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 September 30, 2005

or

¨ 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 incorporation or organization)	(I.R.S. Employer Identification Number)
3128 Smoketree Court, Raleigh, North Carolina	27604
(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 an accelerated filer (as defined in Rule 12b-2 of the Act)    Yes  x    No  ¨

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 November 4, 2005)

INDEX

		Page(s)
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets at September 30, 2005, December 31, 2004, and September 30, 2004	3
	Consolidated Statements of Income for the three-and nine-month periods ended September 30, 2005, and September 30, 2004	4
	Consolidated Statements of Changes in Shareholders’ Equity for the nine-month periods ended September 30, 2005, and September 30, 2004	5
	Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2005, and September 30, 2004	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	25
Item 6.	Exhibits.	25

Consolidated Balance Sheets

First Citizens BancShares, Inc. and Subsidiaries

(thousands, except share data)	September 30* 2005		December 31# 2004		September 30* 2004
Assets
Cash and due from banks	$	702,837	$	679,683	$	666,482
Overnight investments		764,756		383,743		468,543
Investment securities held to maturity		696,928		877,479		843,428
Investment securities available for sale		2,174,803		1,248,045		1,184,409
Loans and leases		9,359,540		9,354,387		9,150,859
Less allowance for loan and lease losses		126,297		123,861		121,266
Net loans and leases		9,233,243		9,230,526		9,029,593
Premises and equipment		624,423		568,365		562,488
Income earned not collected		53,918		40,574		40,411
Other assets		234,011		237,296		230,336
Total assets	$	14,484,919	$	13,265,711	$	13,025,690
Liabilities
Deposits:
Noninterest-bearing	$	2,685,555	$	2,443,059	$	2,442,815
Interest-bearing		9,437,936		8,907,739		8,682,181
Total deposits		12,123,491		11,350,798		11,124,996
Short-term borrowings		696,865		447,686		457,617
Long-term obligations		409,742		285,943		286,437
Other liabilities		95,936		94,974		88,626
Total liabilities		13,326,034		12,179,401		11,957,676
Shareholders’ Equity
Common stock:
Class A - $1 par value (8,756,778 shares issued during all periods)		8,757		8,757		8,757
Class B - $1 par value (1,677,675 shares issued during all periods)		1,678		1,678		1,678
Surplus		143,766		143,766		143,766
Retained earnings		1,004,038		927,621		905,718
Accumulated other comprehensive income		646		4,488		8,095
Total shareholders’ equity		1,158,885		1,086,310		1,068,014
Total liabilities and shareholders’ equity	$	14,484,919	$	13,265,711	$	13,025,690

* Unaudited

# Derived from the 2004 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 September 30					Nine Months Ended September 30
(thousands, except per share data; unaudited)	2005			2004		2005			2004
Interest income
Loans	$	146,009		$	118,306	$	417,745		$	339,660
Investment securities:
U. S. Government		21,031			11,077		49,621			35,578
State, county and municipal		61			67		191			210
Dividends		746			292		1,495			856
Total investment securities interest and dividend income		21,838			11,436		51,307			36,644
Overnight investments		5,687			1,669		12,933			3,461
Total interest income		173,534			131,411		481,985			379,765
Interest expense
Deposits		47,476			26,987		123,322			77,072
Short-term borrowings		4,373			874		8,984			2,262
Long-term obligations		7,457			5,459		19,114			16,333
Total interest expense		59,306			33,320		151,420			95,667
Net interest income		114,228			98,091		330,565			284,098
Provision for credit losses		7,211			7,972		19,531			25,736
Net interest income after provision for credit losses		107,017			90,119		311,034			258,362
Noninterest income
Service charges on deposit accounts		19,553			21,254		57,929			61,206
Cardholder and merchant services income		19,526			16,918		53,908			47,319
Trust income		4,680			4,178		13,966			12,794
Fees from processing services		6,335			5,991		18,851			17,786
Commission income		6,669			6,250		19,503			19,026
ATM income		2,579			2,605		7,724			7,663
Mortgage income		2,507			1,935		6,326			6,423
Other service charges and fees		4,375			3,209		12,479			9,947
Securities gains (losses)		—			—		(22	)		1,852
Other		1,882			1,294		7,231			4,062
Total noninterest income		68,106			63,634		197,895			188,078
Noninterest expense
Salaries and wages		55,659			52,668		159,923			155,161
Employee benefits		13,805			11,977		39,461			37,338
Occupancy expense		12,100			11,014		34,986			33,291
Equipment expense		12,388			12,156		37,417			37,309
Other		34,713			32,566		102,174			97,526
Total noninterest expense		128,665			120,381		373,961			360,625
Income before income taxes		46,458			33,372		134,968			85,815
Income taxes		16,505			16,504		49,942			35,744
Net income	$	29,953		$	16,868	$	85,026		$	50,071
Other comprehensive income (loss) net of taxes
Unrealized securities gains (losses) arising during period	$	(2,440	)	$	7,533	$	(3,855	)	$	(1,416	)
Less: reclassified adjustment for gains (losses) included in net income		—			—		(13	)		1,121
Other comprehensive income (loss)		(2,440	)		7,533		(3,842	)		(2,537	)
Comprehensive income	$	27,513		$	24,401	$	81,184		$	47,534
Average shares outstanding		10,434,453			10,434,453		10,434,453			10,435,514
Net income per share	$	2.87		$	1.62	$	8.15		$	4.80

See accompanying Notes to Consolidated Financial Statements.

4

Consolidated Statements of Changes in Shareholders’ Equity

First Citizens BancShares, Inc. and Subsidiaries

(thousands, except share data, unaudited)	Class A Common Stock			Class B Common Stock		Surplus		Retained Earnings			Accumulated Other Comprehensive Income			Total Shareholders’ Equity
Balance at December 31, 2003	$	8,759		$	1,678	$	143,766	$	864,470		$	10,632		$	1,029,305
Net income									50,071						50,071
Redemption of 1,892 shares of Class A common stock		(2	)						(213	)					(215	)
Cash dividends									(8,610	)					(8,610	)
Unrealized securities losses, net of deferred taxes												(2,537	)		(2,537	)
Balance at September 30, 2004	$	8,757		$	1,678	$	143,766	$	905,718		$	8,095		$	1,068,014
Balance at December 31, 2004	$	8,757		$	1,678	$	143,766	$	927,621		$	4,488		$	1,086,310
Net income									85,026						85,026
Cash dividends									(8,609	)					(8,609	)
Unrealized securities losses, net of deferred taxes												(3,842	)		(3,842	)
Balance at September 30, 2005	$	8,757		$	1,678	$	143,766	$	1,004,038		$	646		$	1,158,885

See accompanying Notes to Consolidated Financial Statements.

5

Consolidated Statements of Cash Flows

First Citizens BancShares, Inc. and Subsidiaries

	Nine months ended September 30,
	2005			2004
	(thousands)
OPERATING ACTIVITIES
Net income	$	85,026		$	50,071
Adjustments to reconcile net income to cash provided by operating activities:
Amortization of intangibles		1,867			1,754
Provision for credit losses		19,531			25,736
Deferred tax benefit		(6,757	)		649
Change in current taxes payable		2,634			(11,169	)
Depreciation		33,610			32,790
Change in accrued interest payable		4,415			(6,129	)
Change in income earned not collected		(13,344	)		1,518
Securities losses (gains)		22			(1,852	)
Origination of loans held for sale		(371,164	)		(388,549	)
Proceeds from sale of loans		602,722			389,681
Gain on sale of loans		(4,885	)		(3,002	)
Net amortization of premiums and discounts		(438	)		6,039
Net change in other assets		11,821			(13,106	)
Net change in other liabilities		(7,624	)		(470	)
Net cash provided by operating activities		357,436			83,961
INVESTING ACTIVITIES
Net change in loans outstanding		(247,373	)		(837,339	)
Purchases of investment securities held to maturity		(262,680	)		(353,833	)
Purchases of investment securities available for sale		(1,263,839	)		(1,336,319	)
Proceeds from maturities of investment securities held to maturity		443,669			731,083
Proceeds from maturities of investment securities available for sale		330,401			1,392,278
Net change in overnight investments		(381,013	)		(174,138	)
Dispositions of premises and equipment		4,506			7,693
Additions to premises and equipment		(92,401	)		(63,302	)
Purchase and sale of branches, net of cash transferred		18,343			8,370
Net cash used by investing activities		(1,450,387	)		(625,507	)
FINANCING ACTIVITIES
Net change in time deposits		430,164			169,510
Net change in demand and other interest-bearing deposits		321,572			232,589
Net change in short-term borrowings		247,978			24,586
Originations of long-term obligations		125,000			—
Repurchases of common stock		—			(215	)
Cash dividends paid		(8,609	)		(8,610	)
Net cash provided by financing activities		1,116,105			417,860
Change in cash and due from banks		23,154			(123,686	)
Cash and due from banks at beginning of period		679,683			790,168
Cash and due from banks at end of period	$	702,837		$	666,482
CASH PAYMENTS FOR:
Interest	$	147,005		$	101,796
Income taxes		52,780			36,507
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Unrealized securities gains (losses)	$	(6,658	)	$	(4,214	)

See accompanying Notes to Consolidated Financial Statements.

6

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Note A

Accounting Policies

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 2004 First Citizens BancShares, Inc. Annual Report, which is incorporated by reference on Form 10-K. Certain amounts for prior periods have been reclassified to conform with statement presentations for 2005. However, the reclassifications have no effect on shareholders’ equity or net income as previously reported.

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. Additionally, the financial results and trends of ISB reflect the de novo nature of its growth.

FCB is a mature banking institution that operates from a single charter from its branch network in North Carolina, Virginia and West Virginia. 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, Neuse, Incorporated, a subsidiary that owns real property used in the banking operation and American Guaranty Insurance Corporation, a property insurance company.

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

	As of and for the nine months ended September 30, 2005
	ISB			FCB		Other			Total		Adjustments			Consolidated
Interest income	$	70,353		$	411,076	$	6,858		$	488,287	$	(6,302	)	$	481,985
Interest expense		25,528			111,010		21,184			157,722		(6,302	)		151,420
Net interest income		44,825			300,066		(14,326	)		330,565		—			330,565
Provision for credit losses		6,637			12,894		—			19,531		—			19,531
Net interest income after provision for credit losses		38,188			287,172		(14,326	)		311,034		—			311,034
Noninterest income		5,454			196,842		1,117			203,413		(5,518	)		197,895
Noninterest expense		48,402			329,408		1,669			379,479		(5,518	)		373,961
Income (loss) before income taxes		(4,760	)		154,606		(14,878	)		134,968		—			134,968
Income taxes		(1,496	)		56,600		(5,162	)		49,942		—			49,942
Net income (loss)	$	(3,264	)	$	98,006	$	(9,716	)	$	85,026	$	—		$	85,026
Total assets	$	1,772,822		$	12,590,284	$	1,834,162		$	16,197,268	$	(1,712,349	)	$	14,484,919
Loans and leases		1,590,285			7,769,255		—			9,359,540		—			9,359,540
Allowance for loan and lease losses		18,193			108,104		—			126,297		—			126,297
Total deposits		1,416,287			10,767,104		—			12,183,391		(59,900	)		12,123,491
	As of and for the nine months ended September 30, 2004
	ISB			FCB		Other			Total		Adjustments			Consolidated
Interest income	$	48,423		$	331,139	$	1,984		$	381,546	$	(1,781	)	$	379,765
Interest expense		14,736			65,981		16,731			97,448		(1,781	)		95,667
Net interest income		33,687			265,158		(14,747	)		284,098		—			284,098
Provision for credit losses		3,017			22,719		—			25,736		—			25,736
Net interest income after provision for credit losses		30,670			242,439		(14,747	)		258,362		—			258,362
Noninterest income		4,078			185,556		3,737			193,371		(5,293	)		188,078
Noninterest expense		38,038			325,825		2,055			365,918		(5,293	)		360,625
Income (loss) before income taxes		(3,290	)		102,170		(13,065	)		85,815		—			85,815
Income taxes		(1,063	)		41,375		(4,568	)		35,744		—			35,744
Net income (loss)	$	(2,227	)	$	60,795	$	(8,497	)	$	50,071	$	—		$	50,071
Total assets	$	1,394,026		$	11,549,197	$	1,546,097		$	14,489,320	$	(1,463,630	)	$	13,025,690
Loans and leases		1,272,146			7,878,713		—			9,150,859		—			9,150,859
Allowance for loan and lease losses		13,809			107,457		—			121,266		—			121,266
Total deposits		1,024,164			10,147,918		—			11,172,082		(47,086	)		11,124,996

8

Note C

Employee Benefits

BancShares recognized pension expense totaling $11,205 and $9,290, respectively, in the nine-month periods ended September 30, 2005 and 2004. Pension expense is included as a component of employee benefit expense.

	Nine months ended September 30,
Components of Pension Expense	2005			2004
Service cost	$	10,240		$	9,067
Interest cost		12,185			11,234
Expected return on plan assets		(14,084	)		(12,818	)
Amortization of prior service cost		290			114
Recognized net actuarial loss		2,574			1,693
Pension expense	$	11,205		$	9,290

The assumed discount rate is 5.75 percent for 2005, compared to 6.00 percent for 2004. The expected long-term rate of return on plan assets for 2005 is 8.50 percent, compared to 8.00 percent for 2004.

Note D

Income Taxes

Income tax expense differed from the amounts computed by applying the federal income tax rate of 35 percent in each period to pretax income as a result of the following:

	Nine months ending September 30,
	2005			2004
Income at statutory rates	$	47,239		$	30,035
Increase (reduction) in income taxes resulting from:
Nontaxable income on loans, leases and investments, net of nondeductible expenses		(649	)		(587	)
State and local income taxes, including change in valuation allowance, net of federal income tax benefit		4,868			8,817
Other, net		(1,516	)		(2,521	)
Total tax expense	$	49,942		$	35,744

9

Note E

Asset Securitization and Sale

During the second quarter of 2005, BancShares completed the securitization and sale of $256,232 of its home equity lines of credit. The transaction generated a pre-tax gain of $2,874, which is included in other noninterest income. BancShares continues to service the assets that were sold.

The securitization and sale transaction was accounted for under the provisions of Statement of Financial Accounting Standards No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (Statement 140). The transaction was completed using a Qualified Special Purpose Entity (QSPE) which, in accordance with Statement 140, is a legally isolated, bankruptcy remote entity beyond the control of the seller. The QSPE is therefore not included within the consolidated financial statements.

BancShares received cash totaling $240,399 from the sale, net of the $7,816 of loans retained by the trust and $8,017 for cash collections and fees retained by the advisors.

BancShares retained a residual interest in the securitized assets in the form of an interest-only strip, which is included within investment securities available for sale and is carried at its estimated fair value. Quoted market prices are not readily available for retained residual interests, so the fair value was estimated based on various factors that may have an impact on the fair value of the retained interests. The assumed discount rate was 10 percent; the assumed rate of credit losses was 10 basis points; the estimated weighted average loan life was 3.3 years. Based on the assumptions used, the estimated fair value of the retained residual interest was $11,586 at the date of the securitization and $12,226 at September 30, 2005. Adverse changes of 10 percent and 20 percent to the assumed rate of credit losses or the estimated weighted average loan life did not have a material impact on the estimated fair value of the retained residual interest. However, 10 percent and 20 percent adverse changes to the assumed discount rate resulted in reductions in the fair value of the retained residual interest of $1,268 and $2,365, respectively.

BancShares established a servicing asset of $1,401, which represents the estimated fair value of the right to service the loans that were securitized and sold. This asset is being amortized over the estimated servicing life of 149 months.

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). 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 and West Virginia. ISB operates offices in Georgia, Florida, Texas, New Mexico, Arizona, California, Oregon, Washington and Colorado. FCB is in the process of establishing offices in Tennessee and Maryland.

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 2005, the reclassifications have no effect on shareholders’ equity or net income as previously reported.

SUMMARY

BancShares’ earnings and cash flows are derived primarily from the commercial banking activities conducted by its banking subsidiaries, which include commercial and consumer lending, deposit and cash management products, cardholder and merchant services, wealth management services as well as various other products and services typically associated with commercial banking. FCB and ISB gather interest-bearing and noninterest-bearing deposits from retail and commercial customers. BancShares and its subsidiaries also secure supplemental short-term and long-term funding through various non-deposit sources. The liquidity generated from these funding sources is invested in various interest-earning assets including loans, investment securities and overnight investments. In addition, funds are invested in bank premises as well as furniture and equipment used in the subsidiaries’ commercial banking business.

Various external factors influence customer demand for our deposit and loan products. As economic conditions improved in early 2004, loan demand was strong throughout our market areas. However, in late 2004 and during 2005, FCB’s rate of loan growth weakened causing consolidated loan growth to slow. As short-term interest rates have continued to rise in connection with actions by the Federal Reserve, variable loan rates and yields on our investment securities have repriced towards higher market rates allowing improvement in the net interest margin. The increasing level of interest rates also has affected the composition of our deposit base, as customers rotate liquidity from low cost demand deposit and money market accounts to higher cost time deposits.

The general condition of the economy and the relative level of interest rates also influence the quality and collectibility of the loan portfolio, as consumer bankruptcy rates and business debt service levels tend to reflect the general economic cycle. Utilizing various asset–liability management and asset quality monitoring tools, we strive to minimize the potentially adverse financial impact of unforeseen and unfavorable economic trends and to take advantage of favorable economic conditions where 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’ return on average assets and return on average equity historically compare unfavorably to the returns of similarly sized financial holding companies. We have typically placed significant emphasis upon balance sheet liquidity, asset quality and capital conservation, even when those priorities may be detrimental to current earnings.

Our organization’s strengths and competitive position within the financial services industry indicate that continued opportunities for growth and expansion exist. We operate in diverse and growing geographic markets and believe that through superior customer service and a focused strategic emphasis, opportunities exist to increase earnings by attracting customers of other financial institutions. We seek opportunities to increase fee income in areas such as merchant processing, wealth management and private banking services, cash management, client bank services, factoring and insurance. In recent years, we have focused our efforts on customers who own their own businesses, medical and other professionals and individuals who are financially active.

We focus substantial attention on the risks that can endanger our profitability and growth prospects. Such risks generally include those that are internal, and thus substantially controllable by management, and those risks that are external to BancShares. External risks fall into categories of economic, industry systemic, competitive and regulatory. Due to the inability to control the outcome of external risks, management believes that the identification of appropriate strategic initiatives in response to such external risks provides reasonable safeguards to minimize their potential adverse impact.

Detailed information regarding the components of net income and other key financial data over the most recent five quarters is provided in Table 1. Tables 4 and 5 provide information on net interest income. Table 6 provides information related to asset quality.

11

Financial Summary Table 1

	2005									2004						Nine Months Ended September 30
(thousands, except per share data and ratios)	Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter			2005			2004
Summary of Operations
Interest income	$	173,534		$	160,206		$	148,245		$	141,352		$	131,411		$	481,985		$	379,765
Interest expense		59,306			49,536			42,578			38,159			33,320			151,420			95,667
Net interest income		114,228			110,670			105,667			103,193			98,091			330,565			284,098
Provision for credit losses		7,211			6,994			5,326			8,737			7,972			19,531			25,736
Net interest income after provision for credit losses		107,017			103,676			100,341			94,456			90,119			311,034			258,362
Noninterest income		68,106			68,566			61,223			62,878			63,634			197,895			188,078
Noninterest expense		128,665			123,951			121,345			118,954			120,381			373,961			360,625
Income before income taxes		46,458			48,291			40,219			38,380			33,372			134,968			85,815
Income taxes		16,505			18,215			15,222			13,608			16,504			49,942			35,744
Net income	$	29,953		$	30,076		$	24,997		$	24,772		$	16,868		$	85,026		$	50,071
Net interest income-taxable equivalent	$	114,603		$	111,038		$	106,014		$	103,511		$	98,403		$	331,655		$	285,045
Selected Quarterly Averages
Total assets	$	14,160,391		$	13,618,161		$	13,309,802		$	13,251,848		$	12,935,674		$	13,699,234		$	12,723,224
Investment securities		2,764,377			2,345,056			2,072,316			2,115,389			2,022,450			2,396,451			2,171,462
Loans and leases		9,323,115			9,324,200			9,357,480			9,232,186			9,058,562			9,334,806			8,778,200
Interest-earning assets		12,750,494			12,255,663			11,929,086			11,852,896			11,561,331			12,314,757			11,359,728
Deposits		11,836,193			11,562,349			11,379,079			11,323,508			11,039,247			11,594,227			10,839,790
Interest-bearing liabilities		10,312,675			9,867,227			9,640,417			9,532,116			9,330,244			9,943,013			9,258,712
Long-term obligations		409,825			308,461			285,666			286,060			286,536			335,105			287,760
Shareholders’ equity	$	1,143,391		$	1,118,122		$	1,094,213		$	1,075,566		$	1,057,749		$	1,118,609		$	1,046,592
Shares outstanding		10,434,453			10,434,453			10,434,453			10,434,453			10,434,453			10,434,453			10,435,514
Selected Quarter-End Balances
Total assets	$	14,484,919		$	14,023,066		$	13,592,675		$	13,265,711		$	13,025,690		$	14,484,919		$	13,025,690
Investment securities		2,871,731			2,644,335			2,187,374			2,125,524			2,027,837			2,871,731			2,027,837
Loans and leases		9,359,540			9,300,984			9,404,742			9,354,387			9,150,859			9,359,540			9,150,859
Interest-earning assets		12,996,027			12,579,346			12,234,577			11,863,654			11,647,239			12,996,027			11,647,239
Deposits		12,123,491			11,758,089			11,629,382			11,350,798			11,124,996			12,123,491			11,124,996
Interest-bearing liabilities		10,544,543			10,156,552			9,818,651			9,641,368			9,426,235			10,544,543			9,426,235
Long-term obligations		409,742			409,964			285,312			285,943			286,437			409,742			286,437
Shareholders’ equity	$	1,158,885		$	1,134,242		$	1,102,568		$	1,086,310		$	1,068,014		$	1,158,885		$	1,068,014
Shares outstanding		10,434,453			10,434,453			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		0.84	%		0.89	%		0.76	%		0.74	%		0.52	%		0.83	%		0.53	%
Shareholders’ equity		10.39			10.79			9.26			9.16			6.34			10.16			6.39
Dividend payout ratio		9.58			9.55			11.46			11.60			16.98			10.12			17.19
Liquidity and Capital Ratios (averages)
Loans to deposits		78.77	%		80.64	%		82.23	%		81.53	%		82.06	%		80.51	%		80.98	%
Shareholders’ equity to total assets		8.07			8.21			8.22			8.12			8.18			8.17			8.23
Time certificates of $100,000 or more to total deposits		12.59			12.24			11.90			11.43			11.16			12.24			10.93
Per Share of Stock
Net income	$	2.87		$	2.88		$	2.40		$	2.37		$	1.62		$	8.15		$	4.80
Cash dividends		0.275			0.275			0.275			0.275			0.275			0.825			0.825
Book value at period end		111.06			108.70			105.67			104.11			102.35			111.06			102.35
Tangible book value at period end		100.17			97.75			94.66			93.12			91.31			100.17			91.31

12

NET INCOME

BancShares realized a significant increase in earnings during the third quarter of 2005 compared to the third quarter of 2004. Consolidated net income during the third quarter of 2005 equaled $30.0 million, compared to $16.9 million earned during the corresponding period of 2004. The $13.1 million or 77.6 percent increase resulted from improved levels of net interest income and noninterest income, partially offset by higher noninterest expense. Net income per share during the third quarter of 2005 totaled $2.87, compared to $1.62 during the third quarter of 2004, a 77.2 percent increase. Return on average assets amounted to 0.84 percent for the third quarter of 2005 and 0.52 percent for the third quarter of 2004. Return on average equity for the third quarter of 2005 was 10.39 percent compared to 6.34 percent during the third quarter of 2004.

