first six months of 1997, BancShares recorded net income of $34.2 million , compared to $33.2 million earned during the first six months of 1996. The 2.9 percent increase was the net result of beneficial increases in net interest income and noninterest income that were largely offset by higher noninterest expenses. Net income per share for the first six months of 1997 was $3.00, compared to $2.95 during the same period of 1996. BancShares returned 0.86 percent on average assets during the first six months of 1997 compared to 0.88 percent during the corresponding period of 1996. 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 4 for the second quarter and Table 5 for the first six months of 1997 and 1996. INTEREST-EARNING ASSETS Average interest-earning assets for the second quarter of 1997 totaled $7.37 billion, an increase of $393.3 million or 5.6 percent from the second quarter of 1996. For the first six months of 1997, earning assets averaged $7.28 billion, an increase of $408.2 million over the same period of 1996. These increases result from growth in the investment and loan portfolios. Loans. At June 30, 1997 and 1996, gross loans totaled $5 billion and $4.92 billion, respectively. As of December 31, 1996, gross loans were $4.93 billion. The $75 million growth in loans from June 30, 1996 to June 30, 1997 results from growth within BancShares' commercial loan products and home equity products during early 1997. Table 2 details outstanding loans by type for the past five quarters. During the second quarter of 1997, average loans totaled $5.02 billion, an increase of $138.6 million or 2.8 percent from the comparable period of 1996. Consumer loans averaged $1.25 billion during the second quarter of 1997, compared to $1.22 billion during the same period of 1996, an increase of $22.6 million or 1.8 percent. Average loans secured by real estate increased $56.5 million between the two periods, a 1.8 percent increase. This increase is primarily due to the growth in home equity loans, partially offset by the sale of residential mortgage loans in 1997. As of June 30, 1997, $110.2 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. Mortgage loan sale activity during the first six months of 1997 has resulted from two primary goals. First, as in the past, management continues to lessen the exposure to changes in interest rates by selling portions of its long-term fixed-rate loan portfolio. Second, management has focused on strengthening BancShares' capacity to meet the loan demand that has been growing among commercial borrowers during recent quarters. The sales of residential mortgage loans has supported both objectives, and such sales are likely to continue during the remainder of 1997. Management's loan growth projections for 1997 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 June 30, 1997 and 1996, the investment portfolio totaled $2.27 billion and $1.89 billion, respectively. At December 31, 1996, the investment portfolio was $2.14 billion. The 20.3 percent increase in the investment portfolio since June 30, 1996 resulted from the liquidity generated by deposit growth. 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. Included in other assets are marketable equity securities with a current fair value of $25.7 million. These securities are reported at their fair values, with the adjustment to historical cost recorded, net of deferred taxes, as an adjustment to shareholders' equity. Income on Interest-Earning Assets. Interest income amounted to $140.1 million during the second quarter of 1997, a 5.6 percent increase over the second quarter of 1996. Balance sheet growth contributed to higher interest income in the second quarter of 1997 when compared to the same period of 1996. The average yield on total interest-earning assets for the second quarter of 1997 was 7.60 percent, compared to 7.62 percent for the corresponding period of 1996. Loan interest income for the second quarter of 1997 was $106 million, an increase of $3.4 million or 3.3 percent from the second quarter of 1996, due to volume growth. The taxable-equivalent yield on the loan portfolio was 8.42 percent during the second quarter of 1997, compared to 8.40 percent during the same period of 1996. Income earned on the investment securities portfolio amounted to $31.8 million during the second quarter of 1997 and $28.7 million during the same period of 1996, an increase of $3.1 million or 10.8 percent. This increase is the combined result of a $176 million increase in the average securities portfolio and a 9 basis point increase in the taxable-equivalent yield. The securities portfolio taxable-equivalent yield increased from 5.80 percent for the quarter ended June 30, 1996, to 5.89 percent for the quarter ended June 30, 1997. INTEREST-BEARING LIABILITIES At June 30, 1997 and 1996, interest-bearing liabilities totaled $6.50 billion and $5.99 billion, respectively, compared to $6.27 billion as of December 31, 1996. During the second quarter of 