10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

 x  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2008

or

 o  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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)

          4300 Six Forks Road, Raleigh, North Carolina                         27609 

(Address of principle 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  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of ‘accelerated filer and large accelerated filer’ in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer    x      Accelerated filer         Non-accelerated filer        Smaller reporting company   r       

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes              No    x 

Class A Common Stock—$1 Par Value—8,756,778 shares

Class B Common Stock—$1 Par Value—1,677,675 shares

 (Number of shares outstanding, by class, as of May 8, 2008)

1

INDEX

		Page(s)
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets at March 31, 2008, December 31, 2007 and March 31, 2007	3
	Consolidated Statements of Income for the three-month periods ended March 31, 2008, and March 31, 2007	4
	Consolidated Statements of Changes in Shareholders’ Equity for the three-month periods ended March 31, 2008, and March 31, 2007	5
	Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2008, and March 31, 2007	6
	Notes to Consolidated Financial Statements	7-10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11-24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4	Controls and Procedures	25

PART II.                       OTHER INFORMATION

Item 6.  Exhibits.

2

PART I

Item 1.  Financial Statements (Unaudited)

Consolidated Balance Sheets
First Citizens BancShares, Inc. and Subsidiaries
	March 31*		December 31#		March 31*
	2008		2007		2007
Assets	(thousands, except share data)
Cash and due from banks	$	734,581	$	793,788	$	847,202
Overnight investments		803,500		266,209		799,848
Investment securities available for sale		3,198,948		3,229,241		2,934,995
Investment securities held to maturity		7,189		7,594		96,803
Loans and leases		11,029,937		10,963,904		10,262,356
Less allowance for loan and lease losses		141,591		136,974		132,640
Net loans and leases		10,888,346		10,826,930		10,129,716
Premises and equipment		773,658		757,694		726,041
Income earned not collected		77,967		79,343		74,648
Goodwill		102,625		102,625		102,625
Other intangible assets		5,343		5,858		7,427
Other assets		154,361		142,825		134,473
Total assets	$	16,746,518	$	16,212,107	$	15,853,778
Liabilities
Deposits:
Noninterest-bearing	$	2,540,340	$	2,519,256	$	2,701,786
Interest-bearing		10,686,651		10,409,288		10,020,746
Total deposits		13,226,991		12,928,544		12,722,532
Short-term borrowings		1,270,813		1,305,287		1,245,025
Long-term obligations		609,335		404,392		405,356
Other liabilities		153,345		132,676		138,538
Total liabilities		15,260,484		14,770,899		14,511,451
Shareholders' Equity
Common stock:
Class A - $1 par value (8,756,778 shares issued for all periods)		8,757		8,757		8,757
Class B - $1 par value (1,677,675 shares issued for all periods)		1,678		1,678		1,678
Surplus		143,766		143,766		143,766
Retained earnings		1,275,989		1,246,473		1,175,449
Accumulated other comprehensive income		55,844		40,534		12,677
Total shareholders' equity		1,486,034		1,441,208		1,342,327
Total liabilities and shareholders' equity	$	16,746,518	$	16,212,107	$	15,853,778
* Unaudited
# Derived from the 2007 Annual Report on Form 10-K.
See accompanying Notes to Consolidated Financial Statements.

3

Consolidated Statements of Income
First Citizens BancShares, Inc. and Subsidiaries
	Three Months Ended March 31,
	2008		2007
Interest income	(thousands, except share and per share data)
Loans and leases	$	177,164	$	176,600
Investment securities:
U. S. Government		35,333		32,744
State, county and municipal		53		58
Other		772		774
Total investment securities interest and dividend income		36,158		33,576
Overnight investments		4,081		7,461
Total interest income		217,403		217,637
Interest expense
Deposits		79,259		80,011
Short-term borrowings		8,181		12,682
Long-term obligations		7,386		6,755
Total interest expense		94,826		99,448
Net interest income		122,577		118,189
Provision for credit losses		10,118		3,532
Net interest income after provision for credit losses		112,459		114,657
Noninterest income
Cardholder and merchant services income		23,050		22,377
Service charges on deposit accounts		19,981		17,157
Wealth management services		13,182		11,697
Fees from processing services		8,804		8,187
Other service charges and fees		4,090		3,751
Mortgage income		1,990		1,779
Insurance commissions		2,481		2,128
ATM income		1,659		1,587
Securities gains		8,051		-
Other		380		368
Total noninterest income		83,668		69,031
Noninterest expense
Salaries and wages		62,785		58,594
Employee benefits		18,183		13,177
Occupancy expense		15,349		13,855
Equipment expense		13,960		13,772
Other		35,364		39,197
Total noninterest expense		145,641		138,595
Income before income taxes		50,486		45,093
Income taxes		18,101		16,109
Net income	$	32,385	$	28,984
Average shares outstanding		10,434,453		10,434,453
Net income per share	$	3.10	$	2.78
See accompanying Notes to Consolidated Financial Statements.

4

Consolidated Statements of Changes in Shareholders' Equity
First Citizens BancShares, Inc. and Subsidiaries
										Accumulated
	Class A		Class B							Other			Total
	Common		Common				Retained			Comprehensive			Shareholders'
	Stock		Stock		Surplus		Earnings			Income (loss)			Equity
	(thousands, except share data)
Balance at December 31, 2006	$	8,757	$	1,678	$	143,766	$	1,148,372		$	8,246		$	1,310,819
Adjustment resulting from adoption of
FASB Interpretation No. 48		-		-		-		962			-			962
Comprehensive income:
Net income		-		-		-		28,984			-			28,984
Unrealized securities gains arising during period,
net of $2,973 deferred tax		-		-		-		-			4,722			4,722
Change in unrecognized loss on cash flow hedge,
net of $190 deferred tax benefit		-		-		-		-			(291	)		(291	)
Total  comprehensive income														33,415
Cash dividends		-		-		-		(2,869	)		-			(2,869	)
Balance at March 31, 2007	$	8,757	$	1,678	$	143,766	$	1,175,449		$	12,677		$	1,342,327
Balance at December 31, 2007	$	8,757	$	1,678	$	143,766	$	1,246,473		$	40,534		$	1,441,208
Comprehensive income:
Net income		-		-		-		32,385			-			32,385
Unrealized securities gains arising during period,
net of $10,551 deferred tax		-		-		-		-			17,501			17,501
Change in unrecognized loss on cash flow hedge,
net of $1,429 deferred tax benefit		-		-		-		-			(2,191	)		(2,191	)
Total  comprehensive income														47,695
Cash dividends		-		-		-		(2,869	)		-			(2,869	)
Balance at March 31, 2008	$	8,757	$	1,678	$	143,766	$	1,275,989		$	55,844		$	1,486,034
See accompanying Notes to Consolidated Financial Statements.

5

Consolidated Statements of Cash Flows
First Citizens BancShares, Inc. and Subsidiaries
	Three months ended March 31,
	2008			2007
	(thousands)
OPERATING ACTIVITIES
Net income	$	32,385		$	28,984
Adjustments to reconcile net income to cash
provided by operating activities:
Amortization of intangibles		515			573
Provision for credit losses		10,118			3,532
Deferred tax benefit		(5,866	)		(2,654	)
Change in current taxes payable		29,742			15,058
Depreciation		13,306			12,678
Change in accrued interest payable		(14,521	)		(907	)
Change in income earned not collected		1,376			(3,086	)
Securities gains		(8,051	)		-
Origination of loans held for sale		(153,883	)		(118,184	)
Proceeds from sale of loans		127,682			128,448
Loss (gain) on sale of loans		(244	)		(467	)
Net amortization of premiums and discounts		(388	)		(1,208	)
Net change in other assets		(14,792	)		(19,162	)
Net change in other liabilities		1,625			1,335
Net cash provided by operating activities		19,004			44,940
INVESTING ACTIVITIES
Net change in loans outstanding		(44,886	)		5,494
Purchases of investment securities available for sale		(410,582	)		(309,431	)
Proceeds from maturities of investment securities held to maturity		406			122,355
Proceeds from maturities of investment securities available for sale		477,365			385,229
Net change in overnight investments		(537,291	)		(451,251	)
Dispositions of premises and equipment		-			505
Additions to premises and equipment		(29,270	)		(32,140	)
Net cash used by investing activities		(544,258	)		(279,239	)
FINANCING ACTIVITIES
Net change in time deposits		68,199			(17,073	)
Net change in demand and other interest-bearing deposits		230,248			(3,719	)
Net change in short-term borrowings		(34,531	)		94,178
Origination of long-term obligations		205,000			-
Cash dividends paid		(2,869	)		(2,869	)
Net cash provided by financing activities		466,047			70,517
Change in cash and due from banks		(59,207	)		(163,782	)
Cash and due from banks at beginning of period		793,788			1,010,984
Cash and due from banks at end of period	$	734,581		$	847,202
CASH PAYMENTS FOR:
Interest	$	109,347		$	100,355
Income taxes		1,583			3,562
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Unrealized securities gains	$	28,052		$	7,695
Unrealized loss on cash flow hedge		(3,620	)		(2,274	)
See accompanying Notes to Consolidated Financial Statements.

6

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Note A

Accounting Policies and Other Matters

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information.  Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements.

In the opinion of management, the consolidated financial statements contain all material adjustments necessary to present fairly the financial position of First Citizens BancShares, Inc. as of and for each of the periods presented, and all such adjustments are of a normal recurring nature.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.  Actual results could differ from those estimates.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the 2007 First Citizens BancShares, Inc. Form 10-K.  Certain amounts for prior periods have been reclassified to conform with statement presentations for 2008.  However, the reclassifications have no effect on shareholders’ equity or net income as previously reported.

At March 31, 2008, loans totaling $1,315,382 were pledged to secure debt obligations, compared to $265,548 at March 31, 2007.  ISB's home equity loans and residential mortgage loans were pledged to the Federal Home Loan Bank of Atlanta (FHLB) during both periods.  For March 31, 2008, ISB had also pledged its commercial real estate loans to the FHLB.

Note B

Operating Segments

BancShares conducts its banking operations through its two wholly-owned subsidiaries, First-Citizens Bank & Trust Company (FCB) and IronStone Bank (ISB).  Although FCB and ISB offer similar products and services to customers, each entity operates in distinct geographic markets and each entity operates under a separate charter.  The financial results and trends of ISB reflect the impact of the de novo nature of its growth.

FCB is a mature banking institution that operates under a state bank charter from its branch network in North Carolina, Virginia, West Virginia, Maryland and Tennessee.  ISB began operations in 1997 and currently operates in Georgia, Florida, Texas, Arizona, California, New Mexico, Colorado, Oregon and Washington under a federal thrift charter.

In the aggregate, FCB and its consolidated subsidiaries, which are integral to its branch operation, and ISB account for more than 90 percent of consolidated assets, revenues and net income.  Other includes activities of the parent company and Neuse, Incorporated, a subsidiary that owns real property used in the banking operation.

The adjustments in the accompanying tables represent the elimination of the impact of certain inter-company transactions.  The adjustments to interest income and interest expense neutralize the earnings and cost of inter-company borrowings.  The adjustments to noninterest income and noninterest expense reflect the elimination of management fees and other service fees paid by one company to another within BancShares’ consolidated group.