For the first nine months of 2005, BancShares recorded net income of $85.0 million, compared to $50.1 million earned during the first nine months of 2004. The $35.0 million or 69.8 percent increase was also the result of improved net interest income, higher noninterest income as well as lower provision for credit losses. These favorable variances were partially offset by higher noninterest expense. Net income per share for the first nine months of 2005 was $8.15, compared to $4.80 recorded during the same period of 2004. BancShares returned 0.83 percent on average assets during the first nine months of 2005 compared to 0.53 percent during the corresponding period of 2004. Return on average equity for the first nine months of 2005 equaled 10.16 percent compared to 6.39 percent during the same period of 2004.

ISB reported net losses of $1.4 million and $3.3 million during the third quarter and first nine months of 2005, respectively, compared to net losses of $620,000 during the third quarter of 2004 and $2.2 million reported during the first nine months of 2004. Continuing losses by ISB result from higher provision for loan losses as well as costs associated with both planned and actual new branch openings. Since its inception, ISB has generated net losses of $29.6 million. Based on the magnitude of recent and planned branch growth, ISB’s net losses will likely extend into the foreseeable future.

Shareholders’ Equity. BancShares and its banking subsidiaries continue to exceed all minimum regulatory capital requirements, and the banking subsidiaries remain well capitalized. In recent years, the de novo growth and expansion of ISB has consumed significant amounts of capital. BancShares infused $15.0 million into ISB during the first nine months of 2005 to support its rapidly expanding balance sheet. Through September 30, 2005, BancShares has provided $245.0 million in capitalization for ISB and expects to continue to infuse amounts approximating $5.0 million per quarter for the foreseeable future. BancShares’ prospective capacity to provide capital to support the growth and expansion of ISB is dependent upon FCB’s ability to return capital through dividends to BancShares.

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 maturity of the underlying asset. Accordingly, 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 portfolio subjected to strenuous underwriting and monitoring procedures. Our investment securities portfolio consists almost exclusively of high-quality assets, primarily United States Treasury and government agency securities. Generally, the investment securities portfolio grows and shrinks based on loan and deposit trends. When deposit growth exceeds loan demand, we invest excess funds in the securities portfolio. Conversely, when loan demand exceeds deposit growth, we use proceeds from maturing securities to fund loan demand. Overnight investments are selectively made with other financial institutions that are within our risk tolerance.

Interest-earning assets for the third quarter of 2005 averaged $12.75 billion, an increase of $1.19 billion or 10.3 percent from the third quarter of 2004. For the nine months ended September 30, 2005, interest-earning assets averaged $12.31 billion, an increase of $955.0 million or 8.4 percent over the same period of 2004. These increases primarily resulted from growth in investment securities and the loan portfolio.

Loans and Leases. At September 30, 2005 and 2004, loans and leases totaled $9.36 billion and $9.15 billion, respectively. The $208.7 million growth in loans and leases from September 30, 2004 to September 30, 2005 primarily reflects growth within BancShares’ commercial mortgage and construction and land development lending. This growth was partially offset by the securitization and sale of $256.2 million in revolving mortgage loans during the second quarter of 2005. Table 2 details outstanding loans and leases by type for the past five quarters. During the twelve-month period from September 30, 2004 to September 30, 2005, FCB’s overall loan growth has remained modest while ISB’s commercial loans have displayed significant increases.

Commercial real estate loans totaled $3.47 billion at September 30, 2005, 37.0 percent of total loans and leases. This represents an increase of $362.5 million or 11.7 percent since September 30, 2004. Both FCB and ISB have experienced continuing demand for commercial real estate financing in recent quarters. A large percentage of our commercial real estate loans are secured by owner-occupied properties, and were underwritten based primarily upon the cash flow from the operation of the business rather than the value of the underlying real estate collateral.

During the 12-month period ended September 30, 2005, we also experienced a $124.4 million or 21.0 percent increase in construction and land development loans, generated primarily in ISB markets. These loans totaled $716.2 million at September 30, 2005, 7.6 percent of total loans and leases, as compared to $591.8 million at September 30, 2004.

At September 30, 2005 and 2004, commercial and industrial loans were $1.03 billion and $987.8 million, respectively. This $45.9 million or 4.6 percent increase was primarily the result of continued growth in ISB markets. Commercial and industrial loans represent 11.0 percent of total loans and leases as of September 30, 2005.

Revolving mortgage loans totaled $1.38 billion at September 30, 2005, representing 14.7 percent of total loans outstanding. This component of the loan portfolio has decreased $327.8 million since September 30, 2004, the combined result of the securitization and sale of $256.2 million of revolving home equity loans during the second quarter of 2005 and a general reduction in loans outstanding under home equity lines of credit. Higher variable rates of interest have made home equity line of credit borrowing more expensive for consumers.

Consumer loans totaled $1.32 billion at September 30, 2005 and $1.38 billion at September 30, 2004, a decrease of $58.7 million or 4.3 percent from September 30, 2004. This reduction results from lower levels of automobile sales finance activity during 2005.

During the third quarter of 2005, total loans and leases averaged $9.32 billion, an increase of $264.6 million or 2.9 percent from the comparable period of 2004. For the year-to-date, loans and leases have averaged $9.33 billion for 2005 compared to $8.78 billion for the same period of 2004, an increase of $556.6 million or 6.3 percent over the prior year.

13

We continue to focus on expansion of banking services to the medical community. At September 30, 2005, 15.8 percent of our loan portfolio represented loans for office facilities, medical and dental equipment and other needs incidental to the respective area of practice. We do not believe that the focus on medical and dental lending presents an inappropriate risk to the overall quality of our loan and lease portfolio.

Our recent growth through ISB has allowed us to mitigate our geographic concentration in North Carolina and Virginia. Although these markets have endured economic instability in the past, we are pleased with the diversification that we are beginning to realize by the growth of ISB. We are aware that, in the absence of rigorous underwriting and monitoring controls, rapid loan and lease growth in new markets may present incremental lending risks. During the expansion of ISB into new markets, we have endeavored to ensure that such controls are functioning effectively and will continue to place emphasis upon maintaining strong lending standards in new markets.

Outstanding Loans and Leases by Type Table 2

	2005
							2004
(thousands)	Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter
Real estate:
Construction and land development	$	716,176	$	690,362	$	637,707	$	588,092	$	591,810
1-4 family residential mortgage		990,355		980,410		963,779		979,663		966,164
Commercial mortgage		3,465,494		3,429,643		3,381,635		3,279,729		3,102,986
Revolving mortgage		1,375,145		1,395,122		1,661,820		1,714,032		1,702,969
Other mortgage		179,217		171,729		165,348		171,700		175,323
Total real estate		6,726,387		6,667,266		6,810,289		6,733,216		6,539,252
Commercial and industrial		1,033,650		1,007,969		973,793		969,729		987,777
Consumer		1,320,232		1,355,860		1,360,603		1,397,820		1,378,970
Lease financing		213,603		205,056		197,495		192,164		185,925
Other		65,668		64,833		62,562		61,458		58,935
Total loans and leases		9,359,540		9,300,984		9,404,742		9,354,387		9,150,859
Less allowance for loan and lease losses		126,297		126,247		125,710		123,861		121,266
Net loans and leases	$	9,233,243	$	9,174,737	$	9,279,032	$	9,230,526	$	9,029,593

Investment Securities. At September 30, 2005 and 2004, the investment securities portfolio totaled $2.87 billion and $2.03 billion, respectively. Total investment securities have increased 41.6 percent since September 30, 2004. Table 3 presents detailed information relating to the investment securities portfolio. During 2005, deposit growth has exceeded loan demand, resulting in excess liquidity that has been invested in the investment securities portfolio. In addition to deposit growth, excess liquidity resulted from the securitization and sale of revolving mortgage loans as well as the $125 million in subordinated debt issued during the second quarter.

Investment securities available for sale totaled $2.17 billion at September 30, 2005, compared to $1.18 billion at September 30, 2004, a $990.4 million or 83.6 percent increase. Available-for-sale securities are reported at their aggregate fair value.

Investment securities held to maturity totaled $696.9 million at September 30, 2005, compared to $843.4 million at September 30, 2004. This component of our investment securities portfolio continues to decline as securities mature and we classify virtually all acquisitions of new investment securities as available for sale. The average maturity of the held-to-maturity portfolio increased from ten months at September 30, 2004 to thirteen months at September 30, 2005. Securities classified as held-to-maturity reflect BancShares’ ability and positive intent to hold those investments until maturity.

14

Investment Securities Table 3

	September 30, 2005							September 30, 2004
(thousands)	Cost		Fair Value		Average Maturity (Yrs./Mos.)	Taxable Equivalent Yield		Cost		Fair Value		Average Maturity (Yrs./Mos.)	Taxable Equivalent Yield
Investment securities held to maturity:
U. S. Government:
Within one year	$	435,535	$	432,297	0/7	2.52	%	$	656,220	$	655,612	0/5	1.84	%
One to five years		249,613		247,954	1/6	3.62			171,750		171,369	1/4	2.12
Five to ten years		—		—					23		24	5/5	8.00
Ten to twenty years		9,561		9,747	11/7	5.55			12,913		13,429	12/7	5.55
Over twenty years		397		394	23/2	7.25			515		527	24/2	7.19
Total		695,106		690,392	1/1	2.96			841,421		840,961	0/10	1.96
State, county and municipal:
Within one year		—		—					165		169	0/9	5.55
One to five years		147		155	3/7	5.88			146		155	4/7	5.88
Five to ten years		—		—					—		—
Ten to twenty years		1,425		1,567	12/7	6.02			1,421		1,583	13/7	6.02
Total		1,572		1,722	11/9	6.01			1,732		1,907	11/7	5.96
Other
Within one year		—		—					25		25	0/4	1.05
One to five years		250		250	2/10	7.75			250		250	3/10	7.75
Five to ten years		—		—					—		—
Total		250		250	2/10	7.75			275		275	3/6	7.14
Total investment securities held to maturity		696,928		692,364	1/1	2.97			843,428		843,143	0/10	1.97
Investment securities available for sale:
U. S. Government:
Within one year		1,090,549		1,073,866	0/4	2.85			852,049		846,944	0/4	2.51
One to five years		1,000,452		992,261	1/9	3.73			259,202		257,688	1/9	2.26
Five to ten years		125		120	5/10	5.44			170		168	6/10	5.41
Ten to twenty years		2,198		2,141	13/2	4.76			1,879		1,858	13/8	4.62
Over twenty years		28,823		28,477	28/5	5.34			20,239		20,250	28/8	5.24
Total		2,122,147		2,096,865	1/5	3.30			1,133,539		1,126,908	0/10	2.43
State, county and municipal:
Within one year		909		903	0/8	2.01			846		844	0/8	1.18
One to five years		3,077		3,046	2/10	3.54			4,077		4,110	3/2	3.03
Five to ten years		1,116		1,114	6/7	4.64			1,302		1,315	7/3	4.59
Ten to twenty years		—		—					—		—
Over twenty years		145		145	27/2	1.15			145		145	28/2	1.15
Total		5,247		5,208	3/11	3.44			6,370		6,414	4/3	3.06
Other
Within one year		—		—					—		—
One to five years		—		—					—		—
Ten to twenty years		11,586		12,226	12/2	11.18			—		—
Five to ten years		—		—					—		—
Total		11,586		12,226					—		—
Equity securities		34,416		60,504					31,117		51,087
Total investment securities available for sale		2,173,396		2,174,803					1,171,026		1,184,409
Total investment securities	$	2,870,324	$	2,867,167				$	2,014,454	$	2,027,552

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

Overnight investments. Overnight investments totaled $764.8 million at September 30, 2005, compared to $468.5 million at September 30, 2004. Overnight investments averaged $663.0 million during the third quarter of 2005, an increase of $182.7 million or 38.0 percent from the third quarter of 2004. For the nine-month periods ended September 30, overnight investments averaged $583.5 million and $410.1 million, respectively, for 2005 and 2004. The changes in overnight investments resulted from liquidity management decisions.

Income on Interest-Earning Assets. Interest income amounted to $173.5 million during the third quarter of 2005, a $42.1 million or 32.1 percent increase from the third quarter of 2004. This increase resulted from higher yields as well as healthy growth in interest-earning assets. The taxable-equivalent yield on interest-earning assets increased 89 basis points from 4.53 percent in the third quarter of 2004 to 5.42 percent in the third quarter of 2005. The taxable-equivalent yield on loans increased 103 basis points, creating a significant favorable yield variance. The taxable-equivalent yield on investment securities increased 88 basis points in the third quarter of 2005 while the yield on overnight investments increased 202 basis points. These yield improvements reflect higher market rates, which have resulted from actions by the Federal Reserve to increase the fed funds rate.

Loan interest income for the third quarter of 2005 was $146.0 million, an increase of $27.7 million or 23.4 percent from the third quarter of 2004, due to much improved loan yields and modest growth in the loan portfolio. The taxable-equivalent yield on average loans grew from 5.21 percent to 6.24 percent from the third quarter of 2004 to the third quarter of 2005 due to higher market rates.

Within the investment securities portfolio, interest income was $21.8 million during the third quarter of 2005 compared to $11.4 million during the third quarter of 2004, an increase of $10.4 million or 91.0 percent. The increase in interest income resulted from the substantial growth in average investment securities and higher yields, which increased from 2.26 percent to 3.14 percent.

Overnight investments generated interest income of $5.7 million during the third quarter of 2005, compared to $1.7 million during the same period of 2004. The higher income is the combined result of an improved yield and higher funds invested. Overnight investments returned 3.40 percent during the third quarter of 2005 compared to 1.38 percent during the same period of 2004.

16

Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Third Quarter Table 4

	2005						2004						Increase (decrease) due to:
(thousands)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Volume			Yield/ Rate			Total Change
Assets
Loans and leases	$	9,323,115	$	146,355	6.24	%	$	9,058,562	$	118,582	5.21	%	$	3,921		$	23,852		$	27,773
Investment securities:
U. S. Government		2,689,999		21,031	3.10			1,962,915		11,077	2.24			4,902			5,052			9,954
State, county and municipal		6,808		90	5.24			8,141		103	4.15			(25	)		12			(13	)
Other		67,570		746	4.38			51,394		292	2.26			136			318			454
Total investment securities		2,764,377		21,867	3.14			2,022,450		11,472	2.26			5,013			5,382			10,395
Overnight investments		663,002		5,687	3.40			480,319		1,669	1.38			1,104			2,914			4,018
Total interest-earning assets	$	12,750,494	$	173,909	5.42	%	$	11,561,331	$	131,723	4.53	%	$	10,038		$	32,148		$	42,186
Liabilities
Deposits:
Checking With Interest	$	1,572,391	$	489	0.12	%	$	1,501,367	$	455	0.12	%	$	28		$	6		$	34
Savings		734,836		384	0.21			757,058		381	0.20			(14	)		17			3
Money market accounts		2,669,273		13,871	2.06			2,567,697		5,475	0.85			391			8,005			8,396
Time deposits		4,264,966		32,732	3.04			3,771,069		20,676	2.18			3,298			8,758			12,056
Total interest-bearing deposits		9,241,466		47,476	2.04			8,597,191		26,987	1.25			3,703			16,786			20,489
Federal funds purchased		47,619		400	3.33			46,065		149	1.29			10			241			251
Repurchase agreements		144,583		689	1.89			142,759		133	0.37			5			551			556
Master notes		413,929		2,804	2.69			199,870		374	0.74			923			1,507			2,430
Other short-term borrowings		55,253		480	3.45			57,823		218	1.50			(16	)		278			262
Long-term obligations		409,825		7,457	7.28			286,536		5,459	7.62			2,295			(297	)		1,998
Total interest-bearing liabilities	$	10,312,675	$	59,306	2.28	%	$	9,330,244	$	33,320	1.42	%	$	6,920		$	19,066		$	25,986
Interest rate spread					3.14	%					3.11	%
Net interest income and net yield on interest-earning assets			$	114,603	3.57	%			$	98,403	3.39	%	$	3,118		$	13,082		$	16,200

Average loan balances include nonaccrual loans. Yields related to loans 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 35.0% and state income tax rate of 6.9% for each period. The taxable-equivalent adjustment was $375 for 2005 and $312 for 2004.

17

Interest income amounted to $482.0 million during the first nine months of 2005, a $102.2 million or 26.9 percent increase from the same period of 2004, the combined result of favorable rate and volume variances. The taxable-equivalent yield on interest-earning assets increased 77 basis points from 4.48 percent for the first nine months of 2004 to 5.25 percent during the same period of 2005. Higher market interest rates during 2005 contributed to the favorable rate variance.

For the nine months ended September 30, 2005, loan interest income was $417.7 million, an increase of $78.1 million or 23.0 percent from the same period of 2004. The increase in interest income reflects higher interest rates and growth in the loan portfolio. For the first nine months, the taxable-equivalent loan yield was 6.00 percent during 2005, compared to 5.18 percent during the same period of 2004, up 82 basis points.

For the nine months ended September 30, 2005, income earned on the investment securities portfolio amounted to $51.3 million, compared to $36.6 million during the same period of 2004, an increase of $14.7 million or 40.0 percent. This increase is the combined result of a 61 basis point yield increase and a $225.0 million increase in average investment securities. Interest earned on overnight investments totaled $12.9 million during the first nine months of 2005 compared to $3.5 million during the same period of 2004, a $9.5 million increase. This was the result of the 183 basis points increase in yield and higher average overnight investments, which increased $173.4 million or 42.3 percent in 2005.

INTEREST-BEARING LIABILITIES

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

At September 30, 2005 and 2004, interest-bearing liabilities totaled $10.54 billion and $9.43 billion, respectively. During the third quarter of 2005, interest-bearing liabilities averaged $10.31 billion, an increase of $982.4 million or 10.5 percent from the third quarter of 2004. This increase primarily resulted from higher levels of time deposits as customers migrated funds from money market and other short-term deposit instruments to time deposits in order to take advantage of higher market interest rates.

Deposits. At September 30, 2005, total deposits were $12.12 billion, an increase of $998.5 million or 9.0 percent over September 30, 2004. Interest-bearing deposits averaged $9.24 billion during the third quarter of 2005 compared to $8.60 billion during the third quarter of 2004, an increase of $644.3 million or 7.5 percent. Average time deposits increased $493.9 million or 13.1 percent to $4.26 billion. Money market accounts averaged $2.67 billion in the third quarter of 2005, up slightly from $2.57 billion the same quarter of 2004, an improvement of $101.6 million or 4.0 percent. Average Checking With Interest increased $71.0 million or 4.7 percent to $1.57 billion. Offsetting these increases, average savings decreased $22.2 million or 2.9 percent to $734.8 million from the third quarter of 2004 to the third quarter of 2005. For the first nine months of 2005, interest-bearing deposits averaged $9.06 billion compared to $8.53 billion during the same period of 2004. This $532.0 million or 6.2 percent increase results from continued growth primarily among time deposits and money market accounts.

Short-term borrowings. At September 30, 2005, short-term borrowings totaled $696.9 million compared to $457.6 million at September 30, 2004. For the quarters ended September 30, 2005 and 2004, short-term borrowings averaged $661.4 million and $446.5 million, respectively. The $214.9 million or 48.1 percent increase in average short-term borrowings is the result of growth in master notes. Customer interest in these commercial cash management products has improved due to increasing interest rates.

For the nine-month periods ended September 30, 2005 and 2004, short-term borrowings averaged $544.4 million and $439.5 million, respectively, an increase of 23.9 percent primarily due to stronger demand for master notes from commercial cash management customers.

