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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 1993 Commission File Number 0-11709
FIRST CITIZENS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE
(State or other jurisdiction of 62-1180360
incorporation or organization) (I.R.S. Employer Identification No.)
P. O. Box 370
First Citizens Place, Dyersburg, Tennessee 38025-0370
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (901) 285-4410
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
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 12 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 90 days.
Yes X No
The aggregate market value of voting stock held by nonaffiliates of
the registrant at December 31, 1993 was $21,199,680.
Of the registrant's only class of common stock ($10.00 par value)
there were 706,656 shares outstanding as of December 31, 1993.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the
Proxy Statement dated March 18, 1993 (Part III)
Filed by Electronic Submission
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PART I
ITEM 1. BUSINESS
GENERAL
First Citizens Bancshares, Inc. ("Bancshares") was organized December,
1982 as a Tennessee Corporation and commenced operations in September,
1983, with the acquisition of all Capital Stock of First Citizens National
Bank of Dyersburg ("First Citizens").
First Citizens was chartered as a national bank in 1900 and presently
operates a general retail banking business in Dyersburg and Dyer County,
Tennessee providing customary banking services. First Citizens operates
under the supervision of the Comptroller of the Currency, is insured up to
applicable limits by the Federal Deposit Insurance Corporation and is a
member of the Federal Reserve System. First Citizens operates under the
day-to-day management of its own officers and directors; and formulates its
own policies with respect to lending practices, interest rates, service
charges and other banking matters.
Bancshares' primary source of income is dividends received from
First Citizens. Dividend payments are determined in relation to First
Citizens' earnings, deposit growth and capital position in compliance with
regulatory guidelines. Management anticipates that future increases in the
capital of First Citizens will be accomplished through earnings retention
or capital injection.
The following table sets forth a comparative analysis of Assets,
Deposits, Net Loans, and Equity Capital of Bancshares as of December 31,
for the years indicated:
December 31
(in thousands)
1993 1992 1991
Total Assets $234,892 $239,897 $227,017
Total Deposits 193,823 193,459 193,064
Total Net Loans 147,646 133,957 131,131
Total Equity Capital 21,700 19,309 17,576
Individual bank performance is compared to industry standards through
utilization of the Uniform Bank Performance Report (UBPR), published
quarterly by the Federal Financial Institution's Examination Council. This
report provides comparisons of significant operating ratios of First
Citizens with peer group banks. Presented in the following chart are
comparisons of First Citizens with peer group banks for the periods
indicated:
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12/31/93* 12/31/92 12/31/91
FCNB PEER GRP FCNB PEER GRP FCNB PEER GRP
Average Assets/
Net Interest Income 4.49% 4.47% 4.51% 4.45% 4.22% 4.21%
Average Assets/
Net Operating Income 1.15% 1.34% .91% 1.29% .83% 1.08%
Net loan losses/
Average total loans .29% .15% .47% .25% .40% .30%
Primary Capital/
Average Assets 8.32% 8.83% 7.29% 8.48% 7.05% 8.13%
Cash Dividends/
Net Income 20.20% 38.00% 32.73% 30.49% 64.61% 44.88%
*Performance as of 12/31/93 is compared to peer group totals as of 09/30/93
(Most recent UBPR available)
EXPANSION
Bancshares may, subject to regulatory approval, acquire existing banks
or organize new banks. The Federal Reserve Board permits bank holding
companies to engage in non-banking activities closely related to banking or
managing or controlling banks, subject to Board approval. In making such
determination, the Federal Reserve Board considers whether the performance
of such activities by a bank holding company would offer advantages to the
public which outweigh possible adverse effects. Approval by the Federal
Reserve Bank of a Bank Holding Company's application to participate in a
proposed activity is not a determination that the activity is a permitted
non-bank activity for all bank holding companies. Approval applies only to
the applicant, although it suggests the likelihood of approval in a similar
case.
First Citizens National Bank through its strategic planning process
has stated its intention to acquire other financial institutions within the
West Tennessee Area. The Bank's objective in acquiring other banking
institutions would be for asset growth and diversification into other
market areas. Acquisitions would afford the bank increased economies of
scale within the data processing function and better utilization of human
resources. Any acquisition approved by the Board of Bancshares, Inc. would
provide a profitable investment for shareholders. In January, 1994, a
Letter of Intent to purchase was issued to a bank located in the West
Tennessee Area. Consummation of the purchase transaction is pending based
on acceptance of the offer and necessary regulatory approval.