7

	March 31, 2008
	ISB			FCB		Other			Total		Adjustments			Consolidated
	(thousands)
Interest income	$	35,899		$	178,948	$	8,410		$	223,257	$	(5,854	)	$	217,403
Interest expense		20,002			69,587		11,091			100,680		(5,854	)		94,826
Net interest income		15,897			109,361		(2,681	)		122,577		-			122,577
Provision for credit losses		5,716			4,402		-			10,118		-			10,118
Net interest income after provision for credit losses		10,181			104,959		(2,681	)		112,459		-			112,459
Noninterest income		3,133			83,189		(1	)		86,321		(2,653	)		83,668
Noninterest expense		20,658			127,012		624			148,294		(2,653	)		145,641
Income (loss) before income taxes		(7,344	)		61,136		(3,306	)		50,486		-			50,486
Income tax expense (credit)		(2,763	)		22,018		(1,154	)		18,101		-			18,101
Net income (loss)	$	(4,581	)	$	39,118	$	(2,152	)	$	32,385	$	-		$	32,385
At March 31, 2008:
Total assets	$	2,661,988		$	13,930,381	$	2,691,191		$	19,283,560	$	(2,537,042	)	$	16,746,518
Loans and leases		2,129,561			8,900,376		-			11,029,937		-			11,029,937
Allowance for loan and lease losses		27,715			113,876		-			141,591		-			141,591
Deposits		2,070,666			11,209,084		-			13,279,750		(52,759	)		13,226,991
	March 31, 2007
	ISB			FCB		Other			Total		Adjustments			Consolidated
	(thousands)
Interest income	$	33,808		$	181,867	$	9,851		$	225,526	$	(7,889	)	$	217,637
Interest expense		17,935			76,123		13,279			107,337		(7,889	)		99,448
Net interest income		15,873			105,744		(3,428	)		118,189		-			118,189
Provision for credit losses		318			3,214		-			3,532		-			3,532
Net interest income after provision for credit losses		15,555			102,530		(3,428	)		114,657		-			114,657
Noninterest income		3,201			69,022		(127	)		72,096		(3,065	)		69,031
Noninterest expense		19,105			122,436		119			141,660		(3,065	)		138,595
Income (loss) before income taxes		(349	)		49,116		(3,674	)		45,093		-			45,093
Income tax expense (credit)		(83	)		17,463		(1,271	)		16,109		-			16,109
Net income (loss)	$	(266	)	$	31,653	$	(2,403	)	$	28,984	$	-		$	28,984
At March 31, 2007:
Total assets	$	2,225,229		$	13,359,371	$	2,438,870		$	18,023,470	$	(2,169,692	)	$	15,853,778
Loans and leases		1,881,368			8,380,988		-			10,262,356		-			10,262,356
Allowance for loan and lease losses		22,580			110,060		-			132,640		-			132,640
Deposits		1,826,095			10,935,271		-			12,761,366		(38,834	)		12,722,532

8

Note C

Employee Benefits

BancShares recognized pension expense totaling $1,666 and $2,625, respectively, in the three-month periods ended March 31, 2008 and 2007.  Pension expense is included as a component of employee benefit expense.

	Three month periods ended March 31,
Components of Net Periodic Benefit Cost	2008			2007
Service cost	$	5,457		$	4,235
Interest cost		9,087			5,250
Expected return on assets		(12,975	)		(7,442	)
Amortization of prior service cost		97			59
Amortization of net actuarial loss		-			523
Total net periodic benefit cost	$	1,666		$	2,625

The expected long-term rate of return on plan assets for 2008 is 8.50 percent, and the assumed discount rate is 6.25 percent.

Note D

Fair Value Disclosures

BancShares adopted the provisions of SFAS No. 157 Fair Value Measurements (Statement 157) and SFAS No. 159 The Fair Value Option for Financial Assets and Liabilities (Statement 159) on January 1, 2008.

Statement 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  Statement 157 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued.  Statement 157 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.

Statement 157 defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, BancShares considers the principal or most advantageous market in which those assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities.  Fair values determined using level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on level 2 inputs, which exist when observable data exists for similar assets and liabilities.  Fair values for assets and liabilities that are not actively traded in observable markets are based on level 3 inputs, which are considered to be unobservable.

Among BancShares’ assets and liabilities, investment securities available for sale and an interest rate swap accounted for as a cash flow hedge are reported at their fair values on a recurring basis.  Certain other assets are adjusted to their fair value on a nonrecurring basis, including loans held for sale, which are carried at the lower of cost or market, and goodwill and other intangible assets, which are periodically tested for impairment.  Loans held for investment, deposits, short-term borrowings and long-term obligations are not reported at fair value.

For assets and liabilities carried at fair value, the following table provides fair value information as of March 31, 2008:

9

		Fair value measurements at March 31, 2008 using:
Description	Fair value at March 31, 2008	Quoted prices in active markets for identical assets and liabilities (Level 1 inputs)	Quoted prices for similar assets and liabilities (Level 2 inputs)	Significant unobservable inputs (Level 3 inputs)
Assets measured at fair value	(thousands)
Investment securities available for sale	$            3,198,948	$               3,071,031	$                    79,521	$                    48,396
Liabilities measured at fair value
Cash flow hedge	8,974	-	8,974	-

Prices for US Treasury and government agency securities are readily available in the active markets in which those securities are traded, and the resulting fair values are shown in the ‘Level 1 input’ column.  Prices for mortgage-backed securities and for state, county and municipal securities are obtained for similar securities, and the resulting fair values are shown in the ‘Level 2 input’ column.  Prices for all other securities, which include a residual interest that was retained from a securitization transaction and other non-marketable investments, are determined based on various assumptions that are not observable.  The fair values for these investment securities are shown in the ‘Level 3 input’ column.  With respect to the residual interest in the asset securitization, the assumed prepayment speed, discount rate and credit spread are not observable in the market due to illiquidity and the uniqueness of the underlying assets. Non-marketable investment securities, which are carried at their purchase price, include those that may only be redeemed by the issuer.

Under the terms of the existing cash flow hedge, BancShares pays a fixed payment to the counterparty in exchange for receipt of a variable payment that is determined based on the 3-month LIBOR rate.  The fair value of the cash flow hedge is therefore based on projected LIBOR rates for the duration of the hedge, values that, while observable in the market, are subject to adjustment due to pricing considerations for the specific instrument.

For those investment securities available for sale with fair values that are determined by reliance on significant unobservable inputs, the following table identifies the factors causing the change in fair value from January 1, 2008 to March 31, 2008:

Description	Investment securities available for sale with fair values based on significant unobservable inputs
	(thousands)
Beginning balance, January 1, 2008	$                                    40,016
Total gains (losses), realized or unrealized:
Included in earnings
Included in other comprehensive income	411
Purchases, sales, issuances and settlements, net	7,969
Transfers in/out of Level 3	-
Ending balance, March 31, 2008	$                                    48,396

No gains or losses were reported for the three-month period ended March 31, 2008 that relate to fair values estimated based on significant unobservable inputs.

Statement 159 allows an entity to elect to measure certain financial assets and liabilities at fair value with changes in fair value recognized in the income statement each period. The statement also requires additional disclosures to identify the effects of an entity’s fair value election on its earnings.  Upon the adoption of Statement 159, BancShares did not elect to report any assets and liabilities at fair value.

10

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

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).  This discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and related notes presented within this report.   Intercompany accounts and transactions have been eliminated. Although certain amounts for prior years have been reclassified to conform to statement presentations for 2008, the reclassifications have no effect on shareholders' equity or net income as previously reported.

OVERVIEW

BancShares is a financial holding company with two wholly owned banking subsidiaries: First-Citizens Bank & Trust Company (FCB), a North Carolina-chartered bank, and IronStone Bank (ISB), a federally-chartered thrift institution.  FCB operates branches in North Carolina, Virginia, West Virginia, Maryland and Tennessee.  ISB operates in Georgia, Florida, Texas, New Mexico, Arizona, California, Oregon, Washington, Colorado, Oklahoma, Missouri and Kansas.  Unless otherwise noted, the terms we, us and BancShares refer to the consolidated financial position and consolidated results of operations for BancShares.

BancShares’ earnings and cash flows are derived primarily from the commercial banking activities conducted by its banking subsidiaries.  These activities include commercial and consumer lending, deposit and cash management products, cardholder, merchant, wealth management services as well as various other products and services typically offered by commercial banks.  FCB and ISB gather interest-bearing and noninterest-bearing deposits from retail and commercial customers.  BancShares and its subsidiaries also secure funding through various non-deposit sources.   We invest the liquidity generated from these funding sources in various types of interest-earning assets such as loans and leases, investment securities and overnight investments.  We also invest in bank premises, furniture and equipment used to conduct the subsidiaries’ commercial banking business.

Various external factors influence customer demand for our loan, lease and deposit products.  In an effort to stimulate and control the rate of growth of economic activity and inflation, monetary actions by the Federal Reserve are significant to the interest rate environment in which we operate.  Interest rate decisions by the Federal Reserve have a significant impact on the pricing of and demand for loan, deposit and cash management products.

In addition to the interest rate environment, the general strength of the economy influences demand as well as the quality and collectibility of our loan and lease portfolio.  External economic indicators such as consumer bankruptcy rates and business debt service capacity closely follow trends in the economic cycle.

Although we are unable to control the external factors that influence our business, through the utilization of various liquidity, interest rate and credit risk management tools, we seek to minimize the potentially adverse risks of unforeseen and unfavorable economic trends and take advantage of favorable economic conditions when appropriate.

Financial institutions frequently focus their strategic and operating emphasis on maximizing profitability and therefore measure their relative success by reference to profitability measures such as return on average assets or return on average shareholders’ equity.  BancShares’ profitability measures have historically compared unfavorably to the returns of similar-sized financial holding companies.  Instead, we place primary emphasis upon asset quality, balance sheet liquidity and capital conservation, even when those priorities may be detrimental to short-term profitability.

Based on our organization’s competitive position and strategic focus within the financial services industry, we believe opportunities for significant growth and expansion exist.  We operate in diverse and growing geographic markets and believe that by offering competitive products and superior customer service, we can increase our business volumes and profitability.  In recent years, we have focused our efforts on customers who own their own businesses, medical and other professionals and financially active individuals.

We seek to increase fee income in areas such as cardholder and merchant services, insurance, cash management and wealth management services.  Leveraging our investments in technology, we also focus on opportunities to generate income by providing processing services to other banks.

11

Financial Summary									Table 1
	2008		2007
	First		Fourth		Third		Second		First
	Quarter		Quarter		Quarter		Quarter		Quarter
Summary of Operations	(thousands, except share data and ratios)
Interest income	$      217,403		$      230,826		$      232,120		$      223,473		$      217,637
Interest expense	94,826		109,197		111,185		103,884		99,448
Net interest income	122,577		121,629		120,935		119,589		118,189
Provision for credit losses	10,118		11,795		17,333		934		3,532
Net interest income after provision
for credit losses	112,459		109,834		103,602		118,655		114,657
Noninterest income	83,668		76,534		77,285		72,620		69,031
Noninterest expense	145,641		146,285		146,906		142,878		138,595
Income before income taxes	50,486		40,083		33,981		48,397		45,093
Income taxes	18,101		13,920		11,362		17,546		16,109
Net income	$        32,385		$        26,163		$        22,619		$        30,851		$        28,984
Net interest income-taxable equivalent	$      124,430		$      123,666		$      122,980		$      121,409		$      119,964
Selected Quarterly Averages
Total assets	$ 16,307,994		$ 16,276,649		$ 16,092,009		$ 15,725,976		$ 15,572,613
Investment securities	3,183,636		3,272,015		3,162,011		3,047,753		3,092,261
Loans and leases	10,961,706		10,831,571		10,623,247		10,360,913		10,230,858
Interest-earning assets	14,691,141		14,655,309		14,476,247		14,118,884		13,908,622
Deposits	12,905,651		12,876,549		12,728,527		12,524,786		12,502,206
Interest-bearing liabilities	12,309,132		12,216,067		12,052,307		11,698,285		11,557,940
Long-term obligations	475,732		404,367		405,101		405,339		408,277
Shareholders' equity	$   1,466,411		$   1,420,348		$   1,385,284		$   1,353,739		$   1,323,327
Shares outstanding	10,434,453		10,434,453		10,434,453		10,434,453		10,434,453
Selected Quarter-End Balances
Total assets	$ 16,746,518		$ 16,212,107		$ 16,311,870		$ 16,008,605		$ 15,853,778
Investment securities	3,206,137		3,236,835		3,266,150		3,023,799		3,031,798
Loans and leases	11,029,937		10,963,904		10,763,158		10,513,041		10,262,356
Interest-earning assets	15,039,574		14,466,948		14,542,241		14,232,802		14,094,002
Deposits	13,226,991		12,928,544		12,980,447		12,772,322		12,722,532
Interest-bearing liabilities	12,566,799		12,118,967		12,170,559		11,830,904		11,671,127
Long-term obligations	609,335		404,392		404,266		405,314		405,356
Shareholders' equity	$   1,486,034		$   1,441,208		$   1,401,575		$   1,367,980		$   1,342,327
Shares outstanding	10,434,453		10,434,453		10,434,453		10,434,453		10,434,453
Profitability Ratios (averages)
Rate of return (annualized) on:
Total assets	0.80	%	0.64	%	0.56	%	0.79	%	0.75	%
Shareholders' equity	8.88		7.31		6.48		9.14		8.88
Dividend payout ratio	8.87		10.96		12.67		9.29		9.89
Liquidity and Capital Ratios (averages)
Loans and leases to deposits	84.94	%	84.12	%	83.46	%	82.72	%	81.83	%
Shareholders' equity to total assets	8.99		8.73		8.61		8.61		8.50
Time certificates of $100,000 or more to
total deposits	18.13		18.04		17.67		16.95		16.60
Per Share of Stock
Net income	$            3.10		$            2.51		$            2.17		$            2.96		$            2.78
Cash dividends	0.275		0.275		0.275		0.275		0.275
Book value at period end	142.42		138.12		134.32		131.10		128.64
Tangible book value at period end	132.07		127.72		123.88		120.61		118.10