Long-term obligations. At September 30, 2005 and 2004, long-term obligations totaled $409.7 million and $286.4 million, respectively. The increase reflects the impact of $125 million in 5.125 percent ten-year fixed rate subordinated debt issued during the second quarter of 2005.

Expense on Interest-Bearing Liabilities. BancShares’ interest expense amounted to $59.3 million during the third quarter of 2005, a $26.0 million or 78.0 percent increase from the third quarter of 2004. The higher interest expense was the result of higher deposit funding costs caused by escalating market rates and substantially higher average balances of interest-bearing liabilities. The rate on interest-bearing liabilities was 2.28 percent during the third quarter of 2005 compared to 1.42 percent during the same period of 2004.

Year-to-date interest expense was $151.4 million, compared to $95.7 million for the same period of 2004. The $55.8 million or 58.3 percent increase results primarily from higher interest rates. The rate on interest-bearing liabilities increased from 1.38 percent during the first nine months of 2004 to 2.04 percent for the same period of 2005, a 66 basis point increase. In addition to a 104 basis point increase on money market accounts, the rate on time deposits increased 63 basis points.

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Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Nine Months Table 5

	2005						2004						Increase (decrease) due to:
(thousands)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Volume			Yield/ Rate		Total Change
Assets
Loans and leases	$	9,334,806	$	418,743	6.00	%	$	8,778,200	$	340,494	5.18	%		22,988			55,261		78,249
Investment securities:
U. S. Government		2,330,138		49,621	2.85			2,110,701		35,578	2.25			4,132			9,911		14,043
State, county and municipal		7,399		283	5.11			8,842		323	4.88			(54	)		14		(40	)
Other		58,914		1,495	3.39			51,919		856	2.20			146			493		639
Total investment securities		2,396,451		51,399	2.87			2,171,462		36,757	2.26			4,224			10,418		14,642
Overnight investments		583,500		12,933	2.96			410,066		3,461	1.13			2,663			6,809		9,472
Total interest-earning assets	$	12,314,757	$	483,075	5.25	%	$	11,359,728	$	380,712	4.48	%	$	29,875		$	72,488	$	102,363
Liabilities
Deposits:
Checking With Interest	$	1,563,338	$	1,428	0.12	%	$	1,489,640	$	1,329	0.12	%	$	83		$	16	$	99
Savings		746,603		1,140	0.20			741,014		1,112	0.20			18			10		28
Money market accounts		2,631,523		34,851	1.77			2,562,924		14,060	0.73			615			20,176		20,791
Time deposits		4,122,007		85,903	2.79			3,737,908		60,571	2.16			6,962			18,370		25,332
Total interest-bearing deposits		9,063,471		123,322	1.82			8,531,486		77,072	1.21			7,678			38,572		46,250
Federal funds purchased		44,839		952	2.84			44,705		336	1.00			1			615		616
Repurchase agreements		138,274		1,496	1.45			140,710		379	0.36			(18	)		1,135		1,117
Master notes		305,838		5,248	2.29			194,679		1,013	0.70			1,251			2,984		4,235
Other short-term borrowings		55,486		1,288	3.10			59,372		534	1.20			(62	)		816		754
Long-term obligations		335,105		19,114	7.61			287,760		16,333	7.57			2,691			90		2,781
Total interest-bearing liabilities	$	9,943,013	$	151,420	2.04	%	$	9,258,712	$	95,667	1.38	%	$	11,541		$	44,212	$	55,753
Interest rate spread					3.21	%					3.10	%
Net interest income and net yield on interest-earning assets			$	331,655	3.60	%			$	285,045	3.35	%	$	18,334		$	28,276	$	46,610

Average loan balances include nonaccrual loans. Yields related to loans 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 35.0% and state income tax rate of 6.9% for each period. The taxable-equivalent adjustment was $1,090 for 2005 and $947 for 2004.

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NET INTEREST INCOME

Net interest income totaled $114.2 million during the third quarter of 2005, an increase of $16.1 million or 16.5 percent from the $98.1 million recorded during the third quarter of 2004. The taxable-equivalent net yield on interest-earning assets was 3.57 percent for the third quarter of 2005, an increase of 18 basis points from the 3.39 percent reported for the third quarter of 2004. Net interest income was $330.6 million and $284.1 million for the nine-month periods ended September 30, 2005 and 2004, respectively. This represents an increase of $46.5 million or 16.4 percent. The taxable-equivalent net yield on interest-earning assets increased 25 basis points from 3.35 percent during the first nine months of 2004 to 3.60 percent during the same period of 2005.

During both the three and nine month periods ended September 30, 2005, the growth in net interest income when compared to the same period of 2004 primarily resulted from higher interest rates and the asset-sensitive position of our balance sheet.

On a linked quarter basis, the third quarter 2005 taxable equivalent net yield declined by 6 basis points due primarily to the full quarter impact of the second quarter loan securitization and subordinated debt issuance as well as generally weak loan demand during the third quarter.

Our asset/liability management strategy continues to focus on maintaining high levels of balance sheet liquidity and managing our interest rate risk. 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. We do not use interest rate swaps, floors, collars or other derivative financial instruments to attempt to hedge our interest rate sensitivity and interest rate risk. Management believes that due to the current interest sensitivity position of the balance sheet, future interest rate hikes will benefit net interest income. However, we also recognize that downward movements in market interest rates may have an adverse impact on net interest income.

ASSET QUALITY

The maintenance of excellent asset quality is one of our primary areas of operational focus. Historically, we have dedicated significant resources to ensuring that we are prudent in our lending practices. Accordingly, we have focused on asset quality as a key performance measure. Table 6 provides details concerning loan and lease loss as well as risk element information over the past five quarters and for the year-to-date for 2005 and 2004.

Nonperforming assets. At September 30, 2005, BancShares’ nonperforming assets, consisting of nonaccrual loans and other real estate, amounted to $15.9 million or 0.17 percent of loans plus foreclosed properties compared to $23.8 million at September 30, 2004. Nonaccrual loans totaled $11.1 million at September 30, 2005, compared to $16.1 million at September 30, 2004. Other real estate totaled $4.8 million at September 30, 2005, compared to $7.7 million at September 30, 2004. We closely monitor nonperforming assets, taking necessary actions to minimize potential exposure.

Allowance for Credit Losses. Our allowance for credit losses includes the allowance for loan and lease losses and the liability for unfunded credit commitments. We continuously analyze the growth and risk characteristics of the total loan and lease portfolio under current economic conditions in order to evaluate the adequacy of the allowance for loan and lease losses. Such factors as the financial condition of the borrower, fair market value of collateral and other considerations are recognized in estimating probable credit losses.

At September 30, 2005, the allowance for credit losses amounted to $133.2 million or 1.42 percent of loans outstanding. This compares to $127.9 million or 1.40 percent at September 30, 2004.

The provision for credit losses charged to operations during the third quarter of 2005 was $7.2 million, compared to $8.0 million during the third quarter of 2004, a decrease of $761,000 or 9.5 percent. Net charge-offs for the three months ended September 30, 2005 totaled $7.2 million, compared to net charge-offs of $5.5 million during the same period of 2004. On an annualized basis, these net charge-offs represent 0.30 percent and 0.24 percent of average loans and leases outstanding during the respective periods, both ratios being within our historical average range for quarterly loss ratios. For the nine-month periods ended September 30, total provision for credit losses was $19.5 million for 2005 and $25.7 million for 2004, a decrease of $6.2 million or 24.1 percent. The reduction in provision expense was primarily the result of lower net charge-offs and reduced levels of loan growth. Net charge-offs for the nine-month period ended September 30, 2005 totaled $15.6 million, compared to $17.2 million during the same period of 2004. As a percentage of average loans and leases outstanding, these losses represent 0.22 percent for 2005 and 0.26 percent for 2004 on an annualized basis.

We consider the established allowance for credit losses adequate to absorb losses inherent in the loan and lease portfolio at September 30, 2005. While we use available information to establish provisions for credit losses, future additions to the allowance may be necessary based on changes in economic conditions or other factors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for credit losses. Such agencies may require the recognition of adjustments to the allowance based on their judgments of information available to them at the time of their examination.

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Summary of Loan and Lease Loss Experience and Risk Elements Table 6

	2005									2004						Nine Months Ended
	Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter			September 30
(thousands, except ratios)																2005			2004
Allowance for credit losses at beginning of period	$	133,218		$	132,681		$	130,832		$	127,857		$	125,357		$	130,832		$	119,357
Provision for credit losses		7,211			6,994			5,326			8,737			7,972			19,531			25,736
Adjustment for sale of loans		(48	)		(1,537	)		—			—			—			(1,585	)		—
Net charge-offs:
Charge-offs		(8,305	)		(6,048	)		(5,745	)		(6,651	)		(6,655	)		(20,099	)		(19,895	)
Recoveries		1,144			1,128			2,268			889			1,183			4,541			2,659
Net charge-offs		(7,161	)		(4,920	)		(3,477	)		(5,762	)		(5,472	)		(15,558	)		(17,236	)
Allowance for credit losses at end of period	$	133,220		$	133,218		$	132,681		$	130,832		$	127,857		$	133,220		$	127,857
Allowance for credit losses includes:
Allowance for loan and lease losses	$	126,297		$	126,247		$	125,710		$	123,861		$	121,266		$	126,297		$	121,266
Liability for unfunded credit commitments		6,923			6,971			6,971			6,971			6,591			6,923			6,591
Allowance for credit losses at end of period	$	133,220		$	133,218		$	132,681		$	130,832		$	127,857		$	133,220		$	127,857
Historical Statistics
Average loans and leases	$	9,323,115		$	9,324,200		$	9,357,480		$	9,232,186		$	9,058,562		$	9,334,806		$	8,778,200
Loans and leases at period-end		9,359,540			9,300,984			9,404,742			9,354,387			9,150,859			9,359,540			9,150,859
Risk Elements
Nonaccrual loans and leases	$	11,065		$	13,362		$	15,344		$	14,266		$	16,062		$	11,065		$	16,062
Other real estate		4,843			5,049			7,533			9,020			7,749			4,843			7,749
Total nonperforming assets	$	15,908		$	18,411		$	22,877		$	23,286		$	23,811		$	15,908		$	23,811
Accruing loans and leases 90 days or more past due	$	7,712		$	10,056		$	7,479		$	12,192		$	10,473		$	7,712		$	10,473
Ratios
Net charge-offs (annualized) to average total loans and leases		0.30	%		0.21	%		0.15	%		0.25	%		0.24	%		0.22	%		0.26	%
Percent of total loans and leases at period-end:
Allowance for loan and lease losses		1.35			1.36			1.34			1.33			1.33			1.35			1.33
Liability for unfunded credit commitments		0.07			0.07			0.07			0.07			0.07			0.07			0.07
Allowance for credit losses		1.42			1.43			1.41			1.40			1.40			1.42			1.40
Nonperforming assets to total loans and leases plus other real estate		0.17			0.20			0.24			0.25			0.26			0.17			0.26

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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 service charges on deposit accounts, cardholder and merchant services income, various types of commission-based income including the sale of investments by our broker-dealer subsidiaries, fees from processing services for client banks, mortgage income and various types of revenues derived from wealth management services. Noninterest income also includes gains and losses resulting from securities transactions as well as gains recognized from the securitization and sale of loans.

During the first nine months of 2005, noninterest income was $197.9 million, compared to $188.1 million during the same period of 2004. The $9.8 million or 5.2 percent increase resulted from higher cardholder and merchant services income, other service charges and fees as well as the gain recognized on the securitization and sale of revolving mortgage loans. The favorable variances in these areas more than offset the impact of reductions in service charge income and the absence of securities gains during 2005. Securities transactions generated net gains of $1.9 million during 2004 compared to net losses of $22,000 in 2005.

Cardholder and merchant services income increased $6.6 million from $47.3 million earned in the first nine months of 2004 to $53.9 million in the first nine months of 2005. This 13.9 percent increase in cardholder income was due to increased merchant discount volume and higher interchange fees for debit and credit card transactions.

Other service charges and fees increased $2.5 million or 25.5 percent during 2005, primarily due to new check cashing fees we began collecting in early 2005. The securitization and sale of revolving mortgage loans resulted in a gain of $2.9 million during the second quarter of 2005. This gain is included in other noninterest income. There were no securitization and sale transactions in prior periods.

Trust income contributed an additional $1.2 million during the first nine months of 2005 compared to the same period of 2004. This increase represents a 9.2 percent increase over the same period of 2004, the result of higher fees earned for various trust and fiduciary services. Fees from processing services increased $1.1 million from $17.8 million during the first nine months of 2004 to $18.9 million earned during the first nine months of 2005 due to higher transaction volume for processed banks.

Service charge income decreased $3.3 million or 5.4 percent from the $61.2 million earned during the first nine months of 2004. Much of the reduction relates to commercial service charge income, which has declined as interest rates have increased for accounts subject to commercial analysis.

During the third quarter of 2005, noninterest income was $68.1 million, a $4.5 million or 7.0 percent increase over the $63.6 million earned during the third quarter of 2004. Cardholder and merchant services income increased $2.6 million or 15.4 percent during 2005 due to growth of interchange income for debit and credit transactions. Other service charges and fees increased $1.2 million due to new fees collected during 2005. Trust income increased $502,000 from $4.2 million in 2004 to $4.7 million in 2005. Fees from processing and commission income were also higher.

Partially offsetting these increases, service charges on deposits decreased $1.7 million or 8.0 percent during the third quarter of 2005 due to reductions in commercial service charge income.

NONINTEREST EXPENSE

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

Noninterest expense was $374.0 million for the first nine months of 2005, a 3.7 percent increase over the $360.6 million recorded during the same period of 2004. The $13.3 million increase in noninterest expense results from higher personnel and general operating costs. ISB noninterest expenses increased $10.4 million or 27.3 percent over 2004.

Salary expense increased $4.8 million during 2005 when compared to the same period of 2004. This 3.1 percent increase is primarily due to the growth in employee population required to staff new branch and loan production offices of ISB. ISB’s salary expense increased $3.7 million or 22.7 percent.

Employee benefits expense increased $2.1 million or 5.7 percent during the first nine months of 2005, compared to the corresponding period of 2004 due to a $1.9 million increase in pension expense and $1.8 million of costs related to a benefit enhancement for a post-retirement executive benefit plan. Health expenses declined $2.0 million due to favorable claims experience within our self-insured health plan. ISB’s employee benefits expense increased $1.1 million or 32.1 percent over 2004 due to growth in the employee population.

22

Occupancy expense increased $1.7 million to $35.0 million during the first nine months of 2005. This 5.1 percent increase resulted from higher depreciation expense for branch facilities and utilities costs. As a result of additional locations, ISB’s occupancy expense increased $821,000 or 11.1 percent during 2005.

The $4.6 million or 4.8 percent increase in other expense resulted from a $2.8 million increase in cardholder processing costs due to transaction volume growth and a $1.5 million unfavorable variance in losses from the sale of assets. Partially offsetting these higher costs were favorable variances in legal, claims and postage costs.

For the third quarter of 2005, noninterest expense totaled $128.7 million, an $8.3 million or 6.9 percent increase over the same period of 2004. Salary expense totaled $55.7 million during the third quarter of 2005, an increase of $3.0 million or 5.7 percent due primarily to costs for new associates hired to support the ISB expansion. Employee benefits expense increased $1.8 million due to higher pension and executive post-retirement benefit costs. Equipment expense increased $1.1 million or 9.9 percent due to higher software-related expenses.

LIQUIDITY

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 September 30, 2005, BancShares had access to $450.0 million in unfunded borrowings through its correspondent bank network.

Once we have satisfied our loan demand, residual liquidity is invested in overnight and longer-term investment products. Investment securities available for sale provide immediate liquidity as needed. In addition, investment securities held to maturity provide an ongoing liquidity source based on the scheduled maturity dates of the securities.

SHAREHOLDERS’ EQUITY AND CAPITAL ADEQUACY

BancShares continues to exceed all minimum regulatory capital requirements, and the banking subsidiaries remain well-capitalized. At September 30, 2005 and 2004, the leverage capital ratio of BancShares was 9.22 percent and 9.32 percent, respectively, surpassing the minimum level of 3 percent. As a percentage of risk-adjusted assets, BancShares’ Tier 1 capital ratio was 12.51 percent at September 30, 2005, and 12.16 percent as of September 30, 2004. The minimum ratio allowed is 4 percent of risk-adjusted assets. The total risk-adjusted capital ratio was 15.08 percent at September 30, 2005 and 13.50 percent as of September 30, 2004. The minimum total capital ratio is 8 percent.

The subordinated debt issued during the second quarter of 2005 qualifies as Tier 2 capital under current regulatory guidelines. As a result, BancShares’ total capital ratio has been further strengthened by that transaction.

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.

For the third quarters of 2005 and 2004, the effective tax rates were 35.5 percent and 49.5 percent, respectively. The effective tax rates for the nine-month periods ended September 30, 2005 and 2004 were 37.0 percent and 41.7 percent, respectively. The higher effective tax rate during 2004 resulted from higher state income tax expense that resulted from an examination of BancShares’ North Carolina tax returns for 2000, 2001 and 2002, net of the reversal of unallocated income tax liabilities that were no longer needed. Including estimated interest and net of federal benefit, the additional income tax expense recorded during the third quarter of 2004 amounted to $4.0 million.

23

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 much of its expansion has been accomplished on a de novo basis. However, because of FCB’s size, market share and maturity as well as the current modest expansion of its branch network, the costs associated with de novo branching are not material to FCB’s financial performance. Since it first opened in 1997, ISB has followed a similar business model for growth and expansion. Yet, due to the large number of branch offices that have yet to attain sufficient size for 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. ISB’s rapid growth in new markets in recent years has continued to adversely impact its financial performance.

IronStone Bank. ISB’s total assets increased from $1.39 billion at September 30, 2004 to $1.77 billion at September 30, 2005, an increase of $378.8 million or 27.2 percent. ISB’s net interest income increased $11.1 million or 33.1 percent during the first nine months of 2005, when compared to the same period of 2004, the result of higher loan yields and substantially higher levels of average loans outstanding. Provision for credit losses increased $3.6 million or 120.0 percent due to growth in the loan portfolio during the current year and higher net charge-offs.

ISB’s noninterest income increased $1.4 million or 33.7 percent during the first nine months of 2005, due to higher cardholder and merchant services income, partially offset by a reduction in deposit service charges. Noninterest expense increased $10.4 million or 27.2 percent during 2005, the net impact of higher personnel, occupancy and card processing costs. Higher personnel and occupancy reflect the impact of the expanded branch network, much of which relates to the expansion of ISB into California, Colorado, Oregon and Washington. These increases reflect the increased employee population within the growing ISB branch network.

ISB recorded a net loss of $3.3 million during the first nine months of 2005 compared to a net loss of $2.2 million during the same period of 2004. This represents an unfavorable variance of $1.0 million, the result of a higher growth rate of noninterest expenses and provision for loan losses than revenues.

ISB continues to evaluate both existing and new markets for expansion. As such growth occurs, ISB will continue to incur incremental operating costs, particularly in the areas of personnel, occupancy and equipment. As a result of the de novo status of much of the ISB franchise and plans for continued expansion, ISB’s net losses will likely extend into the foreseeable future.

First-Citizens Bank & Trust Company. FCB’s total assets increased from $11.55 billion at September 30, 2004 to $12.59 billion at September 30, 2005, an increase of $1.04 billion or 9.0 percent. FCB’s net interest income increased $34.9 million or 13.2 percent during the first nine months of 2005, the result of higher loan yields and loan growth. Provision for credit losses decreased $9.8 million or 43.2 percent due to lower net charge-offs and slower loan and lease growth during the current year.

FCB’s noninterest income increased $11.3 million or 6.1 percent during the first nine months of 2005, primarily the result of cardholder and merchant income and fees from processing services. Noninterest expense increased $3.6 million or 1.1 percent during the first nine months of 2005, primarily due to higher personnel and occupancy costs.

FCB recorded net income of $98.0 million during the first nine months of 2005 compared to $60.8 million during the same period of 2004. This represents a $37.2 million or 61.2 percent increase in net income, which reflects the favorable impact on net interest income of increases in market interest rates during the past 12 months.

CURRENT ACCOUNTING AND REGULATORY ISSUES

There has been no accounting guidance issued since December 31, 2004, that will have a significant impact on our consolidated financial statements. Further, 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 with the Securities and Exchange Commission from time to time.

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 particularly changes that affect our loan portfolio, the abilities of our borrowers to repay their loans, and the values of loan 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.

24

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 September 30, 2005, BancShares’ market risk profile has not changed significantly from December 31, 2004.

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 third quarter of 2005 that had materially affected, or is reasonably likely to materially affect, BancShares’ internal control over financial reporting.