1997, interest-bearing liabilities averaged $6.34 billion, an increase of 4.9 percent from the second quarter of 1996. Growth in interest-bearing deposit accounts caused much of the increase, resulting from acquired branches as well as new deposits from existing customers. Deposits. At June 30, 1997, total deposits were $7.13 billion, an increase of $495 million or 7.5 percent over June 30, 1996. Compared to the December 31, 1996 balance of $6.95 billion, total deposits have increased $173.3 million. Average interest-bearing deposits were $5.92 billion during the second quarter of 1997 compared to $5.71 billion during the second quarter of 1996, an increase of 3.7 percent. Much of the increase is attributed to average time deposits, which increased $111.3 million from the second quarter of 1996 to the second quarter of 1997. Average money market accounts increased $74.3 million from the second quarter of 1996 to the second quarter of 1997, while average Checking With Interest accounts increased $43.8 million between the two periods. Time deposits of $100,000 or more averaged 9.36 percent of total average deposits during the second quarter of 1997, compared to 9.23 percent during the same period of 1996. Management does not consider the current level of high dollar deposits to be excessive. Borrowed Funds. At June 30, 1997, short-term borrowings totaled $488 million compared to $392 million at December 31, 1996 and $338.6 million at June 30, 1996. For the quarters ended June 30, 1997 and 1996, short-term borrowings averaged $409.1 million and $320.6 million, respectively. This increase resulted from short-term borrowings relating to the formation of FCB-VA during the second quarter of 1997. Long-term obligations averaged $11.5 million during the second quarter of 1997, compared to $12.9 million during the second quarter of 1996. Expense on Interest-Bearing Liabilities. BancShares' interest expense amounted to $64.5 million during the second quarter of 1997, a $3.1 million or 5 percent increase from the second quarter of 1996. The higher interest expense was the result of the $294 million increase in average interest-bearing liabilities. The rate on these liabilities was 4.08 percent during the second quarter of 1997, compared to 4.09 percent during the second quarter of 1996. NET INTEREST INCOME Net interest income totaled $75.6 million during the second quarter of 1997, an increase of 6.1 percent from the second quarter of 1996. The taxable-equivalent net yield on interest-earning assets was 4.14 percent for the second quarter of 1997, unchanged from the second quarter of 1996. The taxable equivalent interest rate spread for the second quarter of 1997 was 3.52 percent compared to 3.53 percent for the same period of 1996. 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 June 30, 1997, the reserve for loan losses amounted to $81.9 million or 1.64 percent of loans outstanding. This compares to $81.4 million or 1.65 percent at December 31, 1996, and $81 million or 1.65 percent at June 30, 1996. Management considers the established reserve adequate to absorb losses that relate to loans outstanding at June 30, 1997. 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 second quarter of 1997 was $2.1 million, compared to $2.3 million during the second quarter of 1996. Net charge-offs for the six months ended June 30, 1997 totaled $3.3 million, compared to net charge-offs of $2.7 million during the same period of 1996. The higher level of net charge-offs during 1997 have resulted from higher retail installment loan charge-offs as well as higher revolving loan charge-offs, a trend that management attributes to the rapid growth in personal bankruptcies. These higher levels of retail charge-offs have been partially offset by an increase in commercial loan recoveries. While net charge-offs have increased from 1996 to 1997, the annualized net charge-offs represent only 0.13 percent of loans outstanding for the six months ending June 30, 1997. Management remains committed to maintaining high levels of credit quality. Table 6 provides details concerning the reserve and provision for osses over the past five quarters and for the year-to-date for 1997 and 1996. Nonperforming assets. At June 30, 1997, BancShares' nonperforming assets amounted to $15.7 million or 0.31 percent of gross loans plus foreclosed properties, compared to $14 million at December 31, 1996, and $16.1 million at June 30, 1996. Management continues to closely monitor nonperforming assets, taking necessary actions to minimize potential exposure. NONINTEREST INCOME During the first six months of 1997, noninterest income was $52.3 million, compared to $49.1 million during the same period of 1996. The 6.4 percent increase was due to growth in the credit card operation, improved trust income, and higher other service charge and fee income. As a result of continued growth in merchant income and growth in the number of cardholders, credit card fee income increased 20.6 percent from the