12

We attempt to mitigate certain of the risks that can endanger our profitability and growth prospects.  While we are attentive to all areas of risk, economic risk is especially problematic due to the lack of control and the potential material impact upon our financial results.  Specific economic risks include recession, rapid movements in interest rates, changes in the yield curve and significant shifts in inflation expectations.

PERFORMANCE SUMMARY

BancShares realized an increase in earnings during the first quarter of 2008 compared to the first quarter of 2007.  Consolidated net income during the first quarter of 2008 equaled $32.4 million compared to $29.0 million earned during the corresponding period of 2007.   The annualized return on average assets was 0.80 percent during the first quarter of 2008, compared to 0.75 percent during the same period of 2007.  The annualized return on average equity was 8.88 percent during 2008, unchanged from 2007.  Net income per share during the first quarter of 2008 totaled $3.10, compared to $2.78 during the first quarter of 2007, an 11.5 percent increase.

The $3.4 million or 11.7 percent earnings increase resulted primarily from a gain arising from the redemption of Visa, Inc. stock in conjunction with its initial public offering and the reversal of an accrued liability for Visa member bank liabilities established in 2007.   Significantly higher provision for credit losses reduced current period earnings.

INTEREST-EARNING ASSETS

Interest-earning assets include loans and leases, investment securities and overnight investments, all of which reflect varying interest rates based on the risk level and repricing characteristics of the underlying asset.  Riskier investments typically carry a higher interest rate, but expose the investor to potentially higher levels of default.  We have historically focused on maintaining high asset quality, which results in a loan and lease portfolio subjected to strenuous underwriting and monitoring procedures.   Our investment securities portfolio includes high-quality assets, primarily United States Treasury and government agency securities.  Generally, the investment securities portfolio grows and shrinks based on trends among loans and leases, deposits and borrowings.  When growth among deposits and borrowings exceeds loan and lease demand, we invest excess funds in the securities portfolio.  Conversely, when loan and lease demand exceeds growth in deposit and borrowings, we use proceeds from maturing securities to fund loan and lease demand. Overnight investments are selectively made with other financial institutions that are within our risk tolerance.

During the first quarter of 2008, interest-earning assets averaged $14.69 billion, an increase of $782.5 million or 5.6 percent from the first quarter of 2007.  This increase primarily reflects growth in the loan and lease portfolio.

Loans and leases.  At March 31, 2008 and 2007, loans and leases totaled $11.03 billion and $10.26 billion, respectively.  The $767.6 million or 7.5 percent growth from March 31, 2007 to March 31, 2008 resulted from growth within the commercial mortgage, revolving mortgage and commercial and industrial loan portfolios.

Commercial real estate loans totaled $4.05 billion at March 31, 2008, representing 36.8 percent of total loans and leases.  This balance represents an increase of $313.8 million or 8.4 percent since March 31, 2007.  Demand for loans secured by owner-occupied medical and professional facilities remained reasonably strong, particularly in expansion markets.  These loans are underwritten based primarily upon the cash flow from the operation of the business rather than the value of the real estate collateral.

Commercial and industrial loans equaled $1.72 billion or 15.6 percent of total loans and leases outstanding.  These loans have increased $170.4 million or 11.0 percent since March 31, 2007.  Customer demand and expansion markets have supported the growth of these loans.

At March 31, 2008, revolving mortgage loans totaled $1.52 billion, representing 13.8 percent of total loans outstanding, an increase of $219.9 million or 16.9 percent compared to March 31, 2007.  Retail customers have increased utilization of home equity loans due to lower market rates compared to other consumer debt alternatives.

Construction and land development loans totaled $817.8 million or 7.4 percent of total loans at March 31, 2008, an increase of $38.1 million or 4.9 percent since March 31, 2007.   Given the continuing softening of real estate markets, we have lessened our focus on growth of this area of lending, particularly in the Atlanta, Georgia and Southwest Florida markets.

13

Loans and Leases					Table 2
	2008	2007
	First	Fourth	Third	Second	First
	Quarter	Quarter	Quarter	Quarter	Quarter
Real estate:	(thousands)
Construction and land development	$         817,832	$         810,818	$         816,328	$         784,960	$         779,718
Commercial mortgage	4,053,773	3,982,496	3,899,289	3,815,113	3,739,948
Residential mortgage	1,027,469	1,029,030	1,037,460	1,038,602	1,020,945
Revolving mortgage	1,521,191	1,494,431	1,454,659	1,374,212	1,301,311
Other mortgage	147,082	145,552	153,487	159,421	157,576
Total real estate loans	7,567,347	7,462,327	7,361,223	7,172,308	6,999,498
Commercial and industrial	1,721,927	1,707,394	1,615,550	1,589,519	1,551,532
Consumer	1,308,269	1,368,228	1,375,001	1,362,356	1,345,631
Lease financing	340,620	340,601	329,535	315,965	302,581
Other	91,774	85,354	81,849	72,893	63,114
Total loans and leases	11,029,937	10,963,904	10,763,158	10,513,041	10,262,356
Less allowance for loan and lease losses	141,591	136,974	133,576	129,276	132,640
Net loans and leases	$    10,888,346	$    10,826,930	$    10,629,582	$    10,383,765	$    10,129,716

We anticipate moderate growth in commercial mortgage and commercial and industrial loans in 2008, as our expansion into new markets continues to generate higher levels of loan and lease demand among our business customers.  All growth projections are subject to change as a result of economic deterioration or improvement, competitive forces and other external factors.

Investment securities.  Investment securities available for sale equaled $3.20 billion at March 31, 2008, compared to $2.93 billion at March 31, 2007.  The $264.0 million or 9.0 percent increase resulted from growth in deposits and borrowings that was not absorbed by loan and lease growth.  Available-for-sale securities are reported at their aggregate fair value.  Investment securities held to maturity totaled $7.2 million at March 31, 2008, compared to $96.8 million at March 31, 2007.  In order to augment liquidity, we continued to reinvest proceeds from maturities of held-to-maturity securities into securities designated as available-for sale.  Securities that are classified as held to maturity reflect BancShares’ ability and positive intent to hold those investments until maturity.

Income on interest-earning assets.  Interest income amounted to $217.4 million during the first quarter of 2008, a $234,000 decrease from the first quarter of 2007.  During the first quarter of 2008, the impact of lower asset yields more than offset the impact of balance sheet growth when compared to the same period of 2007.  The taxable-equivalent yield on interest-earning assets equaled 6.00 percent for the first quarter of 2008, compared to 6.38 percent for the corresponding period of 2007.

Loan and lease interest income for the first quarter of 2008 equaled $177.2 million, an increase of $564,000 from the first quarter of 2007, the combined result of lower yields offset by favorable growth in average loan and lease balances.  The taxable-equivalent yield was 6.51 percent during the first quarter of 2008, a 50 basis point reduction from the same period of 2007.  The reduced yields resulted from new loans and leases originated at current market rates and repricing of outstanding variable-rate loans.  Average loans and leases increased $730.8 million or 7.1 percent from 2007 to 2008.

14

Investment Securities																Table 3
	March 31, 2008									March 31, 2007
					Average		Taxable							Average		Taxable
			Fair		Maturity		Equivalent					Fair		Maturity		Equivalent
	Cost		Value		(Yrs./Mos.)		Yield			Cost		Value		(Yrs./Mos.)		Yield
	(thousands)
Investment securities available for sale:
U. S. Government:
Within one year	$	1,575,484	$	1,596,864		0/6		4.85	%	$	1,522,251	$	1,515,123		0/6		4.06	%
One to five years		1,407,293		1,443,238		1/7		3.77			1,267,976		1,268,807		1/7		4.92
Five to ten years		4,362		4,376		5/8		4.85			6,335		6,139		6/4		4.88
Over ten years		75,168		75,776		26/9		5.47			71,151		70,047		27/5		5.45
Total		3,062,307		3,120,254		1/8		4.37			2,867,713		2,860,116		1/0		5.45
State, county and municipal:
Within one year		1,072		1,075		0/6		3.81			871		870		0/3		3.02
One to five years		1,875		1,877		2/4		4.23			2,726		2,692		2/6		3.97
Five to ten years		356		373		5/0		4.95			470		476		5/11		4.90
Over ten years		66		66		20/8		4.44			211		211		24/4		3.46
Total		3,369		3,391		2/4		4.15			4,278		4,249		3/6		3.86
Other
Within one year		-		-				-			-		-		-
One to five years		-		-				-			-		-		-
Five to ten years		-		-				-			-		-		-
Over ten years		7,053		8,672		12/1		11.13			9,566		10,039		11/2		10.66
Total		7,053		8,672		11/2		11.13			9,566		10,039		11/2		10.66
Equity securities		42,714		66,631							34,297		60,591
Total investment securities
available for sale	$	3,115,443	$	3,198,948						$	2,915,854	$	2,934,995
Investment securities held to maturity:
U. S. Government:
Within one year	$	-	$	-		-		-		$	88,294	$	87,889		0/4		3.71	%
One to five years		-		-		-		-			3		3		2/11		8.00
Five to ten years		5,163		5,267		9/0		5.54	%		1,175		1,165		9/11		5.71
Over ten years		191		226		19/3		6.31			5,500		5,502		10/1		5.59
Total		5,354		5,493		9/5		5.56			94,972		94,559		1/0		3.85
State, county and municipal:
Within one year		-		-							-		-
One to five years		149		153		1/1		5.88			149		154		4/1		5.88
Five to ten years		-		-							-		-
Over ten years		1,436		1,520		10/1		6.02			1,432		1,548		12/1		6.02
Total		1,585		1,673		9/3		6.01			1,581		1,702		10/3		6.01
Other
Within one year		-		-							-		-
One to five years		250		250		0/4		3.25			250		250		1/4		3.25
Five to ten years		-		-							-		-
Total		250		250		0/4		3.25			250		250		1/4		3.25
Total investment securities
held to maturity		7,189		7,416		9/1		5.58			96,803		96,511		1/0		3.88
Total investment securities	$	3,122,632	$	3,206,364						$	3,012,657	$	3,031,506
Average maturity assumes callable securities mature on their earliest call date; yields are based on amortized cost; yields related to securities that are
exempt from federal and/or state income taxes are stated on a taxable-equivalent basis assuming statutory rates of 35% for federal income tax purposes
and 6.9% for state income taxes for all periods.