PART II

Item 6. Exhibits
	Exhibit 10.1	Amended and Restated Employee Consultation, Post-Retirement Non-Competition and Death Benefit Agreement by and between First-Citizens Bank & Trust Company and Lewis R. Holding dated October 25, 2005
	Exhibit 10.2	Amended and Restated Employee Consultation, Post-Retirement Non-Competition and Death Benefit Agreement by and between First-Citizens Bank & Trust Company and Frank B. Holding dated October 25, 2005
	Exhibit 10.3	Amended and Restated Employee Consultation, Post-Retirement Non-Competition and Death Benefit Agreement by and between First-Citizens Bank & Trust Company and James B. Hyler, Jr. dated October 25, 2005
	Exhibit 10.4	Amended and Restated Employee Consultation, Post-Retirement Non-Competition and Death Benefit Agreement by and between First-Citizens Bank & Trust Company and Frank B. Holding, Jr. dated October 25, 2005
	Exhibit 10.5	Amended and Restated Employee Consultation, Post-Retirement Non-Competition and Death Benefit Agreement by and between IronStone Bank and James M. Parker dated October 25, 2005
	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: November 4, 2005	FIRST CITIZENS BANCSHARES, INC.
	(Registrant)
	By:	/s/ KENNETH A. BLACK
		Kenneth A. Black
		Vice President, Treasurer
		and Chief Financial Officer

26

EX-10.1

EXHIBIT 10.1

AMENDED AND RESTATED EMPLOYEE CONSULTATION,

POST-RETIREMENT NON-COMPETITION AND DEATH BENEFIT AGREEMENT

THIS EMPLOYEE CONSULTATION, POST-RETIREMENT NON-COMPETITION AND DEATH BENEFIT AGREEMENT (“Agreement”) is made and entered into effective as of the 1st day of July, 2005 (“Effective Date”), by and between FIRST-CITIZENS BANK & TRUST COMPANY, a North Carolina banking corporation with its principal office in Raleigh, Wake County, North Carolina (hereinafter referred to as “Employer”); and LEWIS R. HOLDING (hereinafter referred to as “Employee”);

W I T N E S S E T H

WHEREAS, Employee is an employee of Employer who has provided guidance, leadership and direction in the growth, management and development of Employer and has learned trade secrets, confidential procedures and information, and technical and sensitive plans of Employer; and,

WHEREAS, Employer desires to limit Employee’s availability to other employers or entities which are in competition with Employer following Employee’s retirement from employment with Employer; and,

WHEREAS, Employer has offered to Employee a non-competition arrangement and a consultation arrangement together with a death benefit arrangement for Employee’s designated beneficiary or estate, as applicable, and the parties hereto have reached an agreement concerning those arrangements and other matters contained herein and desire to set forth the terms and conditions thereof.

NOW, THEREFORE, for and in consideration of the mutual promises and undertakings herein set forth, Employee and Employer hereby agree as follows:

1. Consultation Payments. Following Employee’s “Retirement” (as defined below) from Employee’s employment with Employer on the Retirement Date (as defined below), Employer shall pay to Employee the sum of EIGHT THOUSAND THREE HUNDRED THIRTY-FOUR and 46/100 Dollars ($8,334.46) per month, beginning six months and one week after Employee’s Retirement for a period of ten (10) years following Employee’s Retirement or

1

until Employee’s death, whichever first occurs (“Consultation Payments”). Such monthly payments shall be paid for and in consideration of Employee’s support, sponsorship, advisory and other services provided to Employer (“Consultation Services”); such sum to be payable to Employee whether or not Employee’s Consultation Services are utilized in said month by Employer. Except as set forth below, Consultation Payments hereunder shall be payable each month without deductions and Employee agrees to be solely responsible for the payment of all income and other taxes out of said funds and all Social Security, self-employment and any other taxes or assessments, if any, applicable on said compensation.

For and in consideration of said monthly Consultation Payments to Employee, Employee will provide Consultation Services as an independent contractor to Employer, as and when Employer may request, which services may be provided with respect to all phases of Employer’s business and particularly those phases in which Employee has particular expertise and knowledge. Employee’s services shall be limited to those of an independent consultant, shall not be on a day-to-day regularly scheduled operational basis and shall be provided only when Employee is reasonably available and willing, which willingness will not be unreasonably withheld. Employer shall make available to Employee such office space and equipment as are reasonably necessary for Employee to carry out the obligations under this Agreement and shall reimburse Employee for any extraordinary expenses incurred in carrying out the obligations hereunder.

Effective as of Employee’s Retirement date, Employee and Employer agree that Employee shall be, under the terms of this Agreement, an independent contractor, and Employee agrees that Employee’s rights and privileges and obligations are only as provided in this Agreement as to matters covered herein.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments are compensation for other than payments for Consultation Services, and such payments shall be subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under applicable tax law, the said payments shall be subject to the required withholdings.

If Employee should die during the ten-year period during which Consultation Payments are being made under this Paragraph 1 or under Paragraph 3 below, then those payments shall terminate and future payments, if any, shall be made to Employee’s designated beneficiary(ies) or Employee’s estate in accordance with the provisions of Paragraph 4 of this Agreement.

2

As used in this Agreement, the term “Retirement” shall mean a termination of Employee’s employment with Employer on the 1st day of January, 2011 (the “Retirement Date”). Employer and Employee hereby acknowledge that compulsory retirement is not enforceable except as provided by law. Employer and Employee further agree that no provision herein shall be construed as requiring Employee’s retirement except as may now or hereafter be permitted by law.

2. Non-competition Payments. Following Employee’s Retirement from his employment with Employer on the Retirement Date, Employer shall pay to Employee the sum of TWENTY-FIVE THOUSAND THREE and 38/100 Dollars ($25,003.38) per month, beginning six months and one week after Employee’s Retirement for a period of ten (10) years following Employee’s Retirement or until Employee’s death, whichever first occurs. Such monthly payments shall be paid for and in consideration of Employee’s agreement in this Paragraph 2 (Employee’s “Covenant Not To Compete”). Payments hereunder (“Non-competition Payments”) shall be payable each month without deductions and Employee agrees to be solely responsible for the payment of all income or other taxes or assessments, if any, applicable on those payments.

For and in consideration of monthly Non-competition Payments to Employee, Employee 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 Employer is performing at the time of Employee’s Retirement, nor will Employee 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 Employer, whether done directly or indirectly, in ownership, consultation, employment or otherwise. Employee agrees not to reveal to outside sources, without the consent of Employer, any matters, the revealing of which could, in any manner, adversely affect or disclose Employer’s business or any part thereof, unless required by law to do so. This Covenant Not To Compete by Employee is limited to the geographic area consisting of each county or like jurisdictional entity in which either Employer or any banking or investment entity owned directly or indirectly by the parent of Employer shall maintain a banking or other business office at the time of Employee’s

3

Retirement, shall exist for and during the term of all payments to be made under this Paragraph 2, whether made directly by Employer or as otherwise provided herein, and shall not prevent Employee 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 Employer.

Employee acknowledges that the remedy at law for breach of Employee’s Covenant Not To Compete will be inadequate and that Employer shall be entitled to injunctive relief as to any violation thereof; however, nothing herein shall be construed as prohibiting Employer from pursuing any other remedies available to it, in addition to injunctive relief, whether at law or in equity, including the recovery of damages. In the event Employee shall breach any condition of Employee’s Covenant Not To Compete, then Employee’s right to any of the payments becoming due under Paragraphs 1 and 2 or under Paragraph 3 of this Agreement after the date of such breach shall be forever forfeited and the right of Employee’s designated beneficiary(ies) or Employee’s estate to any payments under this Agreement shall likewise be forever forfeited. This forfeiture is in addition to and not in lieu of any of the above-described remedies of Employer and shall be in addition to any injunctive or other relief as described herein. Employee further acknowledges that any breach of Employee’s Covenant Not To Compete shall be deemed a material breach of this Agreement.

Notwithstanding the foregoing, if Employer determines that the Non-competition Payments are compensation for other than payments for Non-competition, and such payments shall be subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable tax law, the said payments shall be subject to the required withholdings.

If Employee should die during the ten-year period during which Non-competition Payments are being made under this Paragraph 2 or under Paragraph 3 below, then those payments shall terminate and future payments, if any, shall be made to Employee’s designated beneficiary(ies) or Employee’s estate in accordance with the provisions of Paragraph 4 of this Agreement.

3. Postponement of Retirement Date and Payments. Employee may postpone the Retirement Date and effectively postpone the timing of the Consultation Payments and Non-competition Payments (collectively “Post-Retirement Payments”). In the event Employee desires to postpone the Retirement Date and the Post-Retirement Payments, Employee

4

shall make an election to postpone in the form attached as Exhibit A to this Agreement. Such election may not take effect until at least twelve months (12) after the date on which the election is made. Employee shall make the election to postpone at least twelve months prior to the original Retirement Date. If Employee makes the election, Employee shall postpone the Retirement Date to a date not less than five years from the original Retirement Date. Consequently, the beginning date of the ten-year payment period for the Post-Retirement Payments shall be postponed to a date that is six months and one week after the new Retirement Date.

To the extent permitted by the Internal Revenue Code of 1986, as amended, and other tax principles, including but not limited to Section 409A of the Code, Employee may make subsequent elections to continue to postpone the Retirement Date and effectively the Post-Retirement Payments. The subsequent election must be made at least twelve months prior to the Retirement Date established by the previous election. If Employee makes a subsequent election, Employee shall postpone the Retirement Date to a date not less than five years from the Retirement Date established by the previous election. Consequently, the beginning date of the ten-year payment period for the Post-Retirement Payments shall be postponed to a date that is six months and one week after the new Retirement Date.

Once Employee makes an election to postpone, the timing of the Post-Retirement Payments may not be accelerated to a date prior to the date established by the election except on account of Employee’s death.

4. Continuation of Payments. Following Employee’s death during the ten-year period of payments under Paragraphs 1 and 2 or under Paragraph 3 above, the sum of THIRTY-THREE THOUSAND THREE HUNDRED THIRTY-SEVEN and 84/100 Dollars ($33,337.84) per month shall be paid to such individual or individuals as Employee shall have designated in writing as his beneficiary(ies) as provided in Paragraph 12 below or, in the absence of such designation, to Employee’s estate, as applicable, beginning the first calendar month following the date of Employee’s death and continuing thereafter until the expiration of the ten-year period. Once the Consultation Payments and Non-competition Payments have begun, whether paid by Employer or as otherwise provided herein, the maximum payment period under this Agreement shall be ten (10) years. Payments hereunder shall be payable each month without deductions and the recipient shall be solely responsible for the payment of all income and other taxes and assessments, if any, applicable on those payments.

5

Notwithstanding the foregoing, if Employer determines that the Consultation Payments and/or Non-competition Payments are compensation such that the payments are subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable tax law, said payment shall be subject to the required withholdings.

5. Death Benefits. In the event Employee dies while employed by Employer prior to Employee’s Retirement Date or dies within six months and one week after Employee’s Retirement Date, Employer will pay the sum of THIRTY-THREE THOUSAND THREE HUNDRED THIRTY-SEVEN and 84/100 Dollars ($33,337.84) per month for a period of ten (10) years, to such individual or individuals as Employee shall have designated in writing as his beneficiary(ies) as provided in Paragraph 12 below or, in the absence of such designation, to Employee’s estate, as applicable. The first payment shall be made not later than two months following Employee’s death. Payments under this Paragraph 5 shall be payable each month without deductions and the recipient shall be solely responsible for the payment of all income and other taxes and assessments, if any, applicable on those payments.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments and/or Non-competition Payments are compensation such that the payments are subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable law, said payments shall be subject to the required withholdings.

6. Forfeiture of Benefits. This Agreement is subject to termination by Employer at any time and without stated cause. In the event Employer shall terminate this Agreement, Employee shall forfeit all rights to receive any payment provided for herein. Likewise, in the event Employee’s employment is terminated, either voluntarily or involuntarily, for reasons other than his death or Retirement, Employee shall forfeit all rights to receive any payment provided for herein. Employee acknowledges and agrees that any benefit provided for herein is merely a contractual benefit and that nothing contained herein shall be construed as conferring upon Employee any vested benefits or any vested rights to receive any payment provided for herein and that any and all payments provided for herein shall be subject to a substantial risk of forfeiture until such time as said payments are actually made by Employer.

6

7. Claims Procedure. Any claim for benefits under this Agreement shall be made in writing to Employer. If any claim for benefits under this Agreement is wholly or partially denied, notice of the decision shall be furnished to the claimant within a reasonable period of time, not to exceed 90 days after receipt of the claim by Employer, unless special circumstances require an extension of time for processing the claim. If such an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed the period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date on which the administrator expects to render a decision.

Employer shall provide every claimant who is denied a claim for benefits written notice setting forth, in a manner calculated to be understood by the claimant, the following: (i) specific reasons for the denial; (ii) specific reference to pertinent provisions upon which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the Agreement’s claims review procedure as set forth below.

The claimant may appeal the denial of his claim to Employer for a full and fair review. A claimant (or his duly authorized representative) may request a review by filing a written application for review with Employer or its designee (the “Reviewer”) at any time within 60 days after receipt by the claimant of written notice of the denial of his claim. The claimant or his duly authorized representative may request, upon written application to Employer, to review pertinent documents, and submit issues and comments in writing.

The decision on review shall be made by the Reviewer, who may, in its or his/her discretion, hold a hearing on the denied claim; the Reviewer shall make this decision promptly, and not later than 60 days after Employer receives the request for review, unless special circumstances require extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If such an extension of time for review is required, written notice of the extension (including the

7

special circumstances requiring the extension of time) shall be furnished to the claimant prior to the commencement of the extension. In the event that the decision on review is not furnished within the time period set forth in this paragraph, the claim shall be deemed denied on review.

The decision on review shall be in writing and shall include reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent provisions in the relevant documents on which the decision is based.

8. Assignment of Rights; Spendthrift Clause. Neither Employee nor Employee’s estate, or any designated beneficiary shall have any right to sell, assign, transfer or otherwise convey the right to receive any payment hereunder. To the extent permitted by law, no benefits payable under this Agreement shall be subject to the claim of any creditor of Employee or Employee’s estate or any designated beneficiary, or to any legal process by any creditor of any such person.

9. Unfunded Plan. Employee and Employer do not intend that the amounts payable hereunder be held by Employer in trust or as a segregated fund for Employee or any other person entitled to payments hereunder. The benefits provided under this Agreement shall be payable solely from the general assets of Employer, and neither Employee nor any other person entitled to payments hereunder shall have any interest in any assets of Employer by virtue of this Agreement. Employer’s obligation under this Agreement shall be merely that of an unfunded and unsecured promise of Employer to pay money in the future. To the extent that this Agreement may be deemed to be a “pension plan,” Employee and Employer intend that it be unfunded for federal income tax purposes, as well as for Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

10. Payments and Funding. Any payments under this Agreement shall be independent of, and in addition to, those under any other plan, program or agreement which may be in effect between the parties hereto, or any other compensation payable to Employee or Employee’s designee by Employer. This Agreement shall not be construed as a contract of employment nor does it restrict the right of Employer to discharge Employee at will or the right of Employee to terminate said Employee’s employment at will.

Employer may, in its sole discretion, purchase an insurance policy on the life of Employee to fund or assist in the funding of this Agreement. Employee agrees to promptly supply to Employer and its selected or prospective insurance carrier, upon request, any and all

8

information requested, in order to enable the insurance carrier to evaluate the risks involved in providing the insurance requested by Employer. Any and all rights to any and all benefits under such insurance policy on the life of Employee shall be solely the property of Employer and all proceeds of such policy shall be payable by the insurer solely to Employer, as owner of such policy. Employee specifically waives any rights in any insurance policy on Employee’s life owned by Employer pursuant to this Agreement. Such policy shall not serve in any way as security to Employee for Employer’s performance under this Agreement. The rights accruing to Employee or any designee hereunder shall be solely those of an unsecured creditor of Employer and shall be subordinate to the rights of the depositors of Employer.

Employer may, in its sole discretion, discharge its liabilities under this Agreement to Employee, Employee’s designated beneficiary(ies) or Employee’s estate at any time by the purchase of an annuity from a reputable insurance or similar company authorized to do, and doing, business in North Carolina and the assignment of the rights under said annuity to the benefit of Employee, Employee’s designated beneficiary(ies) or Employee’s estate. If this option is exercised by Employer, all rights accruing to Employee, Employee’s designated beneficiary(ies) or Employee’s estate hereunder shall be governed solely by the annuity contract and any election made under said annuity contract; and Employer shall be fully discharged from any further liabilities to Employee, Employee’s designated beneficiary(ies) or Employee’s estate under this Agreement.

Employer may, in its sole discretion, discharge its liabilities under this Agreement to Employee, Employee’s designated beneficiary(ies) or Employee’s estate at any time by determining the present value of the payments due hereunder, said amount to be determined by the use of the U.S. Government bond rate for the nearest year applicable to the time of the payments due hereunder for the present value computation, and once determined, by payment of said amount in a lump sum to Employee, Employee’s designated beneficiary(ies) or Employee’s estate, as applicable.

11. Survivor Annuities and QDROs. Nothing contained in this Agreement is intended to give nor shall give any spouse or former spouse of Employee nor any other person any right to benefits under this Agreement by virtue of sections 401(a)(11) and 417 of the Internal Revenue Code (relating to qualified preretirement survivor annuities and qualified joint and survivor annuities) or Internal Revenue Code sections 401(a)(13)(B) and 414(p) (relating to qualified domestic relations orders).

9

12. Designation of Beneficiary(ies). In order to designate one or more beneficiaries as described in Paragraph 4 or 5 above, Employee shall file a written designation with Employer in the form attached as Exhibit B to this Agreement. Each such designation shall specify, by name(s), the person(s) to whom any amounts payable under this Agreement shall be paid following Employee’s death. From time to time, Employee may change or revoke a beneficiary designation without the consent of the beneficiary(ies) by filing a new beneficiary designation form with Employer, and the filing of a new designation form automatically shall revoke any and all designation forms previously filed with Employer. A beneficiary designation form not properly filed with Employer prior to Employee’s death shall be of no force or effect under this Agreement.

Subject to reasonable restrictions imposed by Employer and to Employer’s right to refuse to accept such a designation for reasons satisfactory to it, Employee may designate more than one beneficiary and/or alternative or contingent beneficiaries, in which case Employee’s designation form shall specify the relative shares and terms and conditions upon which amounts shall be paid to such multiple or alternative or contingent beneficiaries.

If, at the time of Employee’s death, (i) no beneficiary designation is on file with Employer, (ii) no beneficiary designated by Employee has survived Employee, or (iii) there are other circumstances not covered by the beneficiary designation form on file with Employer, then Employee’s estate conclusively shall be deemed to be the beneficiary designated to receive any amounts then remaining payable to Employee under this Agreement.

In making all determinations regarding Employee’s beneficiary, the latest designation form filed by Employee with Employer shall control, and all changes in circumstances that occur after the filing of that designation shall be ignored. For example, if Employee’s spouse is designated as beneficiary in the latest designation filed by Employee but, thereafter, is divorced from Employee, such designation shall remain valid until and unless Employee files a later beneficiary designation form with Employer naming a different beneficiary.

Any check for a payment under this Agreement that is issued on or before the date of Employee’s death shall remain payable to Employee and shall be handled accordingly, whether or not the check actually is received by Employee prior to death. Any check issued after the date of Employee’s death shall be the property of Employee’s beneficiary(ies) determined in accordance with this Paragraph 12.

10

13. Named Fiduciary and Administrator. (The purpose of this Paragraph is to comply with ERISA in the event any portion of the Plan is subject to ERISA.) The named fiduciary shall be Employer. The named fiduciary shall have the authority to control and manage the operation and administration of this Agreement. The administration of this Agreement shall be under the supervision of a director, officer or employee of Employer (hereinafter referred to as the “Administrator”) designated by the Board of Directors of Employer. It shall be a principal duty of the Administrator to see that this Agreement is carried out in accordance with its terms.

14. Suicide. In the event Employee commits suicide within two years of the Effective Date of this Agreement, all payments provided for herein to be paid to Employee’s designated beneficiary or Employee’s estate shall be forfeited.

15. Binding Effect. This Agreement shall be binding upon Employee, his heirs, personal representatives and assigns, and upon Employer, its successors and assigns.

16. Amendment of Agreement. This Agreement may not be altered, amended or revoked except by a written agreement signed by Employer and Employee; provided, however, that if Employer determines to its reasonable satisfaction that an alteration or amendment of the Agreement is necessary or advisable in order for the Agreement to comply with the Internal Revenue Code of 1986, as amended, the Treasury Regulations, or any other applicable tax authority (collectively “Tax Law”), then, upon written notice to Employee, Employer may unilaterally amend the Agreement in such manner and to such an extent as it reasonably considers necessary or advisable in order to comply with the Tax Law. Nothing in this Paragraph 16 shall be deemed to limit Employer’s right to terminate this Agreement at any time and without stated cause as provided in Paragraph 6.

17. Interpretation. Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine.

18. Invalid Provision. 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.

11

19. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of North Carolina.

20. Entire Agreement. This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes and replaces any and all prior agreements and understandings, whether oral or written, with respect to the subject matter hereof.

IN TESTIMONY WHEREOF, Employer has caused this Agreement to be executed in its corporate name by its Vice Chairman, and attested by its Secretary/Assistant Secretary, all by the authority of its Board of Directors duly given, and Employee has hereunto set his hand and adopted as his seal the typewritten word “SEAL” appearing beside his name, as of the day and year first above written.

This the 25th day of October 2005.

FIRST-CITIZENS BANK & TRUST COMPANY
By:	/s/ James B. Hyler, Jr.
	James B. Hyler, Jr.
	Vice Chairman

ATTEST:

/s/ Lee Hardeman

Secretary/Assistant Secretary

/s/ Lewis R. Holding	(SEAL)
Lewis R. Holding

12

ELECTION TO POSTPONE RETIREMENT DATE AND POST-RETIREMENT

PAYMENTS

Pursuant to Paragraph 3 of the Amended and Restated Employee Consultation, Post-Retirement Non-competition and Death Benefit Agreement, dated as of July 1, 2005, between me and FIRST-CITIZENS BANK & TRUST COMPANY, I hereby elect to postpone the Retirement Date and the Consultation Payments and the Non-competition Payments (collectively “Post-Retirement Payments”) provided under this Agreement. I understand that I must make this election at least twelve months prior to the previous Retirement Date. I further understand that I must elect to postpone the Retirement Date to a date which is at least five years from the previous Retirement Date which will effectively postpone the timing of the Post-Retirement Payments to a date that is six months and one week after the new Retirement Date and that once I make this election, the payments may not be accelerated except on account of my death.