first six months of 1996 to the same period of 1997. Income earned by the trust department increased 22.8 percent from the first six months of 1997, the result of growth in the assets under management. Other service charges and fees included fees earned by First Citizens Investor Services, which, during the first six months of 1997, were $2.5 million compared to $1.7 million during the same period of 1996. The 47.2 percent increase in fees resulted from growth in the subsidiary's sales of mutual fund and annuity products. Fee income also benefitted from a 12.1 percent increase in income generated from processing services provided to affiliate banks. These fees contributed $4.9 million during the first six months of 1997. NONINTEREST EXPENSE Noninterest expense was $145.4 million for the first six months of 1997, a 10.5 percent increase over the $131.5 million recorded during the same period of 1996. Much of the increase in noninterest expense resulted from higher personnel-related expenses. Salaries and wages were $61.9 million during the first six months of 1997, an increase of 8.5 percent or $4.9 million over the same period of 1996. This increase is due to merit increases, as well as growth in incentives paid to sales associates. Employee benefits expense increased 19.9 percent from 1996 to 1997, the result of growth in health insurance expense. Equipment expense increased 18.8 percent during the first six months of 1997, compared to the corresponding period of 1996 due to increased maintenance contracts and increased equipment rental costs. Occupancy expense increased 6.4 percent during the first six months of 1997, the result of higher rent and depreciation expense. The $3.9 million increase in other e resulted from increases in advertising expense, expenses related to travel awards provided to credit card customers based on their card usage, and consultant expense, much of which relates to addressing technological compliance with the year 2000. INCOME TAXES Income tax expense amounted to $19.4 million during the first six months of 1997, compared to $18.9 million during the same period of 1996, a 2.3 percent increase resulting from higher pre-tax income. The effective tax rates for these periods were 36.2 percent and 36.3 percent, respectively. The slight decrease in the effective tax rate from 1996 to 1997 results from a decrease in state income taxes. 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 have enabled management to fund asset growth and maintain liquidity.. In the event additional liquidity is needed, BancShares maintains readily available sources to borrow funds through its correspondent network. SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY BancShares maintains an adequate capital position and exceeds all minimum regulatory capital requirements. At June 30, 1997 and 1996, the leverage capital ratio of BancShares was 6.6 percent and 6.4 percent, respectively, surpassing the minimum level of 3 percent. As a percentage of risk-adjusted assets, BancShares' core capital ratio was 10.3 percent at June 30, 1997, and 9.8 percent as of June 30, 1996. The minimum ratio allowed is 4 percent of risk-adjusted assets. The total risk-adjusted capital ratio was 11.4 percent at June 30, 1997 and 11 percent as of June 30, 1996. The minimum total capital ratio is 8 percent. BancShares and its subsidiary banks exceed the capital standards established by their respective regulatory agencies. CURRENT ACCOUNTING AND REGULATORY ISSUES The Financial Accounting Standards Board ("FASB") has issued Statement of Financial Accounting Standards ("SFAS") No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," SFAS No. 128 "Earnings Per Share" and SFAS No. 129 "Disclosure of Information about Capital Structure," (collectively, the "Pronouncements"). The Pronouncements are effective for 1997 and require disclosures regarding the matters included in the respective titles. Adoption of each of the Pronouncements is not expected to have a material impact on BancShares' consolidated financial statements. FASB has also issued SFAS No. 130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information." Management is currently evaluating SFAS. No. 130 and SFAS No. 131 and has not determined what impact, if any, those statements will have upon BancShares' consolidated financial statements. Management is not aware of any current recommendations by 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. 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 1996 First Citizens BancShares Annual Report, which is incorporated by reference on Form 10-K. EX-27 2 EXHIBIT 27
9 1,000 6-MOS DEC-31-1997 JUN-30-1997 463,079 0 199,200 0 26,092 2,271,282 2,269,676 4,996,770 81,902 8,351,978 7,127,282 488,012 80,324 12,150 0 0 11,392 632,818 3,851,978 209,856 61,938 4,763 276,557 116,715 9,533 150,309 3,664 0 145,401 53,552 53,552 0 0 34,176 3.00 3.00 7.66 14,589 4,503 0 0 81,439 7,312 3,988 81,902 81,902 0 0
-----END PRIVACY-ENHANCED MESSAGE-----