15

Interest income earned on the investment securities portfolio amounted to $36.2 million during the first quarter of 2008 and $33.6 million during the same period of 2007, an increase of $2.6 million or 7.7 percent.  This increase in income is the result of slightly improved yields and higher average volume.  The taxable-equivalent yield increased 18 basis points from 4.54 percent in the first quarter of 2007 to 4.72 percent in the first quarter of 2008 due to higher market rates.   Average investment securities increased $91.4 million from $3.09 billion during the first quarter of 2007 to $3.18 billion during the first quarter of 2008.  We anticipate significant reduction in the yield on the investment securities portfolio during the remaining quarters of 2008 due to sharply lower market rates on purchases of new securities.

Interest income from overnight investments amounted to $4.1 million during the first quarter of 2008, a decrease of $3.4 million from the $7.5 million earned during the first quarter of 2007, the combined result of a yield decline of 216 basis points and a $39.7 million reduction in average balances.

INTEREST-BEARING LIABILITIES

Interest-bearing liabilities include our interest-bearing deposits as well as short-term borrowings and long-term obligations.  Deposits represent our primary funding source, although we also utilize non-deposit borrowings to stabilize our liquidity base and to fulfill commercial customer demand for cash management services.   Certain of our long-term borrowings also provide capital strength under existing guidelines established by the Federal Reserve Bank and other banking regulators.

Deposits.  At March 31, 2008, total deposits equaled $13.23 billion, an increase of $504.5 million or 4.0 percent over March 31, 2007.  Average interest-bearing deposits were $10.51 billion during the first quarter of 2008, an increase of $564.6 million or 5.7 percent from the first quarter of 2007.  Average time deposits increased $383.9 million or 7.5 percent to $5.50 billion from the first quarter of 2007 to the same period of 2008.  During the first quarter of 2008, money market accounts averaged $3.06 billion, compared to $2.77 billion in the first quarter of 2007.  Partially offsetting these increases, average balances of Checking With Interest dropped $56.1 million while average savings accounts declined $52.7 million.

We attribute the growth of time deposits since the first quarter of 2007 to the volatility in the stock market and overall instability of the economy.  However, due to significantly lower rates, we expect the composition of interest-bearing deposits will shift throughout 2008 with reductions in time deposits and increases in balances held in money market accounts.  Competition for deposit business in our market areas is extremely intense.  While we have access to non-deposit borrowing sources, we prefer to fund loan and lease demand with traditional core bank deposits.  Therefore, generating acceptable levels of deposit growth is a critical challenge for us, particularly during periods of strong loan demand.

Short-term borrowings   At March 31, 2008, short-term borrowings totaled $1.27 billion compared to $1.25 billion at March 31, 2007.  For the quarters ended March 31, 2008 and 2007, short-term borrowings averaged $1.32 billion and $1.20 billion, respectively.  The $119.1 million or 9.9 percent growth in average short-term borrowings was the result of significantly higher customer demand for our commercial master note and overnight repurchase obligation products, key offerings within our cash management suite of products.

Long-term obligations.  Long-term obligations equaled $609.3 million at March 31, 2008, up $204.0 million from March 31, 2007.   During the first quarter 2008, we sought to take advantage of lower funding costs on long-term borrowings from the Federal Home Loan Bank of Atlanta.

Expense on interest-bearing liabilities.  Interest expense amounted to $94.8 million during the first quarter of 2008, a $4.6 million or 4.6 percent decrease from the first quarter of 2007.  The lower interest expense was the net result of lower rates and higher average volume.  The rate on average interest-bearing liabilities equaled 3.10 percent during the first quarter of 2008, a 39 basis point decrease in the aggregate blended rate on interest-bearing liabilities as compared to the first quarter of 2007.    Average interest-bearing liabilities increased $751.2 million or 6.5 percent from first quarter of 2007 to the first quarter of 2008.

16

Consolidated Taxable Equivalent Rate/Volume Variance Analysis - First Quarter
																					Table 4
			2008							2007								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	(thousands)
Loans and leases	$	10,961,706	$	177,664		6.51	%	$	10,230,858	$	177,065		7.01	%	$	13,028		$	(12,429	)	$	599
Investment securities:
U. S. Government		3,108,764		36,658		4.73			3,014,804		34,021		4.54			1,138			1,499			2,637
State, county and municipal		4,963		81		6.56			5,830		91		6.33			(13	)		3			(10	)
Other		69,909		772		4.44			71,627		774		4.38			(16	)		14			(2	)
Total investment securities		3,183,636		37,511		4.72			3,092,261		34,886		4.54			1,109			1,516			2,625
Overnight investments		545,799		4,081		3.01			585,503		7,461		5.17			(373	)		(3,007	)		(3,380	)
Total interest-earning assets	$	14,691,141	$	219,256		6.00	%	$	13,908,622	$	219,412		6.38	%	$	13,764		$	(13,920	)	$	(156	)
Liabilities
Interest-bearing deposits:
Checking With Interest	$	1,419,402	$	370		0.10	%	$	1,475,547	$	454		0.12	%	$	(14	)	$	(70	)	$	(84	)
Savings		540,123		282		0.21			592,804		311		0.21			(28	)		(1	)		(29	)
Money market accounts		3,057,897		19,666		2.59			2,768,393		22,555		3.30			2,187			(5,076	)		(2,889	)
Time deposits		5,495,535		58,941		4.31			5,111,594		56,691		4.50			4,480			(2,230	)		2,250
Total interest-bearing deposits		10,512,957		79,259		3.03			9,948,338		80,011		3.26			6,625			(7,377	)		(752	)
Federal funds purchased		35,527		274		3.10			78,535		1,002		5.17			(438	)		(290	)		(728	)
Repurchase agreements		290,689		1,218		1.69			272,767		2,469		3.67			128			(1,379	)		(1,251	)
Master notes		935,224		5,996		2.58			774,306		8,295		4.34			1,413			(3,712	)		(2,299	)
Other short-term borrowings		59,003		693		4.72			75,717		916		4.91			(196	)		(27	)		(223	)
Long-term obligations		475,732		7,386		6.21			408,277		6,755		6.62			1,079			(448	)		631
Total interest-bearing liabilities	$	12,309,132	$	94,826		3.10	%	$	11,557,940	$	99,448		3.49	%	$	8,611		$	(13,233	)	$	(4,622	)
Interest rate spread						2.90	%						2.89	%
Net interest income and net yield
on interest-earning assets			$	124,430		3.41	%			$	119,964		3.50	%	$	5,153		$	(687	)	$	4,466

Average loan and lease balances include nonaccrual loans and leases.  Yields related to loans, leases and securities exempt from both federal and state income taxes,  federal income taxes only, or state income taxes only are stated on a taxable-equivalent basis assuming a statutory federal income tax rate of 35% and state income tax rate of  6.90% for each period.  The  taxable-equivalent adjustment was $1,853 for 2008 and $1,775 for 2007.

17

NET INTEREST INCOME

Net interest income totaled $122.6 million during the first quarter of 2008, an increase of $4.4 million or 3.7 percent from the first quarter of 2007.  The taxable-equivalent net yield on interest-earning assets equaled 3.41 percent for the first quarter of 2008, down 9 basis points from the 3.50 percent recorded for the first quarter of 2007.  However, the net yield for the first quarter of 2008 increased six basis points above the fourth quarter of 2007.  The continued compression of the taxable-equivalent net yield results from competitive interest rate pressures and the extremely low absolute level of current interest rates on many of our deposit and borrowing products.

Our asset/liability management strategy continues to focus on maintaining high levels of balance sheet liquidity.  We maintain portfolios of interest-earning assets and interest-bearing liabilities with maturities or repricing characteristics that will protect against wide interest rate fluctuations, thereby limiting, to the extent possible, the ultimate interest rate exposure.

NONINTEREST INCOME

The growth of noninterest income is essential to our ability to sustain adequate levels of profitability.  The primary sources of noninterest income are cardholder and merchant services income, service charges on deposit accounts, revenues derived from wealth management services and fees from processing services.  During 2008, we also recorded a significant securities gain.

During the first three months of 2008, noninterest income amounted to $83.7 million, compared to $69.0 million during the same period of 2007.  Of the $14.6 million or 21.2 percent increase in noninterest income, $8.1 million resulted from a securities gain recognized in conjunction with our investment in Visa, Inc.  During the first quarter of 2008, Visa completed its initial public offering resulting in a conversion of our former member-bank equity investment to a new class of restricted stock.  Immediately thereafter, a portion of our new Visa stock was redeemed for cash thereby triggering the gain.  Other noninterest income increases were recorded in fees from wealth management services, service charges on deposit accounts and cardholder and merchant services income.

Service charges on deposit accounts generated $20.0 million and $17.2 million for the first quarter of 2008 and 2007, respectively.  The $2.8 million or 16.5 percent increase was primarily due to improved commercial service charge income and higher bad check and overdraft charges.  Commercial service charges increased as a result of lower interest rates, which translate into higher service charge income on commercial analysis accounts.  In the second half of 2007, we implemented new tiered levels of pricing for NSF and overdraft items that has resulted in higher fee income.

Fees from wealth management services amounted to $13.2 million during the first quarter of 2008, compared to $11.7 million during the first quarter of 2007.  The $1.5 million or 12.7 percent increase was due to strong broker/dealer and asset management results.

Cardholder and merchant services generated $23.1 million during the first quarter of 2008, an increase of $673,000 or 3.0 percent compared to the first quarter of 2007.  This increase resulted from higher business credit card and debit card interchange volume.  The growth rate of revenue derived from merchant processing services slowed during the current quarter due primarily to weakness in consumer spending.

Fees from processing services, which relate to check processing and other industry-specific services provided to other financial institutions, totaled $8.8 million in the first quarter of 2008 and $8.2 million in the first quarter of 2007.  The $617,000 or 7.5 percent increase was the combined result of continued growth in business volumes generated by client banks.

NONINTEREST EXPENSE

The primary components of noninterest expense are salaries and related employee benefit costs, occupancy expenses related to branch offices and support facilities, and equipment costs related to branch offices and technology.

Noninterest expense equaled $145.6 million for the first three months of 2008, a $7.0 million or 5.1 percent increase over the $138.6 million recorded during the same period of 2007.  Noninterest expense for 2008 includes a $3.3 million credit to other expense resulting from the reversal of a litigation reserve that was accrued during the fourth quarter of 2007 as an estimate of exposure resulting from our Visa member bank status.  Once Visa completed its initial public offering during 2008, a portion of the proceeds were retained, and the member bank liabilities that were the basis for the 2007 accruals were settled.  ISB’s continued growth and expansion continue to contribute to the increase in operating costs.  ISB’s noninterest expense increased from $19.1 million for the first quarter of 2007 to $20.7 million in 2008, a $1.6 million or 8.1 percent increase.

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Salaries and wages increased $4.2 million or 7.2 percent during the first quarter of 2008 when compared to the same period of 2007.  The increase resulted from 2007 merit increases and workforce expansions both as a result of new branch offices and headcount additions in several support functions.  Employee benefits expense totaled $18.2 million for the first three months of 2008, an increase of $5.0 million.  The 38.0 percent increase results from $3.1 million of benefits arising from the retirement of an executive officer, $831,000 accrued as a result of enhancements to agreements with two other executive officers and higher employer health costs.

Occupancy expense amounted to $15.3 million during the first quarter of 2008 and $13.9 million during the first quarter of 2007. The $1.5 million or 10.8 percent increase resulted from higher building depreciation, rent expense and other costs arising from branch expansion and costs related to the corporate headquarters building.  ISB reported an 11.3 percent increase during the first quarter of 2008 due to new branch locations.