Effective Date of Election (At least twelve months from date the election is made):

Previous Retirement Date:

New Retirement Date (At least five years from previous Retirement Date):

Date:
	Lewis R. Holding
Witness
	Acknowledged by:
	Title:
	Date:	, 20

13

DESIGNATION OF BENEFICIARY

Pursuant to the terms of the Employee Consultation, Post-Retirement Non-Competition and Death Benefit Agreement, dated as of July 1, 2005, between me and FIRST-CITIZENS BANK & TRUST COMPANY, I hereby designate the following beneficiary(ies) to receive any payments which may be due under such Agreement after my death.

Primary Beneficiary(ies): (If more than one is listed, it is assumed that Employee intends for all Primary Beneficiaries to share in payments as co-beneficiaries in the percentages listed, or equally if no percentages are listed, rather than as alternative or contingent beneficiaries or in any order of listing or otherwise.)

                                                                     %

                                                                     %

                                                                     %

Contingent Beneficiary(ies): (If more than one is listed, it is assumed that, if no Primary Beneficiary shall survive Employee, Employee intends for all Contingent Beneficiaries to share in payments as co-contingent beneficiaries in the percentages listed, or equally if no percentages are listed, rather than in the order in which they are listed or otherwise. If Employee intends for one or more Contingent Beneficiary(ies) to receive payments in any particular order or to the exclusion of any other(s) listed, that should be clearly indicated below.)

                                                                     %

                                                                     %

                                                                     %

This designation hereby revokes any prior designation which may have been in effect.

Date:
	Lewis R. Holding
Witness
	Acknowledged by:
	Title:
	Date:	, 20

14

EX-10.2

EXHIBIT 10.2

AMENDED AND RESTATED EMPLOYEE CONSULTATION,

POST-RETIREMENT NON-COMPETITION AND DEATH BENEFIT AGREEMENT

THIS EMPLOYEE CONSULTATION, POST-RETIREMENT NON-COMPETITION AND DEATH BENEFIT AGREEMENT (“Agreement”) is made and entered into effective as of the 1st day of July, 2005 (“Effective Date”), by and between FIRST-CITIZENS BANK & TRUST COMPANY, a North Carolina banking corporation with its principal office in Raleigh, Wake County, North Carolina (hereinafter referred to as “Employer”); and FRANK B. HOLDING (hereinafter referred to as “Employee”);

W I T N E S S E T H

WHEREAS, Employee is an employee of Employer who has provided guidance, leadership and direction in the growth, management and development of Employer and has learned trade secrets, confidential procedures and information, and technical and sensitive plans of Employer; and,

WHEREAS, Employer desires to limit Employee’s availability to other employers or entities which are in competition with Employer following Employee’s retirement from employment with Employer; and,

WHEREAS, Employer has offered to Employee a non-competition arrangement and a consultation arrangement together with a death benefit arrangement for Employee’s designated beneficiary or estate, as applicable, and the parties hereto have reached an agreement concerning those arrangements and other matters contained herein and desire to set forth the terms and conditions thereof.

NOW, THEREFORE, for and in consideration of the mutual promises and undertakings herein set forth, Employee and Employer hereby agree as follows:

1. Consultation Payments. Following Employee’s “Retirement” (as defined below) from Employee’s employment with Employer on the Retirement Date (as defined below), Employer shall pay to Employee the sum of EIGHT THOUSAND THREE HUNDRED THIRTY-FOUR and 46/100 Dollars ($8,334.46) per month, beginning six months and one week after Employee’s Retirement for a period of ten (10) years following Employee’s Retirement or

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until Employee’s death, whichever first occurs (“Consultation Payments”). Such monthly payments shall be paid for and in consideration of Employee’s support, sponsorship, advisory and other services provided to Employer (“Consultation Services”); such sum to be payable to Employee whether or not Employee’s Consultation Services are utilized in said month by Employer. Except as set forth below, Consultation Payments hereunder shall be payable each month without deductions and Employee agrees to be solely responsible for the payment of all income and other taxes out of said funds and all Social Security, self-employment and any other taxes or assessments, if any, applicable on said compensation.

For and in consideration of said monthly Consultation Payments to Employee, Employee will provide Consultation Services as an independent contractor to Employer, as and when Employer may request, which services may be provided with respect to all phases of Employer’s business and particularly those phases in which Employee has particular expertise and knowledge. Employee’s services shall be limited to those of an independent consultant, shall not be on a day-to-day regularly scheduled operational basis and shall be provided only when Employee is reasonably available and willing, which willingness will not be unreasonably withheld. Employer shall make available to Employee such office space and equipment as are reasonably necessary for Employee to carry out the obligations under this Agreement and shall reimburse Employee for any extraordinary expenses incurred in carrying out the obligations hereunder.

Effective as of Employee’s Retirement date, Employee and Employer agree that Employee shall be, under the terms of this Agreement, an independent contractor, and Employee agrees that Employee’s rights and privileges and obligations are only as provided in this Agreement as to matters covered herein.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments are compensation for other than payments for Consultation Services, and such payments shall be subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under applicable tax law, the said payments shall be subject to the required withholdings.

If Employee should die during the ten-year period during which Consultation Payments are being made under this Paragraph 1 or under Paragraph 3 below, then those payments shall terminate and future payments, if any, shall be made to Employee’s designated beneficiary(ies) or Employee’s estate in accordance with the provisions of Paragraph 4 of this Agreement.

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As used in this Agreement, the term “Retirement” shall mean a termination of Employee’s employment with Employer on the 1st day of January, 2011 (the “Retirement Date”). Employer and Employee hereby acknowledge that compulsory retirement is not enforceable except as provided by law. Employer and Employee further agree that no provision herein shall be construed as requiring Employee’s retirement except as may now or hereafter be permitted by law.

2. Non-competition Payments. Following Employee’s Retirement from his employment with Employer on the Retirement Date, Employer shall pay to Employee the sum of TWENTY-FIVE THOUSAND THREE and 38/100 Dollars ($25,003.38) per month, beginning six months and one week after Employee’s Retirement for a period of ten (10) years following Employee’s Retirement or until Employee’s death, whichever first occurs. Such monthly payments shall be paid for and in consideration of Employee’s agreement in this Paragraph 2 (Employee’s “Covenant Not To Compete”). Payments hereunder (“Non-competition Payments”) shall be payable each month without deductions and Employee agrees to be solely responsible for the payment of all income or other taxes or assessments, if any, applicable on those payments.

For and in consideration of monthly Non-competition Payments to Employee, Employee 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 Employer is performing at the time of Employee’s Retirement, nor will Employee 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 Employer, whether done directly or indirectly, in ownership, consultation, employment or otherwise. Employee agrees not to reveal to outside sources, without the consent of Employer, any matters, the revealing of which could, in any manner, adversely affect or disclose Employer’s business or any part thereof, unless required by law to do so. This Covenant Not To Compete by Employee is limited to the geographic area consisting of each county or like jurisdictional entity in which either Employer or any banking or investment entity owned directly or indirectly by the parent of Employer shall maintain a banking or other business office at the time of Employee’s

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Retirement, shall exist for and during the term of all payments to be made under this Paragraph 2, whether made directly by Employer or as otherwise provided herein, and shall not prevent Employee 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 Employer.

Employee acknowledges that the remedy at law for breach of Employee’s Covenant Not To Compete will be inadequate and that Employer shall be entitled to injunctive relief as to any violation thereof; however, nothing herein shall be construed as prohibiting Employer from pursuing any other remedies available to it, in addition to injunctive relief, whether at law or in equity, including the recovery of damages. In the event Employee shall breach any condition of Employee’s Covenant Not To Compete, then Employee’s right to any of the payments becoming due under Paragraphs 1 and 2 or under Paragraph 3 of this Agreement after the date of such breach shall be forever forfeited and the right of Employee’s designated beneficiary(ies) or Employee’s estate to any payments under this Agreement shall likewise be forever forfeited. This forfeiture is in addition to and not in lieu of any of the above-described remedies of Employer and shall be in addition to any injunctive or other relief as described herein. Employee further acknowledges that any breach of Employee’s Covenant Not To Compete shall be deemed a material breach of this Agreement.

Notwithstanding the foregoing, if Employer determines that the Non-competition Payments are compensation for other than payments for Non-competition, and such payments shall be subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable tax law, the said payments shall be subject to the required withholdings.

If Employee should die during the ten-year period during which Non-competition Payments are being made under this Paragraph 2 or under Paragraph 3 below, then those payments shall terminate and future payments, if any, shall be made to Employee’s designated beneficiary(ies) or Employee’s estate in accordance with the provisions of Paragraph 4 of this Agreement.

3. Postponement of Retirement Date and Payments. Employee may postpone the Retirement Date and effectively postpone the timing of the Consultation Payments and Non-competition Payments (collectively “Post-Retirement Payments”). In the event Employee desires to postpone the Retirement Date and the Post-Retirement Payments, Employee

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shall make an election to postpone in the form attached as Exhibit A to this Agreement. Such election may not take effect until at least twelve months (12) after the date on which the election is made. Employee shall make the election to postpone at least twelve months prior to the original Retirement Date. If Employee makes the election, Employee shall postpone the Retirement Date to a date not less than five years from the original Retirement Date. Consequently, the beginning date of the ten-year payment period for the Post-Retirement Payments shall be postponed to a date that is six months and one week after the new Retirement Date.

To the extent permitted by the Internal Revenue Code of 1986, as amended, and other tax principles, including but not limited to Section 409A of the Code, Employee may make subsequent elections to continue to postpone the Retirement Date and effectively the Post-Retirement Payments. The subsequent election must be made at least twelve months prior to the Retirement Date established by the previous election. If Employee makes a subsequent election, Employee shall postpone the Retirement Date to a date not less than five years from the Retirement Date established by the previous election. Consequently, the beginning date of the ten-year payment period for the Post-Retirement Payments shall be postponed to a date that is six months and one week after the new Retirement Date.

Once Employee makes an election to postpone, the timing of the Post-Retirement Payments may not be accelerated to a date prior to the date established by the election except on account of Employee’s death.

4. Continuation of Payments. Following Employee’s death during the ten-year period of payments under Paragraphs 1 and 2 or under Paragraph 3 above, the sum of THIRTY-THREE THOUSAND THREE HUNDRED THIRTY-SEVEN and 84/100 Dollars ($33,337.84) per month shall be paid to such individual or individuals as Employee shall have designated in writing as his beneficiary(ies) as provided in Paragraph 12 below or, in the absence of such designation, to Employee’s estate, as applicable, beginning the first calendar month following the date of Employee’s death and continuing thereafter until the expiration of the ten-year period. Once the Consultation Payments and Non-competition Payments have begun, whether paid by Employer or as otherwise provided herein, the maximum payment period under this Agreement shall be ten (10) years. Payments hereunder shall be payable each month without deductions and the recipient shall be solely responsible for the payment of all income and other taxes and assessments, if any, applicable on those payments.

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Notwithstanding the foregoing, if Employer determines that the Consultation Payments and/or Non-competition Payments are compensation such that the payments are subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable tax law, said payment shall be subject to the required withholdings.

5. Death Benefits. In the event Employee dies while employed by Employer prior to Employee’s Retirement Date or dies within six months and one week after Employee’s Retirement Date, Employer will pay the sum of THIRTY THREE THOUSAND THREE HUNDRED THIRTY-SEVEN and 84/100 Dollars ($33,337.84) per month for a period of ten (10) years, to such individual or individuals as Employee shall have designated in writing as his beneficiary(ies) as provided in Paragraph 12 below or, in the absence of such designation, to Employee’s estate, as applicable. The first payment shall be made not later than two months following Employee’s death. Payments under this Paragraph 5 shall be payable each month without deductions and the recipient shall be solely responsible for the payment of all income and other taxes and assessments, if any, applicable on those payments.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments and/or Non-competition Payments are compensation such that the payments are subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable law, said payments shall be subject to the required withholdings.

6. Forfeiture of Benefits. This Agreement is subject to termination by Employer at any time and without stated cause. In the event Employer shall terminate this Agreement, Employee shall forfeit all rights to receive any payment provided for herein. Likewise, in the event Employee’s employment is terminated, either voluntarily or involuntarily, for reasons other than his death or Retirement, Employee shall forfeit all rights to receive any payment provided for herein. Employee acknowledges and agrees that any benefit provided for herein is merely a contractual benefit and that nothing contained herein shall be construed as conferring upon Employee any vested benefits or any vested rights to receive any payment provided for herein and that any and all payments provided for herein shall be subject to a substantial risk of forfeiture until such time as said payments are actually made by Employer.

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7. Claims Procedure. Any claim for benefits under this Agreement shall be made in writing to Employer. If any claim for benefits under this Agreement is wholly or partially denied, notice of the decision shall be furnished to the claimant within a reasonable period of time, not to exceed 90 days after receipt of the claim by Employer, unless special circumstances require an extension of time for processing the claim. If such an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed the period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date on which the administrator expects to render a decision.

Employer shall provide every claimant who is denied a claim for benefits written notice setting forth, in a manner calculated to be understood by the claimant, the following: (i) specific reasons for the denial; (ii) specific reference to pertinent provisions upon which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the Agreement’s claims review procedure as set forth below.

The claimant may appeal the denial of his claim to Employer for a full and fair review. A claimant (or his duly authorized representative) may request a review by filing a written application for review with Employer or its designee (the “Reviewer”) at any time within 60 days after receipt by the claimant of written notice of the denial of his claim. The claimant or his duly authorized representative may request, upon written application to Employer, to review pertinent documents, and submit issues and comments in writing.

The decision on review shall be made by the Reviewer, who may, in its or his/her discretion, hold a hearing on the denied claim; the Reviewer shall make this decision promptly, and not later than 60 days after Employer receives the request for review, unless special circumstances require extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If such an extension of time for review is required, written notice of the extension (including the

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special circumstances requiring the extension of time) shall be furnished to the claimant prior to the commencement of the extension. In the event that the decision on review is not furnished within the time period set forth in this paragraph, the claim shall be deemed denied on review.

The decision on review shall be in writing and shall include reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent provisions in the relevant documents on which the decision is based.

8. Assignment of Rights; Spendthrift Clause. Neither Employee nor Employee’s estate, or any designated beneficiary shall have any right to sell, assign, transfer or otherwise convey the right to receive any payment hereunder. To the extent permitted by law, no benefits payable under this Agreement shall be subject to the claim of any creditor of Employee or Employee’s estate or any designated beneficiary, or to any legal process by any creditor of any such person.

9. Unfunded Plan. Employee and Employer do not intend that the amounts payable hereunder be held by Employer in trust or as a segregated fund for Employee or any other person entitled to payments hereunder. The benefits provided under this Agreement shall be payable solely from the general assets of Employer, and neither Employee nor any other person entitled to payments hereunder shall have any interest in any assets of Employer by virtue of this Agreement. Employer’s obligation under this Agreement shall be merely that of an unfunded and unsecured promise of Employer to pay money in the future. To the extent that this Agreement may be deemed to be a “pension plan,” Employee and Employer intend that it be unfunded for federal income tax purposes, as well as for Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

10. Payments and Funding. Any payments under this Agreement shall be independent of, and in addition to, those under any other plan, program or agreement which may be in effect between the parties hereto, or any other compensation payable to Employee or Employee’s designee by Employer. This Agreement shall not be construed as a contract of employment nor does it restrict the right of Employer to discharge Employee at will or the right of Employee to terminate said Employee’s employment at will.

Employer may, in its sole discretion, purchase an insurance policy on the life of Employee to fund or assist in the funding of this Agreement. Employee agrees to promptly supply to Employer and its selected or prospective insurance carrier, upon request, any and all

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information requested, in order to enable the insurance carrier to evaluate the risks involved in providing the insurance requested by Employer. Any and all rights to any and all benefits under such insurance policy on the life of Employee shall be solely the property of Employer and all proceeds of such policy shall be payable by the insurer solely to Employer, as owner of such policy. Employee specifically waives any rights in any insurance policy on Employee’s life owned by Employer pursuant to this Agreement. Such policy shall not serve in any way as security to Employee for Employer’s performance under this Agreement. The rights accruing to Employee or any designee hereunder shall be solely those of an unsecured creditor of Employer and shall be subordinate to the rights of the depositors of Employer.

Employer may, in its sole discretion, discharge its liabilities under this Agreement to Employee, Employee’s designated beneficiary(ies) or Employee’s estate at any time by the purchase of an annuity from a reputable insurance or similar company authorized to do, and doing, business in North Carolina and the assignment of the rights under said annuity to the benefit of Employee, Employee’s designated beneficiary(ies) or Employee’s estate. If this option is exercised by Employer, all rights accruing to Employee, Employee’s designated beneficiary(ies) or Employee’s estate hereunder shall be governed solely by the annuity contract and any election made under said annuity contract; and Employer shall be fully discharged from any further liabilities to Employee, Employee’s designated beneficiary(ies) or Employee’s estate under this Agreement.

Employer may, in its sole discretion, discharge its liabilities under this Agreement to Employee, Employee’s designated beneficiary(ies) or Employee’s estate at any time by determining the present value of the payments due hereunder, said amount to be determined by the use of the U.S. Government bond rate for the nearest year applicable to the time of the payments due hereunder for the present value computation, and once determined, by payment of said amount in a lump sum to Employee, Employee’s designated beneficiary(ies) or Employee’s estate, as applicable.

11. Survivor Annuities and QDROs. Nothing contained in this Agreement is intended to give nor shall give any spouse or former spouse of Employee nor any other person any right to benefits under this Agreement by virtue of sections 401(a)(11) and 417 of the Internal Revenue Code (relating to qualified preretirement survivor annuities and qualified joint and survivor annuities) or Internal Revenue Code sections 401(a)(13)(B) and 414(p) (relating to qualified domestic relations orders).

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12. Designation of Beneficiary(ies). In order to designate one or more beneficiaries as described in Paragraph 4 or 5 above, Employee shall file a written designation with Employer in the form attached as Exhibit B to this Agreement. Each such designation shall specify, by name(s), the person(s) to whom any amounts payable under this Agreement shall be paid following Employee’s death. From time to time, Employee may change or revoke a beneficiary designation without the consent of the beneficiary(ies) by filing a new beneficiary designation form with Employer, and the filing of a new designation form automatically shall revoke any and all designation forms previously filed with Employer. A beneficiary designation form not properly filed with Employer prior to Employee’s death shall be of no force or effect under this Agreement.

Subject to reasonable restrictions imposed by Employer and to Employer’s right to refuse to accept such a designation for reasons satisfactory to it, Employee may designate more than one beneficiary and/or alternative or contingent beneficiaries, in which case Employee’s designation form shall specify the relative shares and terms and conditions upon which amounts shall be paid to such multiple or alternative or contingent beneficiaries.

If, at the time of Employee’s death, (i) no beneficiary designation is on file with Employer, (ii) no beneficiary designated by Employee has survived Employee, or (iii) there are other circumstances not covered by the beneficiary designation form on file with Employer, then Employee’s estate conclusively shall be deemed to be the beneficiary designated to receive any amounts then remaining payable to Employee under this Agreement.

In making all determinations regarding Employee’s beneficiary, the latest designation form filed by Employee with Employer shall control, and all changes in circumstances that occur after the filing of that designation shall be ignored. For example, if Employee’s spouse is designated as beneficiary in the latest designation filed by Employee but, thereafter, is divorced from Employee, such designation shall remain valid until and unless Employee files a later beneficiary designation form with Employer naming a different beneficiary.

Any check for a payment under this Agreement that is issued on or before the date of Employee’s death shall remain payable to Employee and shall be handled accordingly, whether or not the check actually is received by Employee prior to death. Any check issued after the date of Employee’s death shall be the property of Employee’s beneficiary(ies) determined in accordance with this Paragraph 12.

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13. Named Fiduciary and Administrator. (The purpose of this Paragraph is to comply with ERISA in the event any portion of the Plan is subject to ERISA.) The named fiduciary shall be Employer. The named fiduciary shall have the authority to control and manage the operation and administration of this Agreement. The administration of this Agreement shall be under the supervision of a director, officer or employee of Employer (hereinafter referred to as the “Administrator”) designated by the Board of Directors of Employer. It shall be a principal duty of the Administrator to see that this Agreement is carried out in accordance with its terms.

14. Suicide. In the event Employee commits suicide within two years of the Effective Date of this Agreement, all payments provided for herein to be paid to Employee’s designated beneficiary or Employee’s estate shall be forfeited.

15. Binding Effect. This Agreement shall be binding upon Employee, his heirs, personal representatives and assigns, and upon Employer, its successors and assigns.

16. Amendment of Agreement. This Agreement may not be altered, amended or revoked except by a written agreement signed by Employer and Employee; provided, however, that if Employer determines to its reasonable satisfaction that an alteration or amendment of the Agreement is necessary or advisable in order for the Agreement to comply with the Internal Revenue Code of 1986, as amended, the Treasury Regulations, or any other applicable tax authority (collectively “Tax Law”), then, upon written notice to Employee, Employer may unilaterally amend the Agreement in such manner and to such an extent as it reasonably considers necessary or advisable in order to comply with the Tax Law. Nothing in this Paragraph 16 shall be deemed to limit Employer’s right to terminate this Agreement at any time and without stated cause as provided in Paragraph 6.

17. Interpretation. Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine.

18. Invalid Provision. 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.

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19. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of North Carolina.

20. Entire Agreement. This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes and replaces any and all prior agreements and understandings, whether oral or written, with respect to the subject matter hereof.

IN TESTIMONY WHEREOF, Employer has caused this Agreement to be executed in its corporate name by its Vice Chairman, and attested by its Secretary/Assistant Secretary, all by the authority of its Board of Directors duly given, and Employee has hereunto set his hand and adopted as his seal the typewritten word “SEAL” appearing beside his name, as of the day and year first above written.

This the 25th day of October 2005.

FIRST-CITIZENS BANK & TRUST COMPANY
By:	/s/ James B. Hyler, Jr.
	James B. Hyler, Jr.
	Vice Chairman

ATTEST:

/s/ Lee Hardeman

Secretary/Assistant Secretary

/s/ Frank B. Holding	(SEAL)
Frank B. Holding

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ELECTION TO POSTPONE RETIREMENT DATE AND POST-RETIREMENT PAYMENTS

Pursuant to Paragraph 3 of the Amended and Restated Employee Consultation, Post-Retirement Non-competition and Death Benefit Agreement, dated as of July 1, 2005, between me and FIRST-CITIZENS BANK & TRUST COMPANY, I hereby elect to postpone the Retirement Date and the Consultation Payments and the Non-competition Payments (collectively “Post-Retirement Payments”) provided under this Agreement. I understand that I must make this election at least twelve months prior to the previous Retirement Date. I further understand that I must elect to postpone the Retirement Date to a date which is at least five years from the previous Retirement Date which will effectively postpone the timing of the Post-Retirement Payments to a date that is six months and one week after the new Retirement Date and that once I make this election, the payments may not be accelerated except on account of my death.

Effective Date of Election (At least twelve months from date the election is made):

Previous Retirement Date:

New Retirement Date (At least five years from previous Retirement Date):

Date:
	Frank B. Holding
Witness
	Acknowledged by:
	Title:
	Date:	, 20

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DESIGNATION OF BENEFICIARY

Pursuant to the terms of the Employee Consultation, Post-Retirement Non-Competition and Death Benefit Agreement, dated as of July 1, 2005, between me and FIRST-CITIZENS BANK & TRUST COMPANY, I hereby designate the following beneficiary(ies) to receive any payments which may be due under such Agreement after my death.

Primary Beneficiary(ies): (If more than one is listed, it is assumed that Employee intends for all Primary Beneficiaries to share in payments as co-beneficiaries in the percentages listed, or equally if no percentages are listed, rather than as alternative or contingent beneficiaries or in any order of listing or otherwise.)

                                                                     %

                                                                     %

                                                                     %

Contingent Beneficiary(ies): (If more than one is listed, it is assumed that, if no Primary Beneficiary shall survive Employee, Employee intends for all Contingent Beneficiaries to share in payments as co-contingent beneficiaries in the percentages listed, or equally if no percentages are listed, rather than in the order in which they are listed or otherwise. If Employee intends for one or more Contingent Beneficiary(ies) to receive payments in any particular order or to the exclusion of any other(s) listed, that should be clearly indicated below.)

                                                                     %

                                                                     %

                                                                     %

This designation hereby revokes any prior designation which may have been in effect.

Date:
	Frank B. Holding
Witness
	Acknowledged by:
	Title:
	Date:	, 20

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EX-10.3

EXHIBIT 10.3

EMPLOYEE CONSULTATION, POST-RETIREMENT, NON-COMPETITION AND

DEATH BENEFIT AGREEMENT

THIS EMPLOYEE CONSULTATION, POST-RETIREMENT NON-COMPETITION AND DEATH BENEFIT AGREEMENT (“Agreement”) is made and entered into effective as of the 1st day of July, 2005 (“Effective Date”), by and between FIRST-CITIZENS BANK & TRUST COMPANY, a North Carolina banking corporation with its principal office in Raleigh, North Carolina (“Employer”) and JAMES B. HYLER, JR. (“Employee”);

W I T N E S S E T H

WHEREAS, Employee is an employee of Employer who has provided guidance, leadership and direction in the growth, management and development of Employer and has learned trade secrets, confidential procedures and information, and technical and sensitive plans of Employer; and,

WHEREAS, Employer desires to limit Employee’s availability to other employers or entities which are in competition with Employer following Employee’s retirement from employment with Employer; and,

WHEREAS, Employer has offered to Employee a non-competition arrangement and a consultation arrangement together with a death benefit arrangement for Employee’s designated beneficiary or estate, as applicable, and the parties hereto have reached an agreement concerning those arrangements and other matters contained herein and desire to set forth the terms and conditions thereof.

NOW, THEREFORE, for and in consideration of the mutual promises and undertakings herein set forth, Employee and Employer hereby agree as follows:

1. Consultation Payments. Following Employee’s “Retirement” (as defined below) from Employee’s employment with Employer on the Retirement Date (as defined below), Employer shall pay to Employee the sum of SIX THOUSAND SEVEN HUNDRED NINETEEN and 25/100 Dollars ($6,719.25) per month, beginning six months and one week after Employee’s Retirement for a period of ten (10) years following Employee’s Retirement or until Employee’s death, whichever first occurs (“Consultation Payments”). Such monthly payments shall be paid for and in consideration of Employee’s support, sponsorship, advisory and other services

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provided to Employer (“Consultation Services”); such sum to be payable to Employee whether or not Employee’s Consultation Services are utilized in said month by Employer. Except as set forth below, Consultation Payments hereunder shall be payable each month without deductions and Employee agrees to be solely responsible for the payment of all income and other taxes out of said funds and all Social Security, self-employment and any other taxes or assessments, if any, applicable on said compensation.

For and in consideration of said monthly Consultation Payments to Employee, Employee will provide Consultation Services as an independent contractor to Employer, as and when Employer may request, which services may be provided with respect to all phases of Employer’s business and particularly those phases in which Employee has particular expertise and knowledge. Employee’s services shall be limited to those of an independent consultant, shall not be on a day-to-day regularly scheduled operational basis and shall be provided only when Employee is reasonably available and willing, which willingness will not be unreasonably withheld. Employer shall make available to Employee such office space and equipment as are reasonably necessary for Employee to carry out the obligations under this Agreement and shall reimburse Employee for any extraordinary expenses incurred in carrying out the obligations hereunder.

Effective as of Employee’s Retirement date, Employee and Employer agree that Employee shall be, under the terms of this Agreement, an independent contractor, and Employee agrees that Employee’s rights and privileges and obligations are only as provided in this Agreement as to matters covered herein.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments are compensation for other than payments for Consultation Services, and such payments shall be subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under applicable tax law, the said payments shall be subject to the required withholdings.

If Employee should die during the ten-year period during which Consultation Payments are being made under this Paragraph 1, then those payments shall terminate and future payments, if any, shall be made to Employee’s designated beneficiary(ies) or Employee’s estate in accordance with the provisions of Paragraph 3 of this Agreement.

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As used in this Agreement, the term “Retirement” shall mean a termination of Employee’s employment with Employer which is treated as a “retirement” under the terms of Employer’s defined benefit pension plan, and which occurs no later than the last day of the calendar month in which Employee attains the age of sixty-five (65) (the “Retirement Date”), or such other termination of Employee’s employment as Employer and Employee shall agree in writing to treat as “Retirement” for purposes of this Agreement. Employer and Employee hereby acknowledge that compulsory retirement is not enforceable except as provided by law. Employer and Employee further agree that no provision herein shall be construed as requiring Employee’s retirement except as may now or hereafter be permitted by law.

2. Non-competition Payments. Following Employee’s Retirement from his employment with Employer on the Retirement Date, Employer shall pay to Employee the sum of TWENTY THOUSAND ONE HUNDRED FIFTY-SEVEN and 75/100 Dollars ($20,157.75) per month, beginning six months and one week after Employee’s Retirement for a period of ten (10) years following Employee’s Retirement or until Employee’s death, whichever first occurs. Such monthly payments shall be paid for and in consideration of Employee’s agreement in this Paragraph 2 (Employee’s “Covenant Not To Compete”). Payments hereunder (“Non-competition Payments”) shall be payable each month without deductions and Employee agrees to be solely responsible for the payment of all income or other taxes or assessments, if any, applicable on those payments.

For and in consideration of monthly Non-competition Payments to Employee, Employee 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 Employer is performing at the time of Employee’s Retirement, nor will Employee 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 Employer, whether done directly or indirectly, in ownership, consultation, employment or otherwise. Employee agrees not to reveal to outside sources, without the consent of Employer, any matters, the revealing of which could, in any manner, adversely affect or disclose Employer’s business or any part thereof, unless required by law to do so. This Covenant Not To Compete by Employee is limited to the geographic area consisting of each county or like jurisdictional entity in which either Employer or any banking or investment entity owned directly or indirectly by the

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parent of Employer shall maintain a banking or other business office at the time of Employee’s Retirement, shall exist for and during the term of all payments to be made under this Paragraph 2, whether made directly by Employer or as otherwise provided herein, and shall not prevent Employee 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 Employer.

Employee acknowledges that the remedy at law for breach of Employee’s Covenant Not To Compete will be inadequate and that Employer shall be entitled to injunctive relief as to any violation thereof; however, nothing herein shall be construed as prohibiting Employer from pursuing any other remedies available to it, in addition to injunctive relief, whether at law or in equity, including the recovery of damages. In the event Employee shall breach any condition of Employee’s Covenant Not To Compete, then Employee’s right to any of the payments becoming due under Paragraphs 1 and 2 of this Agreement after the date of such breach shall be forever forfeited and the right of Employee’s designated beneficiary(ies) or Employee’s estate to any payments under this Agreement shall likewise be forever forfeited. This forfeiture is in addition to and not in lieu of any of the above-described remedies of Employer and shall be in addition to any injunctive or other relief as described herein. Employee further acknowledges that any breach of Employee’s Covenant Not To Compete shall be deemed a material breach of this Agreement.

Notwithstanding the foregoing, if Employer determines that the Non-Competition Payments are compensation for other than payments for Non-competition, and such payments shall be subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable tax law, the said payments shall be subject to the required withholdings.

If Employee should die during the ten-year period during which Non-competition Payments are being made under this Paragraph 2, then those payments shall terminate and future payments, if any, shall be made to Employee’s designated beneficiary(ies) or Employee’s estate in accordance with the provisions of Paragraph 3 of this Agreement.

3. Continuation of Payments. Following Employee’s death during the original ten-year period of payments under Paragraphs 1 and 2 above, the sum of TWENTY-SIX THOUSAND EIGHT HUNDRED SEVENTY-SEVEN and No/100 Dollars ($26,877.00) per month shall be paid to such individual or individuals as Employee shall have designated in

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writing as his beneficiary(ies) as provided in Paragraph 11 below or, in the absence of such designation, to Employee’s estate, as applicable, beginning the first calendar month following the date of Employee’s death and continuing thereafter until the expiration of said original ten-year period. Once the Consultation Payments and Non-competition Payments have begun, whether paid by Employer or as otherwise provided herein, the maximum payment period under this Agreement shall be ten (10) years. Payments hereunder shall be payable each month without deductions and the recipient shall be solely responsible for the payment of all income and other taxes and assessments, if any, applicable on those payments.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments and/or Non-competition Payments are compensation such that the payments are subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable tax law, said payment shall be subject to the required withholdings.

4. Death Benefits. In the event Employee dies while employed by Employer prior to Employee’s Retirement Date or dies within six months and one week after Employee’s Retirement Date, Employer will pay the sum of TWENTY-SIX THOUSAND EIGHT HUNDRED SEVENTY-SEVEN and No/100 Dollars ($26,877.00) per month for a period of ten (10) years, to such individual or individuals as Employee shall have designated in writing as his beneficiary(ies) as provided in Paragraph 11 below or, in the absence of such designation, to Employee’s estate, as applicable. The first payment shall be made not later than two months following Employee’s death. Payments under this Paragraph 4 shall be payable each month without deductions and the recipient shall be solely responsible for the payment of all income and other taxes and assessments, if any, applicable on those payments.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments and/or Non-competition Payments are compensation such that the payments are subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable law, said payments shall be subject to the required withholdings.

5. Forfeiture of Benefits. This Agreement is subject to termination by Employer at any time and without stated cause. In the event Employer shall terminate this Agreement, Employee shall forfeit all rights to receive any payment provided for herein.

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Likewise, in the event Employee’s employment is terminated, either voluntarily or involuntarily, for reasons other than his death or Retirement, Employee shall forfeit all rights to receive any payment provided for herein. Employee acknowledges and agrees that any benefit provided for herein is merely a contractual benefit and that nothing contained herein shall be construed as conferring upon Employee any vested benefits or any vested rights to receive any payment provided for herein and that any and all payments provided for herein shall be subject to a substantial risk of forfeiture until such time as said payments are actually made by Employer.

6. Claims Procedure. Any claim for benefits under this Agreement shall be made in writing to Employer. If any claim for benefits under this Agreement is wholly or partially denied, notice of the decision shall be furnished to the claimant within a reasonable period of time, not to exceed 90 days after receipt of the claim by Employer, unless special circumstances require an extension of time for processing the claim. If such an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed the period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date on which the administrator expects to render a decision.

Employer shall provide every claimant who is denied a claim for benefits written notice setting forth, in a manner calculated to be understood by the claimant, the following: (i) specific reasons for the denial; (ii) specific reference to pertinent provisions upon which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the Agreement’s claims review procedure as set forth below.

The claimant may appeal the denial of his claim to Employer for a full and fair review. A claimant (or his duly authorized representative) may request a review by filing a written application for review with Employer or its designee (the “Reviewer”) at any time within 60 days after receipt by the claimant of written notice of the denial of his claim. The claimant or his duly authorized representative may request, upon written application to Employer, to review pertinent documents, and submit issues and comments in writing.

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The decision on review shall be made by the Reviewer, who may, in its or his/her discretion, hold a hearing on the denied claim; the Reviewer shall make this decision promptly, and not later than 60 days after Employer receives the request for review, unless special circumstances require extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If such an extension of time for review is required, written notice of the extension (including the special circumstances requiring the extension of time) shall be furnished to the claimant prior to the commencement of the extension. In the event that the decision on review is not furnished within the time period set forth in this paragraph, the claim shall be deemed denied on review.

The decision on review shall be in writing and shall include reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent provisions in the relevant documents on which the decision is based.

7. Assignment of Rights; Spendthrift Clause. Neither Employee nor Employee’s estate, or any designated beneficiary shall have any right to sell, assign, transfer or otherwise convey the right to receive any payment hereunder. To the extent permitted by law, no benefits payable under this Agreement shall be subject to the claim of any creditor of Employee or Employee’s estate or any designated beneficiary, or to any legal process by any creditor of any such person.

8. Unfunded Plan. Employee and Employer do not intend that the amounts payable hereunder be held by Employer in trust or as a segregated fund for Employee or any other person entitled to payments hereunder. The benefits provided under this Agreement shall be payable solely from the general assets of Employer, and neither Employee nor any other person entitled to payments hereunder shall have any interest in any assets of Employer by virtue of this Agreement. Employer’s obligation under this Agreement shall be merely that of an unfunded and unsecured promise of Employer to pay money in the future. To the extent that this Agreement may be deemed to be a “pension plan,” Employee and Employer intend that it be unfunded for federal income tax purposes, as well as for Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

9. Payments and Funding. Any payments under this Agreement shall be independent of, and in addition to, those under any other plan, program or agreement which may be in effect between the parties hereto, or any other compensation payable to Employee or

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Employee’s designee by Employer. This Agreement shall not be construed as a contract of employment nor does it restrict the right of Employer to discharge Employee at will or the right of Employee to terminate said Employee’s employment at will.

Employer may, in its sole discretion, purchase an insurance policy on the life of Employee to fund or assist in the funding of this Agreement. Employee agrees to promptly supply to Employer and its selected or prospective insurance carrier, upon request, any and all information requested, in order to enable the insurance carrier to evaluate the risks involved in providing the insurance requested by Employer. Any and all rights to any and all benefits under such insurance policy on the life of Employee shall be solely the property of Employer and all proceeds of such policy shall be payable by the insurer solely to Employer, as owner of such policy. Employee specifically waives any rights in any insurance policy on Employee’s life owned by Employer pursuant to this Agreement. Such policy shall not serve in any way as security to Employee for Employer’s performance under this Agreement. The rights accruing to Employee or any designee hereunder shall be solely those of an unsecured creditor of Employer and shall be subordinate to the rights of the depositors of Employer.

Employer may, in its sole discretion, discharge its liabilities under this Agreement to Employee, Employee’s designated beneficiary(ies) or Employee’s estate at any time by the purchase of an annuity from a reputable insurance or similar company authorized to do, and doing, business in North Carolina and the assignment of the rights under said annuity to the benefit of Employee, Employee’s designated beneficiary(ies) or Employee’s estate. If this option is exercised by Employer, all rights accruing to Employee, Employee’s designated beneficiary(ies) or Employee’s estate hereunder shall be governed solely by the annuity contract and any election made under said annuity contract; and Employer shall be fully discharged from any further liabilities to Employee, Employee’s designated beneficiary(ies) or Employee’s estate under this Agreement.

Employer may, in its sole discretion, discharge its liabilities under this Agreement to Employee, Employee’s designated beneficiary(ies) or Employee’s estate at any time by determining the present value of the payments due hereunder, said amount to be determined by the use of the U.S. Government bond rate for the nearest year applicable to the time of the payments due hereunder for the present value computation, and once determined, by payment of said amount in a lump sum to Employee, Employee’s designated beneficiary(ies) or Employee’s estate, as applicable.

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10. Survivor Annuities and QDROs. Nothing contained in this Agreement is intended to give nor shall give any spouse or former spouse of Employee nor any other person any right to benefits under this Agreement by virtue of sections 401(a)(11) and 417 of the Internal Revenue Code (relating to qualified preretirement survivor annuities and qualified joint and survivor annuities) or Internal Revenue Code sections 401(a)(13)(B) and 414(p) (relating to qualified domestic relations orders).

11. Designation of Beneficiary(ies). In order to designate one or more beneficiaries as described in Paragraph 3 or 4 above, Employee shall file a written designation with Employer in the form attached as Exhibit A to this Agreement. Each such designation shall specify, by name(s), the person(s) to whom any amounts payable under this Agreement shall be paid following Employee’s death. From time to time, Employee may change or revoke a beneficiary designation without the consent of the beneficiary(ies) by filing a new beneficiary designation form with Employer, and the filing of a new designation form automatically shall revoke any and all designation forms previously filed with Employer. A beneficiary designation form not properly filed with Employer prior to Employee’s death shall be of no force or effect under this Agreement.

Subject to reasonable restrictions imposed by Employer and to Employer’s right to refuse to accept such a designation for reasons satisfactory to it, Employee may designate more than one beneficiary and/or alternative or contingent beneficiaries, in which case Employee’s designation form shall specify the relative shares and terms and conditions upon which amounts shall be paid to such multiple or alternative or contingent beneficiaries.

If, at the time of Employee’s death, (i) no beneficiary designation is on file with Employer, (ii) no beneficiary designated by Employee has survived Employee, or (iii) there are other circumstances not covered by the beneficiary designation form on file with Employer, then Employee’s estate conclusively shall be deemed to be the beneficiary designated to receive any amounts then remaining payable to Employee under this Agreement.

In making all determinations regarding Employee’s beneficiary, the latest designation form filed by Employee with Employer shall control, and all changes in circumstances that occur after the filing of that designation shall be ignored. For example, if Employee’s spouse is designated as beneficiary in the latest designation filed by Employee but, thereafter, is divorced from Employee, such designation shall remain valid until and unless Employee files a later beneficiary designation form with Employer naming a different beneficiary.

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Any check for a payment under this Agreement that is issued on or before the date of Employee’s death shall remain payable to Employee and shall be handled accordingly, whether or not the check actually is received by Employee prior to death. Any check issued after the date of Employee’s death shall be the property of Employee’s beneficiary(ies) determined in accordance with this Paragraph 11.

12. Named Fiduciary and Administrator. (The purpose of this Paragraph is to comply with ERISA in the event any portion of the Plan is subject to ERISA.) The named fiduciary shall be Employer. The named fiduciary shall have the authority to control and manage the operation and administration of this Agreement. The administration of this Agreement shall be under the supervision of a director, officer or employee of Employer (hereinafter referred to as the “Administrator”) designated by the Board of Directors of Employer. It shall be a principal duty of the Administrator to see that this Agreement is carried out in accordance with its terms.

13. Suicide. In the event Employee commits suicide within two years of the Effective Date of this Agreement, all payments provided for herein to be paid to Employee’s designated beneficiary or Employee’s estate shall be forfeited.

14. Binding Effect. This Agreement shall be binding upon Employee, his heirs, personal representatives and assigns, and upon Employer, its successors and assigns.

15. Amendment of Agreement. This Agreement may not be altered, amended or revoked except by a written agreement signed by Employer and Employee; provided, however, that if Employer determines to its reasonable satisfaction that an alteration or amendment of the Agreement is necessary or advisable in order for the Agreement to comply with the Internal Revenue Code of 1986, as amended, the Treasury Regulations, or any other applicable tax authority (collectively “Tax Law”), then, upon written notice to Employee, Employer may unilaterally amend the Agreement in such manner and to such an extent as it reasonably considers necessary or advisable in order to comply with the Tax Law. Nothing in this Paragraph 15 shall be deemed to limit Employer’s right to terminate this Agreement at any time and without stated cause as provided in Paragraph 5.

16. Interpretation. Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine.

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17. Invalid Provision. 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.

18. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of North Carolina.

19. Entire Agreement. This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes and replaces any and all prior agreements and understandings, whether oral or written, with respect to the subject matter hereof.