Other expenses decreased $3.8 million or 9.8 percent from the first quarter of 2007 to the first quarter of 2008.  This reduction includes the $3.3 million reversal of Visa member bank accrued liabilities that were settled as a result of Visa’s initial public offering.  Advertising costs declined $1.8 million during the first quarter of 2008, while   postage, cardholder and merchant services and other third party processing costs experienced increases in 2008.

INCOME TAXES

BancShares continually monitors and evaluates the potential impact of current events on the estimates used to establish income tax expenses and income tax liabilities.  On a periodic basis, we evaluate our income tax positions based on current tax law, positions taken by various tax auditors within the jurisdictions that BancShares is required to file income tax returns as well as potential or pending audits or assessments by such tax auditors.

Income tax expense amounted to $18.1 million during the three months ended March 31, 2008, compared to $16.1 million during the same period of 2007.  The 12.4 percent increase in income tax expense was primarily the result of higher pre-tax earnings.  The effective tax rates for these periods equaled  35.9 percent and 35.7 percent, respectively.

On January 1, 2007, we adopted the provisions of FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes (FIN 48).  FIN 48 clarifies uncertainty in income taxes recognized by establishing a recognition threshold and a measurement attribute for the financial statement treatment of a tax position taken or expected to be taken in a tax return.  The adoption of FIN 48 resulted in a reduction in the liability for unrecognized tax benefits, which was offset by a $962,000 increase in retained earnings.

SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY

BancShares continues to exceed minimum regulatory capital standards, and the banking subsidiaries remain well-capitalized.  At March 31, 2008 and 2007, the leverage capital ratios of BancShares were 9.80 percent and 9.60 percent, respectively, surpassing the minimum level of 3 percent.  As a percentage of risk-adjusted assets, BancShares' Tier 1 capital ratios were 13.12 percent at March 31, 2008 and 13.09 percent at March 31, 2007.  The minimum ratio allowed is 4 percent of risk-adjusted assets.  The total risk-adjusted capital ratios were 15.47 percent at March 31, 2008 and 15.52 percent as of March 31, 2007.  The minimum total capital ratio is 8 percent.

The continued de novo growth and operating losses of ISB has required BancShares to infuse significant amounts of capital into ISB to support its expanding balance sheet.  BancShares infused $7.0 million into ISB during the first quarter of 2008.  Since ISB was formed in 1997, BancShares has provided $311.0 million in capital.  BancShares’ prospective capacity to provide capital to support the growth and expansion of ISB is highly dependent upon FCB’s ability to return capital through dividends to BancShares.

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Summary of Loan and Lease Loss Experience and Risk Elements																Table 5
	2008			2007
	First			Fourth					Third			Second				First
	Quarter			Quarter					Quarter			Quarter				Quarter
	(thousands, except ratios)
Allowance for credit losses at beginning of period	$	144,271		$	140,871				$	136,396		$	139,496			$	138,646
Provision for credit losses		10,118			11,795					17,333			934				3,532
Adjustment					-
Net charge-offs:
Charge-offs		(6,606	)		(9,657	)				(14,099	)		(4,954	)			(3,980	)
Recoveries		1,308			1,262					1,241			920				1,298
Net charge-offs		(5,298	)		(8,395	)				(12,858	)		(4,034	)			(2,682	)
Allowance for credit losses at end of period	$	149,091		$	144,271			#	$	140,871		$	136,396			$	139,496
Allowance for credit losses includes:
Allowance for loan and lease losses	$	141,591		$	136,974				$	133,576		$	129,276			$	132,640
Liability for unfunded credit commitments		7,500			7,297					7,295			7,120				6,856
Allowance for credit losses at end of period	$	149,091		$	144,271				$	140,871		$	136,396			$	139,496
Historical Statistics
Average loans and leases	$	10,961,706		$	10,831,571				$	10,623,247		$	10,360,913			$	10,230,858
Loans and leases at period-end		11,029,937			10,963,904					10,763,158			10,513,041				10,262,356
Risk Elements
Nonaccrual loans and leases	$	39,259		$	13,021				$	18,227		$	12,458			$	14,943
Other real estate		3,987			6,893					5,202			6,352				6,245
Total nonperforming assets	$	43,246		$	19,914				$	23,429		$	18,810			$	21,188
Accruing loans and leases 90 days or more past due	$	7,569		$	7,124				$	10,322		$	9,289			$	8,396
Ratios
Net charge-offs (annualized) to average total loans and leases		0.19	%		0.31		%			0.48	%		0.16		%		0.11	%
Percent of loans and leases at period-end:
Allowance for loan and lease losses		1.28			1.25					1.24			1.23				1.29
Reserve for unfunded commitments		0.07			0.07					0.07			0.07				0.07
Allowance for credit losses		1.35			1.32					1.31			1.30				1.36
Nonperforming assets to total loans and leases plus other real estate		0.39			0.18					0.22			0.18				0.21

RISK MANAGEMENT

In the normal course of business, BancShares is exposed to various risks.   To manage the major risks that are inherent in the operation of a financial holding company and to provide reasonable assurance that our long-term business objectives will be attained, various policies and risk management processes identify, monitor and manage risk within acceptable tolerances.  Management continually refines and enhances its risk management policies and procedures to maintain effective risk management.

The most prominent risk exposures are credit, interest rate and liquidity risk.  Credit risk is the risk of not collecting the amount of a loan or investment when it is contractually due.  Interest rate risk is the potential reduction of net interest income as a result of changes in market interest rates.  Liquidity risk is the possible inability to fund obligations to depositors, creditors, investors or borrowers.

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Credit risk.  BancShares manages and monitors extensions of credit and the quality of the loan and lease portfolio through rigorous initial underwriting processes and periodic ongoing reviews.  Underwriting standards reflect credit policies and procedures, and much of the credit decision process is centralized.  We maintain a credit review function that conducts independent risk reviews and analyses for the purpose of ensuring compliance with credit policies and to monitor asset quality trends.   The independent risk reviews include portfolio analysis by geographic location and horizontal reviews across industry sectors within the banking subsidiaries.  BancShares strives to identify potential credit problems as early as possible, to take charge-offs or write-downs as appropriate and to maintain adequate allowances for credit losses that are inherent in the loan and lease portfolio.  The maintenance of excellent asset quality is one of our key performance measures.

We maintain a well-diversified loan and lease portfolio and seek to avoid the risk associated with large concentrations within specific geographic areas or industries.  Our continuing expansion has allowed us to mitigate our historic exposure to geographic risk concentration in North Carolina and Virginia.  However, as we have entered new markets, we have endeavored to ensure that rigorous centralized underwriting and monitoring controls are functioning effectively.  We will continue to place emphasis upon maintaining strong lending standards in new markets.

In recent years, we have sought opportunities to provide financial services to businesses associated with and professionals within the medical community.  Due to strong loan growth within this industry, our loans and leases to borrowers in medical, dental or related fields totaled $2.35 billion as of March 31, 2008, which represents 21.3 percent of loans and leases outstanding, compared to $1.97 billion or 19.2 percent of loans and leases at March 31, 2007.  No other industry represented more than 10 percent of total loans and leases outstanding at March 31, 2008.

Nonperforming assets include nonaccrual loans and leases and other real estate.   Other real estate includes foreclosed property as well as branch facilities that we have closed but not sold.   At March 31, 2008, BancShares' nonperforming assets amounted to $43.2 million or 0.39 percent of loans and leases plus foreclosed properties, compared to $21.2 million at March 31, 2007.  During the first quarter of 2008, we moved $27.9 million of residential construction loans to nonaccrual status. These loans are secured by properties located in the Atlanta, Georgia and Southwest Florida markets, areas that have suffered from significant excess capacity and falling property values.  Our borrowers, who are dependent on proceeds from sales to fund their obligations to us, face significant liquidity challenges.  Further, due to concerns about other borrowers' ability to comply with existing loan repayment terms, additional residential construction loans totaling $42.2 million were identified as potential problem loans as of March 31, 2008.  As real estate markets remain soft, we will continue to closely monitor nonperforming assets, taking necessary actions to minimize potential exposure.

At March 31, 2008, the allowance for credit losses totaled $149.1 million or 1.35 percent of total loans and leases, compared to 1.36 percent at March 31, 2007.  The allowance for credit losses includes the allowance for loan and lease losses and the reserve for unfunded credit commitments.  We continuously analyze the growth and risk characteristics of the loan and lease portfolio under current economic conditions in order to evaluate the adequacy of the allowance.  Such factors as the financial condition of borrowers, fair market value of collateral and other considerations are recognized in estimating probable credit losses.

Management considers the established allowance adequate to absorb estimated probable losses that relate to loans and leases outstanding at March 31, 2008, although future additions may be necessary based on changes in economic conditions and other factors.  In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for credit losses.  Such agencies may require adjustments to the allowance based on information available to them at the time of their examination.

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The provision for credit losses charged to operations during the first quarter of 2008 was $10.1 million, compared to $3.5 million during the first quarter of 2007.  The $6.6 million increase in the provision for credit losses during 2008 resulted primarily from allowances related to the residential construction loan portfolio and higher net charge-offs.  Net charge-offs during the first quarter of 2008 equaled $5.3 million compared to $2.7 million during the first quarter of 2007 with increases noted among both commercial and consumer loans.  On an annualized basis, net charge-offs represent 0.19 percent of average loans and leases during the first quarter of 2008 compared to 0.11 percent in the first quarter of 2007.

Interest rate risk.  Interest rate risk results principally from assets and liabilities maturing or repricing at different points in time, from assets and liabilities repricing at the same point in time but in different amounts and from short-term and long-term interest rates changing in different magnitudes, an event frequently described by the resulting impact on the shape of the yield curve.   Market interest rates may also have a direct or indirect impact on the interest rate and repricing characteristics of loans and leases that are originated as well as the rate characteristics of our interest-bearing liabilities.

We do not typically utilize interest rate swaps, floors, collars or other derivative financial instruments to attempt to hedge our rate sensitivity and interest rate risk.  However, during the second quarter of 2007, in conjunction with the issuance of $115.0 million in trust preferred securities, we entered into an interest rate swap to synthetically convert the variable rate coupon on the securities to a fixed rate of 7.125 percent for a period of five years.

We assess our interest rate risk by simulating future amounts of net interest income under various interest rate scenarios and comparing those results to forecasted net interest income assuming stable rates.  These simulations indicate that net interest income will vary by less than 4 percent when interest rates rise or decline by 200 basis points.  We also utilize the market value of equity as a tool in measuring and managing interest rate risk.  The market value of equity is estimated to vary by less than 10 percent when interest rates move 200 basis points in either direction.

Liquidity risk.  Liquidity risk results from the mismatching of asset and liability cash flows.  BancShares manages this risk by structuring its balance sheet prudently and by maintaining various borrowing resources to fund potential cash needs.  BancShares has historically maintained a strong focus on liquidity, and our deposit base represents our primary liquidity source.  Through our deposit pricing strategies, we have the ability to stimulate or curtail deposit growth.  BancShares also maintains additional sources for borrowed funds through federal funds lines of credit and other borrowing facilities.  At March 31, 2008, BancShares had access to $525.0 million in unfunded borrowings through its correspondent bank network.  Through membership in the Federal Home Loan Bank of Atlanta, our subsidiary banks have access to overnight, short-term and long-term funding, subject to underwriting and collateral requirements.  We also utilize deposit brokers to provide funding.

Once we have generated the needed liquidity and satisfied our loan and lease demand, residual liquidity is invested in overnight and longer-term investment products.  Investment securities available for sale provide immediate liquidity as needed.

SEGMENT REPORTING

BancShares conducts its banking operations through its two banking subsidiaries, FCB and ISB.  Although FCB and ISB offer similar products and services to customers, each entity operates in distinct geographic markets and has separate management groups.  We monitor growth and financial results in these institutions separately and, within each institution, by geographic segregation.

Although FCB has grown through acquisition in certain of its markets, throughout its history the majority of its expansion has been accomplished on a de novo basis.  Since it first opened in 1997, ISB has followed a similar business model for growth and expansion.  Because of its size, the costs associated with FCB’s current rate of expansion are not material to its financial performance.  However, due to the rapid pace of its growth and the number of branch offices that have not attained sufficient size to achieve profitability, the financial results and trends of ISB are significantly affected by its current and continuing growth.  Each new market ISB enters creates additional operating costs that are typically not fully offset by operating revenues until the third year after initial opening.  Losses incurred since ISB’s inception total $39.3 million.

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IronStone Bank.  At March 31, 2008, ISB operated 55 facilities in twelve states, with a focus on markets with favorable growth prospects.  Our business model for new markets has two primary requirements.  First, we hire experienced bankers who are established in the markets we are entering and who are focused on strong asset quality and delivering high-quality customer service while maintaining strong asset quality.  Second, we occupy branch facilities located in areas conducive to attracting medical and professional customers.  While these are costly goals, we believe that they are critical to establishing a solid foundation for future success in new markets.  As its newest branches continue to mature, we expect ISB will operate at a loss throughout 2008.

ISB’s total assets equaled $2.66 billion at March 31, 2008 compared to $2.23 billion at March 31, 2007, an increase of $436.8 million or 19.6 percent.  ISB recorded a net loss of $4.6 million during the first quarter of 2008, compared to net loss of $266,000 during the same period of 2007.  This represents an unfavorable variance of $4.3 million.

Net interest income increased $24,000 during the first quarter of 2008, the result of loan growth offset by a reduction in the net yield on interest-earning assets.  The provision for credit losses increased $5.4 million during the first quarter of 2008 primarily due to the $27.9 million of residential construction loans moved to nonaccrual status during the quarter.  The provision for credit losses also increased due to higher net charge-offs, which increased from $219,000 in the first quarter of 2007 to $1.8 million in the first quarter of 2008.  On an annualized basis, the ratio of current quarter net charge-offs to average loans and leases outstanding equaled 0.34 percent, compared to 0.04 percent in the prior year.

ISB’s noninterest income decreased $68,000 or 2.1 percent during the first quarter of 2008, the net result of lower working capital finance fees and improved service charge income and cardholder income.  Noninterest expense increased $1.6 million or 8.1 percent during the first quarter of 2008, versus the same period of 2007.  Salary expense increased $510,000 or 6.9 percent due to merit increases and new positions.  Occupancy expense was up $415,000 or 11.3 percent due to the new facilities.  Other expense equaled $5.8 million during the first quarter of 2008 compared to $5.3 million during the first quarter of 2007 caused by higher general operating expenses, such as credit card processing and third party processing fees.

First-Citizens Bank & Trust Company.  At March 31, 2008, FCB operated 342 branches in five states.

FCB’s total assets increased from $13.36 billion at March 31, 2007 to $13.93 billion at March 31, 2008, an increase of $571.0 million or 4.3 percent.  FCB recorded net income of $39.1 million during the first quarter of 2008 compared to $31.7 million during the same period of 2007.   This represents a $7.5 million or 23.6 percent increase in net income due to the nonrecurring gain in noninterest income. FCB’s net interest income increased $3.6 million or 3.4 percent during 2008, due to higher balances of interest-earning assets.

The provision for credit losses increased $1.2 million due to higher net charge offs, which increased by 42.2 percent.  FCB’s ratio of net charge-offs to average loans and leases was 0.16 percent for the first quarter of 2008 compared to 0.10 percent for the same period of 2007.  FCB’s noninterest income increased $14.2 million or 20.5 percent during the first quarter of 2008, primarily the result of the nonrecurring gain from the sale of Visa, Inc. stock.  Other improvements were noted in service charges on deposit accounts, wealth management services and fees from processing services.  Noninterest expense increased $4.6 million or 3.7 percent during 2008, caused principally by higher personnel, occupancy and credit card processing costs.

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CURRENT ACCOUNTING AND REGULATORY ISSUES

In September 2007, the FASB issued Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (Statement 157).  Statement 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  Statement 157 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued.  We adopted Statement 157 on January 1, 2008, and the adoption did not have a material impact on our consolidated financial statements.

In September 2007, the FASB issued Summary of Statement No. 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (Statement 158).  In addition to other provisions that have already been applied for all periods presented, Statement 158 requires sponsors of defined benefit and other post-retirement plans to measure the funded status of a plan as of the date of its year-end statement of financial position.  For BancShares, that provision will become effective December 31, 2008.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities” (Statement 159). Statement 159 allows an entity to elect to measure certain financial assets and liabilities at fair value with changes in fair value recognized in the income statement each period. The statement also requires additional disclosures to identify the effects of an entity’s fair value election on its earnings. We adopted Statement 159 on January 1, 2008, and the adoption did not have a material impact on financial condition, results of operations, or liquidity.

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.

FORWARD-LOOKING STATEMENTS

Statements in this Report and exhibits relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments, expectations or beliefs about future events or results, and other statements that are not descriptions of historical facts, may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in our Annual Report on Form 10-K and in other documents filed by us from time to time with the Securities and Exchange Commission.

Forward-looking statements may be identified by terms such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “forecasts,” “projects,” “potential” or “continue,” or similar terms or the negative of these terms, or other statements concerning opinions or judgments of BancShares’ management about future events.

Factors that could influence the accuracy of those forward-looking statements include, but are not limited to, the financial success or changing strategies of our customers, customer acceptance of our services, products and fee structure, the competitive nature of the financial services industry, our ability to compete effectively against other financial institutions in our banking markets, actions of government regulators, the level of market interest rates and our ability to manage our interest rate risk, changes in general economic conditions that affect our loan and lease portfolio, the abilities of our borrowers to repay their loans and leases, the values of real estate and other collateral, and other developments or changes in our business that we do not expect.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We have no obligation to update these forward-looking statements.

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Item 3.                      Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential economic loss resulting from changes in market prices and interest rates.  This risk can either result in diminished current fair values of financial instruments or reduced net interest income in future periods.  As of March 31, 2008, BancShares’ market risk profile has not changed significantly from December 31, 2007.  Changes in fair value that result from movement in market rates cannot be predicted with any degree of certainty. Therefore, the impact that future changes in market rates will have on the fair values of financial instruments is uncertain.

Item 4.                      Controls and Procedures

BancShares’ management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of BancShares’ disclosure controls and procedures in accordance with Rule 13a-15 of the Securities Exchange Act of 1934 (Exchange Act).  Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, BancShares’ disclosure controls and procedures were effective in enabling it to record, process, summarize and report in a timely manner the information required to be disclosed in reports it files under the Exchange Act.

No change in BancShares’ internal control over financial reporting occurred during the first quarter of 2008 that had materially affected, or is reasonably likely to materially affect, BancShares’ internal control over financial reporting.

PART II

Item 6.                            Exhibits

10	Retirement Agreement and Release between Registrant’s subsidiary, First-Citizens Bank & Trust Company, the Registrant and James B. Hyler, Jr.
31.1	Certification of Chief Executive Officer
31.2	Certification of Chief Financial Officer
32	Certifications of Chief Executive Officer and Chief Financial Officer

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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.

Dated:  May 8, 2008                                                                   FIRST CITIZENS BANCSHARES, INC.

                   (Registrant)

By: /s/ KENNETH A. BLACK

Kenneth A. Black

Vice President, Treasurer

and Chief Financial Officer

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EX-10

Exhibit 10

STATE OF NORTH CAROLINA

COUNTY OF WAKE

RETIREMENT AGREEMENT AND RELEASE

THIS RETIREMENT AGREEMENT AND RELEASE (the "Agreement") is made and entered into by and between FIRST-CITIZENS BANK & TRUST COMPANY, a North Carolina banking corporation with its principal place of business in Raleigh, Wake County, North Carolina (the "Bank"); First Citizens BancShares, Inc. (“BancShares”) and JAMES B. HYLER, JR. ("Associate") (individually referred to as a “Party” and collectively referred to as the “Parties”);

W I T N E S S E T H:

WHEREAS, Associate has been employed by the Bank for a number of years in various capacities; and,

WHEREAS, the Bank is a wholly-owned subsidiary of First Citizens BancShares, Inc. ("BancShares") and BancShares has additional subsidiaries including IronStone Bank ("IronStone") and the two principal subsidiaries have subsidiaries all of which entities are within the BancShares Group ("BancShares Group"); and,

WHEREAS, Associate has been paid and benefits have been provided for Associate by the Bank and Associate has exercised officer and managerial authority, served as a member of the Board of Directors, and held other positions within the BancShares Group and is currently Vice Chairman of the Board and Chief Operating Officer of the Bank and BancShares in addition to his other positions; and,

WHEREAS, Associate and the Bank and the BancShares Group have mutually agreed that Associate will retire from his employment with the BancShares Group and resign from his position as Vice Chairman of the Board and Chief Operating Officer of the Bank and BancShares and all other employment and fiduciary positions with any entity within the BancShares Group and the parties have reached an arrangement as to such retirement from employment as evidenced in this Agreement.

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, and for other good and valuable considerations, the receipt and sufficiency of which hereby are acknowledged, the Bank and Associate agree as follows:

1.           RETIREMENT.  Associate retired from his employment with the Bank and resigned from all of his positions within the BancShares Group and particularly as Vice Chairman of the Board and Chief Operating Officer and all other officer and director positions held within the BancShares Group effective as of January 25, 2008 (the "Retirement Date").  The Bank and BancShares on behalf of the BancShares Group has expressly agreed to Associate's retirement from employment on such Retirement Date.  Associate recognizes and agrees that he shall have no further authority as an employee, agent, director, or officer of any entity within the BancShares Group following the Retirement Date.  Associate further specifically recognizes and agrees that this Agreement is a full and complete resolution, settlement, and termination of any rights or claims that Associate may have had, or alleges to have had, to any further employment with any entity within the BancShares Group following the Retirement Date.

2.           SALARY AND PAID TIME OFF PAY.  The Bank shall pay to Associate his normal salary, less normal deductions and withholdings, through January 31, 2008, and agrees to provide further Special Payments and consideration to Associate as set forth below.  The Bank also shall pay to Associate any accrued but unused paid time off, less normal deductions and withholdings, calculated as of the Retirement Date.  In addition, Bank shall pay Associate the equivalent of one month's pay on or about Effective Date.

3.           COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE.  For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code")("Section 409A"), as applicable, any installment payment made hereunder shall be considered a separate payment.

Key Employee.  Associate is a Key Employee for purposes of Section 409A.  In the event a payment due Associate under this Agreement is subject to Section 409A, such payment shall be paid no earlier than six months and one week after Associate's termination of employment.

4.           SPECIAL PAYMENTS.  On or after the Retirement Date or the Effective Date (as defined in Paragraph 12), whichever occurs later, the Bank shall pay to Associate the amount of One Hundred Fifty Thousand and No/100 Dollars ($150,000.00), gross, for and in consideration of the provisions of Paragraph 7 (Covenant of Good Faith and Confidentiality) and  Paragraph 10 (Covenant of Nondisclosure), and the other terms and conditions of this Agreement, and the amount of Fifty Thousand and No/100 Dollars ($50,000.00), gross, for and

in consideration of the provisions of Paragraph 12 (Release)(the "Special Payments").  Bank agrees to pay to Associate's attorney her reasonable fees on the basis of her normal hourly rate for the time devoted to representing Associate in connection with this Agreement with a cap of Ten Thousand and No/100 Dollars ($10,000).  Services will be billed to Bank c/o David L. Ward, Jr., Ward and Smith, P.A., PO Box 2091, Raleigh, NC  27602-2091.