IN TESTIMONY WHEREOF, Employer has caused this Agreement to be executed in its corporate name by its Executive Vice President, and attested by its Secretary/Assistant Secretary, all by the authority of its Board of Directors duly given, and Employee has hereunto set his hand and adopted as his seal the typewritten word “SEAL” appearing beside his name, as of the day and year first above written.

This the 25th day of October 2005.

FIRST-CITIZENS BANK & TRUST COMPANY
By:	/s/ Lou Jones Davis
	Lou Jones Davis
	Executive Vice President

ATTEST:

/s/ Lee Hardeman

Secretary/Assistant Secretary

/s/ James B. Hyler, Jr.	(SEAL)
James B. Hyler, Jr.

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DESIGNATION OF BENEFICIARY

Pursuant to the terms of the Employee Consultation, Post-Retirement Non-Competition and Death Benefit Agreement, dated as of July 1, 2005, between me and FIRST-CITIZENS BANK & TRUST COMPANY, I hereby designate the following beneficiary(ies) to receive any payments which may be due under such Agreement after my death.

Primary Beneficiary(ies): (If more than one is listed, it is assumed that Employee intends for all Primary Beneficiaries to share in payments as co-beneficiaries in the percentages listed, or equally if no percentages are listed, rather than as alternative or contingent beneficiaries or in any order of listing or otherwise.)

                                                                     %

                                                                     %

                                                                     %

Contingent Beneficiary(ies): (If more than one is listed, it is assumed that, if no Primary Beneficiary shall survive Employee, Employee intends for all Contingent Beneficiaries to share in payments as co-contingent beneficiaries in the percentages listed, or equally if no percentages are listed, rather than in the order in which they are listed or otherwise. If Employee intends for one or more Contingent Beneficiary(ies) to receive payments in any particular order or to the exclusion of any other(s) listed, that should be clearly indicated below.)

                                                                     %

                                                                     %

                                                                     %

This designation hereby revokes any prior designation which may have been in effect.

Date:
	James B. Hyler, Jr.
Witness
	Acknowledged by:
	Title:
	Date:	, 20

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EX-10.4

EXHIBIT 10.4

EMPLOYEE CONSULTATION, POST-RETIREMENT, NON-COMPETITION AND

DEATH BENEFIT AGREEMENT

THIS EMPLOYEE CONSULTATION, POST-RETIREMENT NON-COMPETITION AND DEATH BENEFIT AGREEMENT (“Agreement”) is made and entered into effective as of the 1st day of July, 2005 (“Effective Date”), by and between FIRST-CITIZENS BANK & TRUST COMPANY, a North Carolina banking corporation with its principal office in Raleigh, Wake County, North Carolina (“Employer”) and FRANK B. HOLDING, JR. (“Employee”);

W I T N E S S E T H

WHEREAS, Employee is an employee of Employer who has provided guidance, leadership and direction in the growth, management and development of Employer and has learned trade secrets, confidential procedures and information, and technical and sensitive plans of Employer; and,

WHEREAS, Employer desires to limit Employee’s availability to other employers or entities which are in competition with Employer following Employee’s retirement from employment with Employer; and,

WHEREAS, Employer has offered to Employee a non-competition arrangement and a consultation arrangement together with a death benefit arrangement for Employee’s designated beneficiary or estate, as applicable, and the parties hereto have reached an agreement concerning those arrangements and other matters contained herein and desire to set forth the terms and conditions thereof.

NOW, THEREFORE, for and in consideration of the mutual promises and undertakings herein set forth, Employee and Employer hereby agree as follows:

1. Consultation Payments. Following Employee’s “Retirement” (as defined below) from Employee’s employment with Employer on the Retirement Date (as defined below), Employer shall pay to Employee the sum of FOUR THOUSAND SIXTY-FOUR and 29/100 Dollars ($4,064.29) per month, beginning six months and one week after Employee’s Retirement for a period of ten (10) years following Employee’s Retirement or until Employee’s death, whichever first occurs (“Consultation Payments”). Such monthly payments shall be paid for and in consideration of Employee’s support, sponsorship, advisory and other services provided to

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Employer (“Consultation Services”); such sum to be payable to Employee whether or not Employee’s Consultation Services are utilized in said month by Employer. Except as set forth below, Consultation Payments hereunder shall be payable each month without deductions and Employee agrees to be solely responsible for the payment of all income and other taxes out of said funds and all Social Security, self-employment and any other taxes or assessments, if any, applicable on said compensation.

For and in consideration of said monthly Consultation Payments to Employee, Employee will provide Consultation Services as an independent contractor to Employer, as and when Employer may request, which services may be provided with respect to all phases of Employer’s business and particularly those phases in which Employee has particular expertise and knowledge. Employee’s services shall be limited to those of an independent consultant, shall not be on a day-to-day regularly scheduled operational basis and shall be provided only when Employee is reasonably available and willing, which willingness will not be unreasonably withheld. Employer shall make available to Employee such office space and equipment as are reasonably necessary for Employee to carry out the obligations under this Agreement and shall reimburse Employee for any extraordinary expenses incurred in carrying out the obligations hereunder.

Effective as of Employee’s Retirement date, Employee and Employer agree that Employee shall be, under the terms of this Agreement, an independent contractor, and Employee agrees that Employee’s rights and privileges and obligations are only as provided in this Agreement as to matters covered herein.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments are compensation for other than payments for Consultation Services, and such payments shall be subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under applicable tax law, the said payments shall be subject to the required withholdings.

If Employee should die during the ten-year period during which Consultation Payments are being made under this Paragraph 1, then those payments shall terminate and future payments, if any, shall be made to Employee’s designated beneficiary(ies) or Employee’s estate in accordance with the provisions of Paragraph 3 of this Agreement.

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As used in this Agreement, the term “Retirement” shall mean a termination of Employee’s employment with Employer which is treated as a “retirement” under the terms of Employer’s defined benefit pension plan, and which occurs no later than the last day of the calendar month in which Employee attains the age of sixty-five (65) (the “Retirement Date”), or such other termination of Employee’s employment as Employer and Employee shall agree in writing to treat as “Retirement” for purposes of this Agreement. Employer and Employee hereby acknowledge that compulsory retirement is not enforceable except as provided by law. Employer and Employee further agree that no provision herein shall be construed as requiring Employee’s retirement except as may now or hereafter be permitted by law.

2. Non-competition Payments. Following Employee’s Retirement from his employment with Employer on the Retirement Date, Employer shall pay to Employee the sum of TWELVE THOUSAND ONE HUNDRED NINETY-TWO and 86/100 Dollars ($12,192.86) per month, beginning six months and one week after Employee’s Retirement for a period of ten (10) years following Employee’s Retirement or until Employee’s death, whichever first occurs. Such monthly payments shall be paid for and in consideration of Employee’s agreement in this Paragraph 2 (Employee’s “Covenant Not To Compete”). Payments hereunder (“Non-competition Payments”) shall be payable each month without deductions and Employee agrees to be solely responsible for the payment of all income or other taxes or assessments, if any, applicable on those payments.

For and in consideration of monthly Non-competition Payments to Employee, Employee 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 Employer is performing at the time of Employee’s Retirement, nor will Employee 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 Employer, whether done directly or indirectly, in ownership, consultation, employment or otherwise. Employee agrees not to reveal to outside sources, without the consent of Employer, any matters, the revealing of which could, in any manner, adversely affect or disclose Employer’s business or any part thereof, unless required by law to do so. This Covenant Not To Compete by Employee is limited to the geographic area consisting of each county or like jurisdictional entity in which either Employer or any banking or investment entity owned directly or indirectly by the

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parent of Employer shall maintain a banking or other business office at the time of Employee’s Retirement, shall exist for and during the term of all payments to be made under this Paragraph 2, whether made directly by Employer or as otherwise provided herein, and shall not prevent Employee 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 Employer.

Employee acknowledges that the remedy at law for breach of Employee’s Covenant Not To Compete will be inadequate and that Employer shall be entitled to injunctive relief as to any violation thereof; however, nothing herein shall be construed as prohibiting Employer from pursuing any other remedies available to it, in addition to injunctive relief, whether at law or in equity, including the recovery of damages. In the event Employee shall breach any condition of Employee’s Covenant Not To Compete, then Employee’s right to any of the payments becoming due under Paragraphs 1 and 2 of this Agreement after the date of such breach shall be forever forfeited and the right of Employee’s designated beneficiary(ies) or Employee’s estate to any payments under this Agreement shall likewise be forever forfeited. This forfeiture is in addition to and not in lieu of any of the above-described remedies of Employer and shall be in addition to any injunctive or other relief as described herein. Employee further acknowledges that any breach of Employee’s Covenant Not To Compete shall be deemed a material breach of this Agreement.

Notwithstanding the foregoing, if Employer determines that the Non-Competition Payments are compensation for other than payments for Non-competition, and such payments shall be subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable tax law, the said payments shall be subject to the required withholdings.

If Employee should die during the ten-year period during which Non-competition Payments are being made under this Paragraph 2, then those payments shall terminate and future payments, if any, shall be made to Employee’s designated beneficiary(ies) or Employee’s estate in accordance with the provisions of Paragraph 3 of this Agreement.

3. Continuation of Payments. Following Employee’s death during the original ten-year period of payments under Paragraphs 1 and 2 above, the sum of SIXTEEN THOUSAND TWO HUNDRED FIFTY-SEVEN and 15/100 Dollars ($16,257.15) per month shall be paid to such individual or individuals as Employee shall have designated in writing as

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his beneficiary(ies) as provided in Paragraph 11 below or, in the absence of such designation, to Employee’s estate, as applicable, beginning the first calendar month following the date of Employee’s death and continuing thereafter until the expiration of said original ten-year period. Once the Consultation Payments and Non-competition Payments have begun, whether paid by Employer or as otherwise provided herein, the maximum payment period under this Agreement shall be ten (10) years. Payments hereunder shall be payable each month without deductions and the recipient shall be solely responsible for the payment of all income and other taxes and assessments, if any, applicable on those payments.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments and/or Non-competition Payments are compensation such that the payments are subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable tax law, said payment shall be subject to the required withholdings.

4. Death Benefits. In the event Employee dies while employed by Employer prior to Employee’s Retirement Date or dies within six months and one week after Employee’s Retirement Date, Employer will pay the sum of SIXTEEN THOUSAND TWO HUNDRED FIFTY-SEVEN and 15/100 Dollars ($16,257.15) per month for a period of ten (10) years, to such individual or individuals as Employee shall have designated in writing as his beneficiary(ies) as provided in Paragraph 11 below or, in the absence of such designation, to Employee’s estate, as applicable. The first payment shall be made not later than two months following Employee’s death. Payments under this Paragraph 4 shall be payable each month without deductions and the recipient shall be solely responsible for the payment of all income and other taxes and assessments, if any, applicable on those payments.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments and/or Non-competition Payments are compensation such that the payments are subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable law, said payments shall be subject to the required withholdings.

5. Forfeiture of Benefits. This Agreement is subject to termination by Employer at any time and without stated cause. In the event Employer shall terminate this Agreement, Employee shall forfeit all rights to receive any payment provided for herein.

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Likewise, in the event Employee’s employment is terminated, either voluntarily or involuntarily, for reasons other than his death or Retirement, Employee shall forfeit all rights to receive any payment provided for herein. Employee acknowledges and agrees that any benefit provided for herein is merely a contractual benefit and that nothing contained herein shall be construed as conferring upon Employee any vested benefits or any vested rights to receive any payment provided for herein and that any and all payments provided for herein shall be subject to a substantial risk of forfeiture until such time as said payments are actually made by Employer.

6. Claims Procedure. Any claim for benefits under this Agreement shall be made in writing to Employer. If any claim for benefits under this Agreement is wholly or partially denied, notice of the decision shall be furnished to the claimant within a reasonable period of time, not to exceed 90 days after receipt of the claim by Employer, unless special circumstances require an extension of time for processing the claim. If such an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed the period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date on which the administrator expects to render a decision.

Employer shall provide every claimant who is denied a claim for benefits written notice setting forth, in a manner calculated to be understood by the claimant, the following: (i) specific reasons for the denial; (ii) specific reference to pertinent provisions upon which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the Agreement’s claims review procedure as set forth below.

The claimant may appeal the denial of his claim to Employer for a full and fair review. A claimant (or his duly authorized representative) may request a review by filing a written application for review with Employer or its designee (the “Reviewer”) at any time within 60 days after receipt by the claimant of written notice of the denial of his claim. The claimant or his duly authorized representative may request, upon written application to Employer, to review pertinent documents, and submit issues and comments in writing.

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The decision on review shall be made by the Reviewer, who may, in its or his/her discretion, hold a hearing on the denied claim; the Reviewer shall make this decision promptly, and not later than 60 days after Employer receives the request for review, unless special circumstances require extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If such an extension of time for review is required, written notice of the extension (including the special circumstances requiring the extension of time) shall be furnished to the claimant prior to the commencement of the extension. In the event that the decision on review is not furnished within the time period set forth in this paragraph, the claim shall be deemed denied on review.

The decision on review shall be in writing and shall include reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent provisions in the relevant documents on which the decision is based.

7. Assignment of Rights; Spendthrift Clause. Neither Employee nor Employee’s estate, or any designated beneficiary shall have any right to sell, assign, transfer or otherwise convey the right to receive any payment hereunder. To the extent permitted by law, no benefits payable under this Agreement shall be subject to the claim of any creditor of Employee or Employee’s estate or any designated beneficiary, or to any legal process by any creditor of any such person.

8. Unfunded Plan. Employee and Employer do not intend that the amounts payable hereunder be held by Employer in trust or as a segregated fund for Employee or any other person entitled to payments hereunder. The benefits provided under this Agreement shall be payable solely from the general assets of Employer, and neither Employee nor any other person entitled to payments hereunder shall have any interest in any assets of Employer by virtue of this Agreement. Employer’s obligation under this Agreement shall be merely that of an unfunded and unsecured promise of Employer to pay money in the future. To the extent that this Agreement may be deemed to be a “pension plan,” Employee and Employer intend that it be unfunded for federal income tax purposes, as well as for Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

9. Payments and Funding. Any payments under this Agreement shall be independent of, and in addition to, those under any other plan, program or agreement which may be in effect between the parties hereto, or any other compensation payable to Employee or

7

Employee’s designee by Employer. This Agreement shall not be construed as a contract of employment nor does it restrict the right of Employer to discharge Employee at will or the right of Employee to terminate said Employee’s employment at will.

Employer may, in its sole discretion, purchase an insurance policy on the life of Employee to fund or assist in the funding of this Agreement. Employee agrees to promptly supply to Employer and its selected or prospective insurance carrier, upon request, any and all information requested, in order to enable the insurance carrier to evaluate the risks involved in providing the insurance requested by Employer. Any and all rights to any and all benefits under such insurance policy on the life of Employee shall be solely the property of Employer and all proceeds of such policy shall be payable by the insurer solely to Employer, as owner of such policy. Employee specifically waives any rights in any insurance policy on Employee’s life owned by Employer pursuant to this Agreement. Such policy shall not serve in any way as security to Employee for Employer’s performance under this Agreement. The rights accruing to Employee or any designee hereunder shall be solely those of an unsecured creditor of Employer and shall be subordinate to the rights of the depositors of Employer.

Employer may, in its sole discretion, discharge its liabilities under this Agreement to Employee, Employee’s designated beneficiary(ies) or Employee’s estate at any time by the purchase of an annuity from a reputable insurance or similar company authorized to do, and doing, business in North Carolina and the assignment of the rights under said annuity to the benefit of Employee, Employee’s designated beneficiary(ies) or Employee’s estate. If this option is exercised by Employer, all rights accruing to Employee, Employee’s designated beneficiary(ies) or Employee’s estate hereunder shall be governed solely by the annuity contract and any election made under said annuity contract; and Employer shall be fully discharged from any further liabilities to Employee, Employee’s designated beneficiary(ies) or Employee’s estate under this Agreement.

Employer may, in its sole discretion, discharge its liabilities under this Agreement to Employee, Employee’s designated beneficiary(ies) or Employee’s estate at any time by determining the present value of the payments due hereunder, said amount to be determined by the use of the U.S. Government bond rate for the nearest year applicable to the time of the payments due hereunder for the present value computation, and once determined, by payment of said amount in a lump sum to Employee, Employee’s designated beneficiary(ies) or Employee’s estate, as applicable.

8

10. Survivor Annuities and QDROs. Nothing contained in this Agreement is intended to give nor shall give any spouse or former spouse of Employee nor any other person any right to benefits under this Agreement by virtue of sections 401(a)(11) and 417 of the Internal Revenue Code (relating to qualified preretirement survivor annuities and qualified joint and survivor annuities) or Internal Revenue Code sections 401(a)(13)(B) and 414(p) (relating to qualified domestic relations orders).

11. Designation of Beneficiary(ies). In order to designate one or more beneficiaries as described in Paragraph 3 or 4 above, Employee shall file a written designation with Employer in the form attached as Exhibit A to this Agreement. Each such designation shall specify, by name(s), the person(s) to whom any amounts payable under this Agreement shall be paid following Employee’s death. From time to time, Employee may change or revoke a beneficiary designation without the consent of the beneficiary(ies) by filing a new beneficiary designation form with Employer, and the filing of a new designation form automatically shall revoke any and all designation forms previously filed with Employer. A beneficiary designation form not properly filed with Employer prior to Employee’s death shall be of no force or effect under this Agreement.

Subject to reasonable restrictions imposed by Employer and to Employer’s right to refuse to accept such a designation for reasons satisfactory to it, Employee may designate more than one beneficiary and/or alternative or contingent beneficiaries, in which case Employee’s designation form shall specify the relative shares and terms and conditions upon which amounts shall be paid to such multiple or alternative or contingent beneficiaries.

If, at the time of Employee’s death, (i) no beneficiary designation is on file with Employer, (ii) no beneficiary designated by Employee has survived Employee, or (iii) there are other circumstances not covered by the beneficiary designation form on file with Employer, then Employee’s estate conclusively shall be deemed to be the beneficiary designated to receive any amounts then remaining payable to Employee under this Agreement.

In making all determinations regarding Employee’s beneficiary, the latest designation form filed by Employee with Employer shall control, and all changes in circumstances that occur after the filing of that designation shall be ignored. For example, if Employee’s spouse is designated as beneficiary in the latest designation filed by Employee but, thereafter, is divorced from Employee, such designation shall remain valid until and unless Employee files a later beneficiary designation form with Employer naming a different beneficiary.

9

Any check for a payment under this Agreement that is issued on or before the date of Employee’s death shall remain payable to Employee and shall be handled accordingly, whether or not the check actually is received by Employee prior to death. Any check issued after the date of Employee’s death shall be the property of Employee’s beneficiary(ies) determined in accordance with this Paragraph 11.

12. Named Fiduciary and Administrator. (The purpose of this Paragraph is to comply with ERISA in the event any portion of the Plan is subject to ERISA.) The named fiduciary shall be Employer. The named fiduciary shall have the authority to control and manage the operation and administration of this Agreement. The administration of this Agreement shall be under the supervision of a director, officer or employee of Employer (hereinafter referred to as the “Administrator”) designated by the Board of Directors of Employer. It shall be a principal duty of the Administrator to see that this Agreement is carried out in accordance with its terms.

13. Suicide. In the event Employee commits suicide within two years of the Effective Date of this Agreement, all payments provided for herein to be paid to Employee’s designated beneficiary or Employee’s estate shall be forfeited.

14. Binding Effect. This Agreement shall be binding upon Employee, his heirs, personal representatives and assigns, and upon Employer, its successors and assigns.

15. Amendment of Agreement. This Agreement may not be altered, amended or revoked except by a written agreement signed by Employer and Employee; provided, however, that if Employer determines to its reasonable satisfaction that an alteration or amendment of the Agreement is necessary or advisable in order for the Agreement to comply with the Internal Revenue Code of 1986, as amended, the Treasury Regulations, or any other applicable tax authority (collectively “Tax Law”), then, upon written notice to Employee, Employer may unilaterally amend the Agreement in such manner and to such an extent as it reasonably considers necessary or advisable in order to comply with the Tax Law. Nothing in this Paragraph 15 shall be deemed to limit Employer’s right to terminate this Agreement at any time and without stated cause as provided in Paragraph 5.

16. Interpretation. Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine.

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17. Invalid Provision. 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.

18. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of North Carolina.

19. Entire Agreement. This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes and replaces any and all prior agreements and understandings, whether oral or written, with respect to the subject matter hereof.

IN TESTIMONY WHEREOF, Employer has caused this Agreement to be executed in its corporate name by its Executive Vice President, and attested by its Secretary/Assistant Secretary, all by the authority of its Board of Directors duly given, and Employee has hereunto set his hand and adopted as his seal the typewritten word “SEAL” appearing beside his name, as of the day and year first above written.

This the 25th day of October 2005.

FIRST-CITIZENS BANK & TRUST COMPANY
By:	/s/ Lou Jones Davis
	Lou Jones Davis
	Executive Vice President

ATTEST:

/s/ Lee Hardeman

Secretary/Assistant Secretary

/s/ Frank B. Holding, Jr .	(SEAL)
Frank B. Holding, Jr.

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DESIGNATION OF BENEFICIARY

Pursuant to the terms of the Employee Consultation, Post-Retirement Non-Competition and Death Benefit Agreement, dated as of July 1, 2005, between me and FIRST-CITIZENS BANK & TRUST COMPANY, I hereby designate the following beneficiary(ies) to receive any payments which may be due under such Agreement after my death.

Primary Beneficiary(ies): (If more than one is listed, it is assumed that Employee intends for all Primary Beneficiaries to share in payments as co-beneficiaries in the percentages listed, or equally if no percentages are listed, rather than as alternative or contingent beneficiaries or in any order of listing or otherwise.)