The Bank and Associate agree that Associate has received the equipment (security system in his home, laptop utilized by him, Blackberry, cell phone, printer, router, and related equipment, all in his home or personally with him) requested by him and upon the Effective Date, said electronic equipment shall become the property of Associate.  All future services after January 31, 2008, will be the responsibility and at the cost of Associate.

5.           INSURANCE CONTINUATION.  Beginning on the Retirement Date, the Bank shall extend the group medical and dental insurance coverage provided by the Bank to Associate and his qualified beneficiaries, as applicable, for the period from the Retirement Date through January 31, 2008 (the "Continuation Period"), subject to the terms and conditions (including eligibility requirements) of the applicable insurance plan and Associate's election to continue his coverage under the provisions of the applicable insurance plan.  During this insurance continuation period, Associate shall be responsible for payment of all premiums, if any, for the medical and dental insurance coverage elected by Associate for himself and his qualified beneficiaries, as applicable, at the same premiums as then are paid by actively employed employees of the Bank.  Following the insurance continuation period, Associate shall retain any rights he has under Bank's benefit plan to continue any retiree insurance coverage that is available pursuant to applicable provisions of Bank's benefit plans, state law and/or COBRA.

As additional consideration, the Bank agrees to pay to Associate on or about the Effective Date (as defined in Paragraph 12), an amount equal to the cost of seven (7) months of retiree health insurance benefits or of Comprehensive Omnibus Budget Reconciliation Act ("COBRA") group insurance continuation coverage in effect on the date of this Agreement, whichever coverage is elected by Associate, to keep the Associate in a like and similar insurance cost for the seven (7) month period following January 31, 2008; provided that such amount shall be grossed-up to cover all additional taxes incurred by Associate as a result of this reimbursement.

6.           SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN.  Associate is a current Participant in a Supplemental Executive Retirement Plan ("SERP" or "Plan") executed by the Bank and Associate as of September 17, 2007.  In accordance with the provisions of Paragraph 16 of the Plan, the Bank and Associate hereby agree and amend by mutual agreement the terms and conditions of the SERP, subject to compliance with the SERP and this Agreement being complete and not in default as follows:

a.           SERP shall vest on the Retirement Date or the Effective Date (as defined in Paragraph 12), under this Agreement, whichever is later, and Associate’s right to receive benefits under the SERP shall not thereafter by subject to forfeiture or termination by the Bank, except under the provisions of Section 5 of the SERP or under Section 9 of this Agreement.

b.           The payment of the benefits under the SERP shall commence on March 1, 2013 unless required to be delayed pursuant to the provisions of Section 409A as defined in Paragraph 3 above and shall begin, if such delay is required, as specified in the said Paragraph 3.

c.           The provisions in the SERP relating to consultation, specifically the amounts to be paid for consultation, shall be combined with the amount to be paid for noncompetition and treated as one payment.

7.           TERMINATION/CONTINUATION OF CERTAIN RIGHTS AND BENEFITS.  Associate recognizes and agrees that payment of Associate's salary, payment of accrued but unused paid time off, payment of the Special Payments, and the continuation of group insurance coverage (subject to the terms and conditions, including eligibility requirements, of the applicable insurance plan), as described in Paragraphs 2, 3, 4, and 5 above, are in full settlement of any wages and benefits owed to Associate through the Retirement Date and that, except for Associate's rights and benefits under this Agreement, Associate's vested rights in the Bank's benefit or retirement plans (if any), Associate’s rights to participate in the Bank’s retiree health benefits in accordance with the terms of the plan, and Associate's eligibility to continue certain group insurance coverage pursuant to Associate's rights under the provisions of state law and/or the Consolidated Omnibus Budget Reconciliation Act ("COBRA"), to the extent

permitted by law, all of Associate's employment rights, wages, and benefits with the Bank, and all entities of BancShares, shall terminate and be forfeited as of the Retirement Date, including, without limitation, Associate's eligibility for further payment of any salary, paid time off, sick leave, severance pay, incentive awards, bonuses, or any other amounts.  Associate further recognizes and agrees that payment of Associate's salary, payment of accrued but unused paid time off, payment of the Special Payments, and the continuation of group insurance coverage by the Bank are not to be construed as an admission of liability on the part of the Bank or any entity of BancShares, and that the Bank and all entities in the BancShares Group has denied and do deny any violation of any law and any liability, and intends by such payments simply to recognize Associate's length of service and Associate's Retirement from employment, and to avoid the time and costs of any legal proceedings.

8.           COVENANT OF GOOD FAITH AND CONFIDENTIALITY.  The Bank and Associate acknowledge and agree that the Bank and all entities in the BancShares Group have a significant interest in protecting their reputation and public trust, maintaining good public relations with their customers, prospective customers, and others in their market areas, and maintaining good relationships with their current and prospective employees; that Associate has a significant interest in protecting Associate's personal and professional reputation; and that it is in the Bank's and the entities of the BancShares Group's and Associate's mutual best interests to characterize their employment relationship in a positive light, and to characterize the expiration of Associate's employment and the related payments to be paid to Associate hereunder as having resulted from an agreement made in good faith between Associate and the Bank.  In this connection, Associate shall not downgrade, speak adversely about, or comment derogatorily about or in any other way make any adverse or negative indications, actions, or comments about the Bank nor any entity in the BancShares Group, its and their successors and assigns, or the shareholders, directors, officers, employees, associates, agents, or attorneys of said entities.  The Bank and the entities of the BancShares Group agree that they will not, and they shall use their best efforts to ensure that their management employees will not, downgrade, speak adversely about, or comment derogatorily about or in any other way make any adverse or negative indications, actions, or comments about Associate; provided, however, that the Bank and any entity of the BancShares Group may disclose information regarding Associate as required by applicable federal or state law or regulation and Associate may disclose any information regarding Bank or any entity of the BancShares Group as required by applicable federal or state law or regulation.

All of the terms and conditions of this Agreement shall be held in strictest confidence by the Bank, the entities of the BancShares Group and Associate and shall not be disclosed by either party to any third party without the prior written consent of the other party, except to Associate's immediate family and/or to legal or accounting professionals or financial or regulatory institutions or as required by federal or state laws or regulations, on a need to know basis for the information required for a particular purpose only.

9.           COVENANT NOT TO COMPETE.  For and in consideration of Associate's Covenant Not to Compete as set forth in this Paragraph 9 and as consideration for the provisions of Paragraph 10 (Covenant Not to Solicit), the Bank shall pay to Associate the amount of Four Hundred Thousand and No/100 Dollars ($400,000.00), gross, payable on or after the Retirement Date or the Effective Date (as defined in Paragraph 12), whichever is later, and four (4) additional payments in the amount of Six Hundred Thousand and No/100 Dollars ($600,000.00), gross, to be paid on an annual basis, with the first such payment to be made on March 1, 2009, and each successive payment to be made on the first day of March thereafter, until either (i) a material breach of this Agreement by Associate, (ii) Associate's death, or (iii) March 1, 2012, whichever first occurs; provided, however, that if the Bank elects to terminate payments pursuant to subsection 9(i) of this Agreement, the Bank may only do so after first complying with the notice and mediation provisions of paragraph 14 of this Agreement.

Associate agrees not to become an officer or employee of, provide any consultation to, nor participate in any manner with, any other entity of any type or description involved in any major element of business which the Bank or any entity of the BancShares

Group is performing at the time of Associate's separation from service with the Bank, nor will Associate perform or seek to perform any consultation or other type of work or service with any other firm, person or entity, directly or indirectly, in any such business which competes with the Bank or any entity of the BancShares Group, whether done directly or indirectly, in ownership, consultation, employment or otherwise.  This Covenant Not to Compete by Associate is limited to the geographic area consisting of each county or like jurisdictional entity in which either the Bank or any entity within the BancShares Group shall maintain a banking or other business

office at the time of Associate's separation from service, shall exist for and during the term of all payments to be made under Paragraphs 9 and 10, whether made directly by the Bank or as otherwise provided herein, and shall not prevent Associate from purchasing or acquiring, as an

investor only, a financial interest of less than 5% in a business or other entity which is in competition with the Bank.

10.          COVENANT NOT TO SOLICIT.  The Bank and Associate recognize that during the course of Associate's employment with the Bank, Associate has contracted, solicited, or approached the Bank's and the BancShares Group's customers and prospective customers on behalf of the Bank and/or the entities within the BancShares Group.  The Bank and Associate further acknowledge that Associate has developed, and has had access to, the Bank's and the entities within the BancShares Group's customer lists and other customer records.  To protect the Bank and the entities within the BancShares Group from Associate's solicitation of business from such customers during the term of the Covenant Not to Compete set forth in this Agreement, Associate shall not solicit business, other than on behalf of the Bank or the entities within the BancShares Group, from any person, corporation, firm, or other entity in the geographic area consisting of each county or like jurisdictional entity in which either the Bank or any entity within the BancShares Group shall maintain a banking or other business office at the time of Associate's separation from service, which is a customer or recognized prospective customer of the Bank or any entity within the BancShares Group, on the Retirement Date.  Further, Associate shall not employ, or seek to employ, any employee of the Bank or any entity of the BancShares Group, or induce any such person to leave his or her employment for the period of the Covenant Not to Compete as specified in Paragraph 9.

11.          COVENANT OF NONDISCLOSURE.  During the course of Associate's employment with the Bank, Associate has been given and has obtained various confidential information concerning the Bank, and other entities within the BancShares Group, the shareholders, directors, officers, associates, employees, and agents of said entities, and their customers, prospective customers, services, trade secrets, proprietary information, personnel information, and other information concerning their business (collectively, the "Information"), all of which constitute valuable assets and privileged information of the Bank or the specific entity within the BancShares Group, which Information is particularly sensitive due to the fiduciary responsibilities and public trust inherent in the Bank's and BancShares Group's business.  The Bank and Associate acknowledge that the Bank has invested, and shall continue to invest, considerable amounts of time, effort, and resources in developing such valuable assets and Information, and that disclosure by Associate of such assets and Information to the public or to any other person or entity, regardless of how insignificant such assets or Information may seem, would cause irreparable harm, damage, and loss to the Bank or the particular entity of the BancShares Group.

To protect the Bank and/or an entity within the BancShares Group from Associate's use, disclosure, or exploitation of customer contacts and the Information, Associate agrees that Associate shall not, directly or indirectly, at any time after the Retirement Date, for any reason, reveal, divulge, disclose, or communicate to any person, corporation, firm, or other entity or to any shareholder, director, officer, partner, member, manager, employee, agent, or associate of any such person, corporation, firm, or other entity, any confidential, sensitive, or personal information, proprietary information, trade secret, or other information whatsoever, including but not limited to the Information, about or received by Associate from the Bank or any one or more of the entities of the BancShares Group, developed or received by Associate during employment with the Bank or the BancShares Group entities, or developed or received by Associate during the course of Associate's association with the Bank or any of the entities of the BancShares Group, relating to the business affairs of the Bank or any of the entities of the BancShares Group, or the business or personal affairs of the shareholders, directors, officers, associates, employees, agents, or attorneys of said entities, including, without limitation, information concerning customer and prospective customer records, personnel information, ideas, proprietary information, methods, marketing investigations, surveys, research, and other like or similar information, unless required to do so by law or by a court of competent jurisdiction.  Associate shall not use the Information to the detriment of the Bank or any of the entities within the BancShares Group, or the principals, shareholders, directors, officers, associates, or employees of said entities, particularly in any manner competitive with the Bank or any entity within the BancShares Group, in any unlawful manner, or to interfere with or attempt to terminate or otherwise adversely affect any business relationship of the Bank or any entity within the BancShares Group with a customer or prospective customer.