                                                                     %

                                                                     %

                                                                     %

Contingent Beneficiary(ies): (If more than one is listed, it is assumed that, if no Primary Beneficiary shall survive Employee, Employee intends for all Contingent Beneficiaries to share in payments as co-contingent beneficiaries in the percentages listed, or equally if no percentages are listed, rather than in the order in which they are listed or otherwise. If Employee intends for one or more Contingent Beneficiary(ies) to receive payments in any particular order or to the exclusion of any other(s) listed, that should be clearly indicated below.)

                                                                     %

                                                                     %

                                                                     %

This designation hereby revokes any prior designation which may have been in effect.

Date:
	Frank B. Holding, Jr.
Witness
	Acknowledged by:
	Title:
	Date:	, 20

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EX-10.5

EXHIBIT 10.5

EMPLOYEE CONSULTATION, POST-RETIREMENT NON-COMPETITION

AND DEATH BENEFIT AGREEMENT

THIS EMPLOYEE CONSULTATION, POST-RETIREMENT NON-COMPETITION AND DEATH BENEFIT AGREEMENT (“Agreement”) is made and entered into effective as of the 1st day of July, 2005 (“Effective Date”), by and between IRONSTONE BANK, a federal savings association with its principal office in Ft Myers, Florida (“Employer”) and JAMES M. PARKER (“Employee”);

W I T N E S S E T H

WHEREAS, Employee is an employee of Employer who has provided guidance, leadership and direction in the growth, management and development of Employer and has learned trade secrets, confidential procedures and information, and technical and sensitive plans of Employer; and,

WHEREAS, Employer desires to limit Employee’s availability to other employers or entities which are in competition with Employer following Employee’s retirement from employment with Employer; and,

WHEREAS, Employer has offered to Employee a non-competition arrangement and a consultation arrangement together with a death benefit arrangement for Employee’s designated beneficiary or estate, as applicable, and the parties hereto have reached an agreement concerning those arrangements and other matters contained herein and desire to set forth the terms and conditions thereof.

NOW, THEREFORE, for and in consideration of the mutual promises and undertakings herein set forth, Employee and Employer hereby agree as follows:

1. Consultation Payments. Following Employee’s “Retirement” (as defined below) from Employee’s employment with Employer on the Retirement Date (as defined below), Employer shall pay to Employee the sum of THREE THOUSAND SIX HUNDRED TWENTY-FOUR and 46/100 Dollars ($3,624.46) per month, beginning six months and one week after Employee’s Retirement for a period of ten (10) years following Employee’s Retirement or until Employee’s death, whichever first occurs (“Consultation Payments”). Such monthly payments shall be paid for and in consideration of Employee’s support, sponsorship, advisory and other services provided to Employer (“Consultation Services”); such sum to be payable to Employee

1

whether or not Employee’s Consultation Services are utilized in said month by Employer. Except as set forth below, Consultation Payments hereunder shall be payable each month without deductions and Employee agrees to be solely responsible for the payment of all income and other taxes out of said funds and all Social Security, self-employment and any other taxes or assessments, if any, applicable on said compensation.

For and in consideration of said monthly Consultation Payments to Employee, Employee will provide Consultation Services as an independent contractor to Employer, as and when Employer may request, which services may be provided with respect to all phases of Employer’s business and particularly those phases in which Employee has particular expertise and knowledge. Employee’s services shall be limited to those of an independent consultant, shall not be on a day-to-day regularly scheduled operational basis and shall be provided only when Employee is reasonably available and willing, which willingness will not be unreasonably withheld. Employer shall make available to Employee such office space and equipment as are reasonably necessary for Employee to carry out the obligations under this Agreement and shall reimburse Employee for any extraordinary expenses incurred in carrying out the obligations hereunder.

Effective as of Employee’s Retirement date, Employee and Employer agree that Employee shall be, under the terms of this Agreement, an independent contractor, and Employee agrees that Employee’s rights and privileges and obligations are only as provided in this Agreement as to matters covered herein.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments are compensation for other than payments for Consultation Services, and such payments shall be subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under applicable tax law, the said payments shall be subject to the required withholdings.

If Employee should die during the ten-year period during which Consultation Payments are being made under this Paragraph 1, then those payments shall terminate and future payments, if any, shall be made to Employee’s designated beneficiary(ies) or Employee’s estate in accordance with the provisions of Paragraph 3 of this Agreement.

As used in this Agreement, the term “Retirement” shall mean a termination of Employee’s employment with Employer which is treated as a “retirement” under the terms of

2

Employer’s defined benefit pension plan, and which occurs no later than the last day of the calendar month in which Employee attains the age of sixty-five (65) (the “Retirement Date”), or such other termination of Employee’s employment as Employer and Employee shall agree in writing to treat as “Retirement” for purposes of this Agreement. Employer and Employee hereby acknowledge that compulsory retirement is not enforceable except as provided by law. Employer and Employee further agree that no provision herein shall be construed as requiring Employee’s retirement except as may now or hereafter be permitted by law.

2. Non-competition Payments. Following Employee’s Retirement from his employment with Employer on the Retirement Date, Employer shall pay to Employee the sum of TEN THOUSAND EIGHT HUNDRED SEVENTY-THREE and 38/100 Dollars ($10,873.38) per month, beginning six months and one week after Employee’s Retirement for a period of ten (10) years following Employee’s Retirement or until Employee’s death, whichever first occurs. Such monthly payments shall be paid for and in consideration of Employee’s agreement in this Paragraph 2 (Employee’s “Covenant Not To Compete”). Payments hereunder (“Non-competition Payments”) shall be payable each month without deductions and Employee agrees to be solely responsible for the payment of all income or other taxes or assessments, if any, applicable on those payments.

For and in consideration of monthly Non-competition Payments to Employee, Employee 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 Employer is performing at the time of Employee’s Retirement, nor will Employee 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 Employer, whether done directly or indirectly, in ownership, consultation, employment or otherwise. Employee agrees not to reveal to outside sources, without the consent of Employer, any matters, the revealing of which could, in any manner, adversely affect or disclose Employer’s business or any part thereof, unless required by law to do so. This Covenant Not To Compete by Employee is limited to the geographic area consisting of each county or like jurisdictional entity in which either Employer or any banking or investment entity owned directly or indirectly by the parent of Employer shall maintain a banking or other business office at the time of Employee’s Retirement, shall exist for and during the term of all payments to be made under this Paragraph

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2, whether made directly by Employer or as otherwise provided herein, and shall not prevent Employee 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 Employer.

Employee acknowledges that the remedy at law for breach of Employee’s Covenant Not To Compete will be inadequate and that Employer shall be entitled to injunctive relief as to any violation thereof; however, nothing herein shall be construed as prohibiting Employer from pursuing any other remedies available to it, in addition to injunctive relief, whether at law or in equity, including the recovery of damages. In the event Employee shall breach any condition of Employee’s Covenant Not To Compete, then Employee’s right to any of the payments becoming due under Paragraphs 1 and 2 of this Agreement after the date of such breach shall be forever forfeited and the right of Employee’s designated beneficiary(ies) or Employee’s estate to any payments under this Agreement shall likewise be forever forfeited. This forfeiture is in addition to and not in lieu of any of the above-described remedies of Employer and shall be in addition to any injunctive or other relief as described herein. Employee further acknowledges that any breach of Employee’s Covenant Not To Compete shall be deemed a material breach of this Agreement.

Notwithstanding the foregoing, if Employer determines that the Non-Competition Payments are compensation for other than payments for Non-competition, and such payments shall be subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable tax law, the said payments shall be subject to the required withholdings.

If Employee should die during the ten-year period during which Non-competition Payments are being made under this Paragraph 2, then those payments shall terminate and future payments, if any, shall be made to Employee’s designated beneficiary(ies) or Employee’s estate in accordance with the provisions of Paragraph 3 of this Agreement.

3. Continuation of Payments. Following Employee’s death during the original ten-year period of payments under Paragraphs 1 and 2 above, the sum of FOURTEEN THOUSAND FOUR HUNDRED NINETY-SEVEN and 84/100 Dollars ($14,497.84) per month shall be paid to such individual or individuals as Employee shall have designated in writing as his beneficiary(ies) as provided in Paragraph 11 below or, in the absence of such designation, to Employee’s estate, as applicable, beginning the first calendar month following the date of

4

Employee’s death and continuing thereafter until the expiration of said original ten-year period. Once the Consultation Payments and Non-competition Payments have begun, whether paid by Employer or as otherwise provided herein, the maximum payment period under this Agreement shall be ten (10) years. Payments hereunder shall be payable each month without deductions and the recipient shall be solely responsible for the payment of all income and other taxes and assessments, if any, applicable on those payments.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments and/or Non-competition Payments are compensation such that the payments are subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable tax law, said payment shall be subject to the required withholdings.

4. Death Benefits. In the event Employee dies while employed by Employer prior to Employee’s Retirement Date or dies within six months and one week after Employee’s Retirement Date, Employer will pay the sum of FOURTEEN THOUSAND FOUR HUNDRED NINETY-SEVEN and 84/100 Dollars ($14,497.84) per month for a period of ten (10) years, to such individual or individuals as Employee shall have designated in writing as his beneficiary(ies) as provided in Paragraph 11 below or, in the absence of such designation, to Employee’s estate, as applicable. The first payment shall be made not later than two months following Employee’s death. Payments under this Paragraph 4 shall be payable each month without deductions and the recipient shall be solely responsible for the payment of all income and other taxes and assessments, if any, applicable on those payments.

Notwithstanding the foregoing, if Employer determines that the Consultation Payments and/or Non-competition Payments are compensation such that the payments are subject to any and all applicable withholding, Social Security, employment, income and other taxes or assessments, if any, under the applicable law, said payments shall be subject to the required withholdings.

5. Forfeiture of Benefits. This Agreement is subject to termination by Employer at any time and without stated cause. In the event Employer shall terminate this Agreement, Employee shall forfeit all rights to receive any payment provided for herein. Likewise, in the event Employee’s employment is terminated, either voluntarily or involuntarily, for reasons other than his death or Retirement, Employee shall forfeit all rights to receive any

5

payment provided for herein. Employee acknowledges and agrees that any benefit provided for herein is merely a contractual benefit and that nothing contained herein shall be construed as conferring upon Employee any vested benefits or any vested rights to receive any payment provided for herein and that any and all payments provided for herein shall be subject to a substantial risk of forfeiture until such time as said payments are actually made by Employer.

6. Claims Procedure. Any claim for benefits under this Agreement shall be made in writing to Employer. If any claim for benefits under this Agreement is wholly or partially denied, notice of the decision shall be furnished to the claimant within a reasonable period of time, not to exceed 90 days after receipt of the claim by Employer, unless special circumstances require an extension of time for processing the claim. If such an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall such extension exceed the period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date on which the administrator expects to render a decision.

Employer shall provide every claimant who is denied a claim for benefits written notice setting forth, in a manner calculated to be understood by the claimant, the following: (i) specific reasons for the denial; (ii) specific reference to pertinent provisions upon which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the Agreement’s claims review procedure as set forth below.

The claimant may appeal the denial of his claim to Employer for a full and fair review. A claimant (or his duly authorized representative) may request a review by filing a written application for review with Employer or its designee (the “Reviewer”) at any time within 60 days after receipt by the claimant of written notice of the denial of his claim. The claimant or his duly authorized representative may request, upon written application to Employer, to review pertinent documents, and submit issues and comments in writing.

The decision on review shall be made by the Reviewer, who may, in its or his/her discretion, hold a hearing on the denied claim; the Reviewer shall make this decision promptly, and not later than 60 days after Employer receives the request for review, unless special

6

circumstances require extension of time for processing, in which case a decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If such an extension of time for review is required, written notice of the extension (including the special circumstances requiring the extension of time) shall be furnished to the claimant prior to the commencement of the extension. In the event that the decision on review is not furnished within the time period set forth in this paragraph, the claim shall be deemed denied on review.

The decision on review shall be in writing and shall include reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent provisions in the relevant documents on which the decision is based.

7. Assignment of Rights; Spendthrift Clause. Neither Employee nor Employee’s estate, or any designated beneficiary shall have any right to sell, assign, transfer or otherwise convey the right to receive any payment hereunder. To the extent permitted by law, no benefits payable under this Agreement shall be subject to the claim of any creditor of Employee or Employee’s estate or any designated beneficiary, or to any legal process by any creditor of any such person.

8. Unfunded Plan. Employee and Employer do not intend that the amounts payable hereunder be held by Employer in trust or as a segregated fund for Employee or any other person entitled to payments hereunder. The benefits provided under this Agreement shall be payable solely from the general assets of Employer, and neither Employee nor any other person entitled to payments hereunder shall have any interest in any assets of Employer by virtue of this Agreement. Employer’s obligation under this Agreement shall be merely that of an unfunded and unsecured promise of Employer to pay money in the future. To the extent that this Agreement may be deemed to be a “pension plan,” Employee and Employer intend that it be unfunded for federal income tax purposes, as well as for Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

9. Payments and Funding. Any payments under this Agreement shall be independent of, and in addition to, those under any other plan, program or agreement which may be in effect between the parties hereto, or any other compensation payable to Employee or Employee’s designee by Employer. This Agreement shall not be construed as a contract of employment nor does it restrict the right of Employer to discharge Employee at will or the right of Employee to terminate said Employee’s employment at will.

7

Employer may, in its sole discretion, purchase an insurance policy on the life of Employee to fund or assist in the funding of this Agreement. Employee agrees to promptly supply to Employer and its selected or prospective insurance carrier, upon request, any and all information requested, in order to enable the insurance carrier to evaluate the risks involved in providing the insurance requested by Employer. Any and all rights to any and all benefits under such insurance policy on the life of Employee shall be solely the property of Employer and all proceeds of such policy shall be payable by the insurer solely to Employer, as owner of such policy. Employee specifically waives any rights in any insurance policy on Employee’s life owned by Employer pursuant to this Agreement. Such policy shall not serve in any way as security to Employee for Employer’s performance under this Agreement. The rights accruing to Employee or any designee hereunder shall be solely those of an unsecured creditor of Employer and shall be subordinate to the rights of the depositors of Employer.

Employer may, in its sole discretion, discharge its liabilities under this Agreement to Employee, Employee’s designated beneficiary(ies) or Employee’s estate at any time by the purchase of an annuity from a reputable insurance or similar company authorized to do, and doing, business in North Carolina and the assignment of the rights under said annuity to the benefit of Employee, Employee’s designated beneficiary(ies) or Employee’s estate. If this option is exercised by Employer, all rights accruing to Employee, Employee’s designated beneficiary(ies) or Employee’s estate hereunder shall be governed solely by the annuity contract and any election made under said annuity contract; and Employer shall be fully discharged from any further liabilities to Employee, Employee’s designated beneficiary(ies) or Employee’s estate under this Agreement.

Employer may, in its sole discretion, discharge its liabilities under this Agreement to Employee, Employee’s designated beneficiary(ies) or Employee’s estate at any time by determining the present value of the payments due hereunder, said amount to be determined by the use of the U.S. Government bond rate for the nearest year applicable to the time of the payments due hereunder for the present value computation, and once determined, by payment of said amount in a lump sum to Employee, Employee’s designated beneficiary(ies) or Employee’s estate, as applicable.

10. Survivor Annuities and QDROs. Nothing contained in this Agreement is intended to give nor shall give any spouse or former spouse of Employee nor any other person

8

any right to benefits under this Agreement by virtue of sections 401(a)(11) and 417 of the Internal Revenue Code (relating to qualified preretirement survivor annuities and qualified joint and survivor annuities) or Internal Revenue Code sections 401(a)(13)(B) and 414(p) (relating to qualified domestic relations orders).

11. Designation of Beneficiary(ies). In order to designate one or more beneficiaries as described in Paragraph 3 or 4 above, Employee shall file a written designation with Employer in the form attached as Exhibit A to this Agreement. Each such designation shall specify, by name(s), the person(s) to whom any amounts payable under this Agreement shall be paid following Employee’s death. From time to time, Employee may change or revoke a beneficiary designation without the consent of the beneficiary(ies) by filing a new beneficiary designation form with Employer, and the filing of a new designation form automatically shall revoke any and all designation forms previously filed with Employer. A beneficiary designation form not properly filed with Employer prior to Employee’s death shall be of no force or effect under this Agreement.

Subject to reasonable restrictions imposed by Employer and to Employer’s right to refuse to accept such a designation for reasons satisfactory to it, Employee may designate more than one beneficiary and/or alternative or contingent beneficiaries, in which case Employee’s designation form shall specify the relative shares and terms and conditions upon which amounts shall be paid to such multiple or alternative or contingent beneficiaries.

If, at the time of Employee’s death, (i) no beneficiary designation is on file with Employer, (ii) no beneficiary designated by Employee has survived Employee, or (iii) there are other circumstances not covered by the beneficiary designation form on file with Employer, then Employee’s estate conclusively shall be deemed to be the beneficiary designated to receive any amounts then remaining payable to Employee under this Agreement.

In making all determinations regarding Employee’s beneficiary, the latest designation form filed by Employee with Employer shall control, and all changes in circumstances that occur after the filing of that designation shall be ignored. For example, if Employee’s spouse is designated as beneficiary in the latest designation filed by Employee but, thereafter, is divorced from Employee, such designation shall remain valid until and unless Employee files a later beneficiary designation form with Employer naming a different beneficiary.

Any check for a payment under this Agreement that is issued on or before the date of Employee’s death shall remain payable to Employee and shall be handled accordingly, whether or

9

not the check actually is received by Employee prior to death. Any check issued after the date of Employee’s death shall be the property of Employee’s beneficiary(ies) determined in accordance with this Paragraph 11.

12. Named Fiduciary and Administrator. (The purpose of this Paragraph is to comply with ERISA in the event any portion of the Plan is subject to ERISA.) The named fiduciary shall be Employer. The named fiduciary shall have the authority to control and manage the operation and administration of this Agreement. The administration of this Agreement shall be under the supervision of a director, officer or employee of Employer (hereinafter referred to as the “Administrator”) designated by the Board of Directors of Employer. It shall be a principal duty of the Administrator to see that this Agreement is carried out in accordance with its terms.

13. Suicide. In the event Employee commits suicide within two years of the Effective Date of this Agreement, all payments provided for herein to be paid to Employee’s designated beneficiary or Employee’s estate shall be forfeited.

14. Binding Effect. This Agreement shall be binding upon Employee, his heirs, personal representatives and assigns, and upon Employer, its successors and assigns.

15. Amendment of Agreement. This Agreement may not be altered, amended or revoked except by a written agreement signed by Employer and Employee; provided, however, that if Employer determines to its reasonable satisfaction that an alteration or amendment of the Agreement is necessary or advisable in order for the Agreement to comply with the Internal Revenue Code of 1986, as amended, the Treasury Regulations, or any other applicable tax authority (collectively “Tax Law”), then, upon written notice to Employee, Employer may unilaterally amend the Agreement in such manner and to such an extent as it reasonably considers necessary or advisable in order to comply with the Tax Law. Nothing in this Paragraph 15 shall be deemed to limit Employer’s right to terminate this Agreement at any time and without stated cause as provided in Paragraph 5.

16. Interpretation. Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine.

17. Invalid Provision. 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.

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18. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of North Carolina.

19. Entire Agreement. This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes and replaces any and all prior agreements and understandings, whether oral or written, with respect to the subject matter hereof.

IN TESTIMONY WHEREOF, Employer has caused this Agreement to be executed in its corporate name by its Chairman of the Board, and attested by its Secretary/Assistant Secretary, all by the authority of its Board of Directors duly given, and Employee has hereunto set his hand and adopted as his seal the typewritten word “SEAL” appearing beside his name, as of the day and year first above written.

This the 25th day of October 2005.

IRONSTONE BANK
By:	/s/ Lewis R. Holding
	Lewis R. Holding
	Chairman of the Board

ATTEST:

/s/ Lee Hardeman

Secretary/Assistant Secretary

/s/ James M. Parker	(SEAL)
James M. Parker

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DESIGNATION OF BENEFICIARY

Pursuant to the terms of the Employee Consultation, Post-Retirement Non-Competition and Death Benefit Agreement, dated as of July 1, 2005, between me and IRONSTONE BANK, I hereby designate the following beneficiary(ies) to receive any payments which may be due under such Agreement after my death.

Primary Beneficiary(ies): (If more than one is listed, it is assumed that Employee intends for all Primary Beneficiaries to share in payments as co-beneficiaries in the percentages listed, or equally if no percentages are listed, rather than as alternative or contingent beneficiaries or in any order of listing or otherwise.)

                                                                     %

                                                                     %

                                                                     %

Contingent Beneficiary(ies): (If more than one is listed, it is assumed that, if no Primary Beneficiary shall survive Employee, Employee intends for all Contingent Beneficiaries to share in payments as co-contingent beneficiaries in the percentages listed, or equally if no percentages are listed, rather than in the order in which they are listed or otherwise. If Employee intends for one or more Contingent Beneficiary(ies) to receive payments in any particular order or to the exclusion of any other(s) listed, that should be clearly indicated below.)

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This designation hereby revokes any prior designation which may have been in effect.

Date:
	James M. Parker
Witness
	Acknowledged by:
	Title:
	Date:	, 20

12

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Lewis R. Holding, 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(s) 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)) 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: November 4, 2005

/s/ LEWIS R. HOLDING

Lewis R. Holding

Chief Executive Officer

EX-31.2

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(s) 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)) 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: November 4, 2005

/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 September 30, 2005, 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.

November 4, 2005	/s/ LEWIS R. HOLDING
	Lewis R. Holding
	Chairman and Chief Executive Officer
	/s/ KENNETH A. BLACK
	Kenneth A. Black
	Vice President and Chief Financial Officer