12.          RELEASE.  Except for Associate's specific contractual rights and benefits under this Agreement, and any rights Associate has for indemnity for any actions arising prior to his resignation under any director and officer indemnity provided pursuant to the North Carolina law or under the Bank’s charter or bylaws existing on the Retirement Date, and except as prohibited by law, Associate hereby releases, acquits, quitclaims, and discharges the Bank and any entities within the BancShares Group and their respective successors and assigns, and the shareholders, directors, officers, associates, employees, agents, attorneys, benefit plans, and plan administrators of all of said entities, and their respective successors and assigns (collectively, the "Releasees"), of and from any and all actions, causes of action, claims, demands, damages, costs (including reasonable attorneys' fees), loss of services, expenses, and compensation, and for all consequential, compensatory, actual, punitive, or liquidated damages, known or unknown, including those under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., on account of, or in any way arising from the employment or any other relationship between Associate and the Bank and any entity within the BancShares Group, and any and all collateral matters pertaining thereto, whether directly, indirectly, or in any way connected with any Releasee.  As part of the consideration for this Agreement, Associate agrees that, to the extent permitted by law and except as otherwise required by law, neither Associate nor any of Associate's heirs, legal representatives, or assigns will make or file any claim, charge, or lawsuit, or cooperate voluntarily in any investigation, lawsuit, or legal or administrative proceeding by any individual, entity, or agency, against or involving any Releasee, for or on account of any claim Associate may have or may have had against any Releasee in connection with Associate's employment or any other relationship with the Bank or any of the entities within the BancShares Group, the matters referenced above, and/or the cessation of Associate's employment with the Bank.  Associate further agrees that, except as prohibited by law, Associate will waive and release any and all personal damages (including but not limited to damages relating to pain and suffering, back pay, and compensatory and/or punitive damages) resulting from any charge filed with or investigation conducted by the Equal Employment Opportunity Commission or any other administrative agency in connection with Associate's employment or any other relationship with the Bank or any of the entities within the BancShares Group.

Associate understands and agrees that with respect to any rights or claims of Associate under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. (the "Act"):  (a) no rights or claims are waived by Associate that may arise from an event or transaction that occurs after the date this Agreement is executed by Associate; (b) Associate has been advised in writing to consult with an attorney prior to executing this Agreement; (c) Associate has been advised that Associate has twenty-one (21) days from Associate's receipt of this Agreement, unless extended in writing by the Bank, to consider the release provisions of this Agreement; (d) Associate has been advised that Associate has seven (7) days following Associate's execution of this Agreement to revoke the release provisions of this Agreement pertaining to any right or claim under the Act; and (e) the release provisions of this Agreement pertaining to any right or claim under the Act shall not become effective or enforceable until the revocation period of seven (7) days following Associate's execution hereof has expired (the "Effective Date").

13.          ENFORCEMENT.

(a)           The Parties acknowledge and agree that the mutual covenants and agreements of Associate, the Bank and BancShares Group contained in this Agreement are a material part of this Agreement.  Payment of the Special Payments referenced in Paragraph 4and payment of the amounts referenced in Paragraph 9 of this Agreement are conditioned upon Associate's adherence to these covenants and agreements.  Associate’s agreement under Paragraphs 1, 8, 9, 10, 11, and 12 is conditioned upon the Bank’s and BancShares Group’s adherence to their covenants and agreements herein.  Associate acknowledges and agrees that should Associate materially breach any of the covenants and agreements contained in this Agreement, Associate shall be required to return to the Bank the entire amount of the payments paid to Associate for Associate's execution of this Agreement.  Further, Associate shall indemnify and hold harmless the Bank from any and all losses, costs, or expenses, including reasonable attorneys' fees, which the Bank may incur in recovering this amount or as a result of Associate's breach of the terms of this Agreement, or both.  Return of any such amounts pursuant to this Paragraph 13 shall not entitle Associate to renew any claim Associate may have against the Bank that is waived or released under this Agreement, shall not prohibit the Bank's enforcement of the breached covenant or agreement, shall not terminate the remaining covenants and agreements set forth in this Agreement, and shall not impair any of the Bank's enforcement rights as described in this Paragraph 13.  Bank shall indemnify and hold harmless Associate from any and all losses, costs, or expenses, including reasonable attorneys' fees, which Associate may incur in recovering funds due or damages incurred as a result of the Bank's or BancShares Group’s breach of the terms of this Agreement.

(b)           In the event of Associate's breach of any covenant or agreement of Associate contained in this Agreement, and in the event of the Bank’s or BancShares Group’s breach of any covenant or agreement contained herein, the non-breaching Party shall be entitled, in addition to any other rights and remedies available at law or in equity, to an injunction enjoining and restraining the breaching Party from doing or continuing to do any such act and any other violation or threatened violation of such covenant or agreement.  In the event that a Party shall institute any action or proceeding to enforce the provisions of the covenants or agreements contained herein, the Party against whom the action is brought shall waive the claim or defense that the Party seeking enforcement has an adequate remedy at law, and the Party against whom the action is brought shall not urge in any such action or proceeding the claim or defense that such a remedy at law exists, each Party recognizing that the other Party shall be entitled to injunctive relief as to the violation of any such covenant or agreement.  However, nothing contained in this Agreement shall be construed as prohibiting a Party from pursuing any other remedies available, in addition to injunctive relief, whether at law or in equity, including the recovery of damages.

14.          MEDIATION.  In the event the Bank receives notice of Associate's breach of any covenant or agreement of Associate contained in this Agreement, the Bank will provide to Associate notice of facts sufficient to make out a prima facie case for violation of the Agreement and Associate will have sixty (60) days from receipt of the Bank's notice to cure the breach.  If a dispute arises between the Bank and Associate over whether Associate breached any covenant or agreement contained in this Agreement, the Bank and Associate mutually agree to submit the dispute to mediation before filing any court action in North Carolina courts or any other jurisdiction.

15.          TAXES AND INDEMNIFICATION.  Associate agrees that he shall be solely responsible for all taxes, insurance, penalties, and other charges, if any, which may be owed to or assessed by governmental agencies as a result of the Special Payments made to him pursuant to Paragraph 4 and the amounts paid to Associate pursuant to Paragraphs 9 and 10.  Associate further agrees to indemnify and hold harmless the Bank and its attorneys from any claims, demands, deficiencies, levies, assessments, judgments, or recoveries by any governmental authority asserted against the Bank because of Associate's failure to pay applicable taxes.

16.          ENTIRE UNDERSTANDING/AMENDMENTS.  This Agreement contains the entire understanding between the Bank and all entities within the BancShares Group and Associate as to the matters contained herein, and no conditions precedent or subsequent exist which are not contained herein.  This Agreement may not be altered, amended, or revoked except by a written agreement signed by the Bank and Associate.

17.          BINDING EFFECT.  The Bank and Associate recognize and agree that this Agreement is binding upon the Bank and Associate and its/Associate's respective heirs, representatives, successors, and assigns, as applicable.  Associate further acknowledges that Associate has carefully read this Agreement, which contains a release, and knows and understands the contents hereof and voluntarily executes the same as Associate's free act and deed, and that the provisions contained herein constitute the entire agreement between the parties hereto, and that the terms of this Agreement are contractual and not a mere recital.

18.          GOVERNING LAW AND VENUE.  The Bank and Associate agree that without regard to principles of conflicts of laws, the internal laws of the State of North Carolina shall govern and control the validity, interpretation, performance, and enforcement of this Agreement.  The Bank and Associate agree that any action relating to this Agreement shall be instituted and prosecuted only in the courts of Wake County, North Carolina or the federal courts of the Eastern District of North Carolina, and the Bank and Associate hereby consent to the jurisdiction of such courts and waive any right or defense relating to venue and jurisdiction over the person.

19.          SEVERABILITY.  The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were not contained herein.

20.          SECTION 409A SAVINGS CLAUSE.  To the extent any of the payments or benefits required under this Agreement are, or in the opinion of counsel to the Bank or Associate, could be interpreted in the future to create, a nonqualified deferred compensation plan that does not meet the requirements of Section 409A(a)(2), (3) and (4) of the Internal Revenue Code (the “Code”) and all regulations, guidance, or other interpretative authority thereunder (the “Section 409A Requirements”), the Bank and Associate hereby agree to execute any and all amendments to this Agreement or otherwise reform this Agreement as deemed necessary by either of such counsel, and prepared by counsel to the Bank, to either cause such payments or benefits not to be a nonqualified deferred compensation plan or to meet the Section 409A Requirements.  In amending or reforming this Agreement for Code Section 409A purposes, the Bank shall maintain, to the maximum extent practicable, the original intent and economic benefit of this Agreement without subjecting Associate to additional tax or interest.

21.          ASSIGNMENT.  The Bank shall assign this Agreement to any other corporation or entity acquiring all or substantially all of the assets of the Bank, or to any other corporation or entity into which or with which the Bank may be merged or consolidated.  Upon such assignment, merger, or consolidation, the rights of the Bank under this Agreement, as well as the obligations and liabilities of the Bank herein, shall inure to the benefit of and be binding upon any and all successors-in-interest or transferees of all or substantially all of the assets of the Bank.  This Agreement is not assignable in any respect by Associate.

22.          HEADINGS.  The headings appearing in this Agreement are for convenience only and are not to be considered in interpreting this Agreement.

23.          NOTICE.  For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when (i) delivered personally; (ii) sent by telecopy or similar electronic device and confirmed; (iii) delivered by overnight express; or (iv) sent by registered or certified mail, postage prepaid, addressed as follows:  (a)  If to Associate, to him at the last home address listed in the Bank’s records, with a copy to his attorney,  Rosemary Gill Kenyon, Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, P.O. Box 2611, Raleigh, NC 27602-2611; and (b)  If to the Bank or to BancShares Group, to:  Lewis R. Holding, Attention:   Peggy Hayes, P.O. Box 151, Raleigh, NC 27602, with a copy to their attorney, David L. Ward, Jr., Ward and Smith, P.A., PO Box 2091, Raleigh, NC  27602-2091.  Any Party may notify the other Party of another address, except that notices of change of address shall be effective only upon receipt.

[Remainder of page intentionally left blank.  Signatures follow.]

IN TESTIMONY WHEREOF, the Bank has caused this instrument to be executed in its corporate name by the Chairman of the Board, attested by its Secretary/Assistant Secretary, and its corporate seal to be hereto affixed, all within the authority duly given by its Board of Directors, and Associate has hereunto set Associate's hand and adopted as Associate's seal the typewritten word "SEAL" appearing beside Associate's name, all effective as of the Effective Date.

FIRST-CITIZENS BANK & TRUST COMPANY

By:     /s/ LEWIS R. HOLDING                                                                

    Lewis R. Holding

    Chairman of the Board

FIRST-CITIZENS BANCSHARES, INC.

By:     /s/ LEWIS R. HOLDING                                                                

   Lewis R. Holding

   Chairman of the Board

ASSOCIATE:

          /s/ JAMES B. HYLER, JR.             (SEAL)

           James B. Hyler, Jr.

February 1, 2008                                                                

Date of Execution by Associate

EX-31

Exhibit 31.1

CERTIFICATION

I, Frank B. Holding, Jr., certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of First Citizens BancShares, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.   The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2008

/s/ FRANK B. HOLDING, JR.

Frank B. Holding, Jr.

Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION

I, Kenneth A. Black, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of First Citizens BancShares, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.   The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 8, 2008

/s/ KENNETH A. BLACK

Kenneth A. Black

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION

The undersigned hereby certifies that, to his or her knowledge, (i) the Form 10-Q filed by First Citizens BancShares, Inc. (the "Issuer") for the quarter ended March 31, 2008, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.

May 8, 2008                                                                                  /s/ FRANK B. HOLDING, JR.

Frank B. Holding

President and Chief Executive Officer

 /s/ KENNETH A. BLACK

Kenneth A. Black

Vice President and Chief Financial Officer