During 1985, the Tennessee Legislature passed the Regional Reciprocal
Interstate Banking Act. This law provided for banks located within 13
states named therein to purchase banks located in Tennessee. Tennessee
banks, in turn, could purchase financial institutions located in any of the
states identified by the law. The Comptroller of the Currency ruled in
1987 that Banks may branch within any state to the extent permitted
state-chartered thrifts also engaged in the business of banking. As a
result of this ruling, the state legislature amended the 1985 Regional
Reciprocal Interstate Banking Act effective January 1, 1991 to remove
regional limitations on interstate banking. This will allow branching
within any state which allows reciprocal branching.
The issue of interstate branching is one which even bankers are unable
to agree upon. Smaller banking organizations vigorously oppose the concept
while the regionals and super-regionals continue to lobby for legislation
which will allow them access to all markets.
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SUPERVISION AND REGULATION
Bancshares is a one-bank holding company under the Bank Holding
Company Act of 1956, as amended, and is subject to supervision and
examination by the Board of Governors of the Federal Reserve System.
As a bank holding company, Bancshares is required to file with the
Federal Reserve Board annual reports and other information regarding the
business obligations of itself and its subsidiaries. Board approval must
be obtained before Bancshares may:
(1) Acquire ownership or control of any voting securities of a bank
or Bank Holding Company where the acquisition results in the BHC
owning or controlling more than 5 percent of a class of voting
securities of that bank or BHC;
(2) Acquire substantially all assets of a bank or BHC or merge with
another BHC.
Federal Reserve Board approval is not required for a bank subsidiary
of a BHC to merge with or acquire substantially all assets of another bank
if prior approval of a federal supervisory agency, such as the Comptroller
of the Currency is required under the Bank Merger Act. Relocation of a
subsidiary bank of a BHC from one state to another requires prior approval
of the Federal Reserve Board and is subject to the prohibitions of the
Douglas Amendment.
The Bank Holding Company Act provides that the Federal Reserve Board
shall not approve any acquisition, merger or consolidation which would
result in a monopoly or which would be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of banking
in any part of the United States. Further, the Federal Reserve Board may
not approve any other proposed acquisition, merger, or consolidation, the
effect of which might be to substantially lessen competition or tend to
create a monopoly in any section of the country, or which in any manner
would be in restraint of trade, unless the anti-competitive effect of the
proposed transaction is clearly outweighed in favor of public interest by
the probable effect of the transaction in meeting the convenience and needs
of the community to be served. An amendment effective February 4, 1993
further provides that an application may be denied if the applicant has
failed to provide the Federal Reserve Board with adequate assurances that
it will make available such information on its operations and activities,
and the operations and activities of any affiliate, deemed appropriate to
determine and enforce compliance with the Bank Holding Company Act and any
other applicable federal banking statutes and regulations. In addition,
consideration is given to the competence, experience and integrity of the
officers, directors and principal shareholders of the applicant and any
subsidiaries as well as the banks and bank holding companies concerned.
The Board also considers the record of the applicant and its affiliates in
fulfilling commitments to conditions imposed by the Board in connection
with prior applications.
A bank holding company is prohibited with limited exceptions from
engaging directly or indirectly through its subsidiaries in activities
unrelated to banking or managing or controlling banks. One exception to
this limitation permits ownership of a company engaged solely in furnishing
services to banks; another permits ownership of shares of the company, all
of the activities of which the Federal Reserve Board has determined after
due notice and opportunity for hearing, to be so closely related to banking
or managing or controlling banks, as to be a proper incident thereto.
Moreover, under the 1970 amendments to the Act and to the Board's
regulations, a bank holding company and its subsidiaries are prohibited
from engaging in certain "tie-in" arrangements in connection with any
extension of credit or provision of any property or service. Subsidiary
banks of a bank holding company are subject to certain restrictions imposed
by the Federal Reserve Act on any extension of credit to the bank holding
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company or to any of its other subsidiaries, or investments in the stock or
other securities thereof, and on the taking of such stock or securities as
collateral for loans to any borrower.
Bank holding companies are required to file an annual report of their
operations with the Federal Reserve Board, and they and their subsidiaries
are subject to examination by the Board.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information relates to the principal executive officers
of Bancshares and its principal subsidiary, First Citizens National Bank as
of December 31, 1993.
Name Age Position and Office
Stallings Lipford 63 Chairman of the Board and CEO
of First Citizens and Bancshares.
Mr. Lipford joined First Citizens
in 1950. He became a member of the
Board of Directors in 1960 and
President in 1970. He was made
Vice-Chairman of the Board in 1982.
He served as Vice Chairman of the
Board of Bancshares from September,
1983 to February, 1984. The Board
elected Mr. Lipford Chairman of
both First Citizens and Bancshares
on February 14, 1984. He served as
President of First Citizens and
Bancshares from 1983 to 1992.
Katie Winchester 53 President of First Citizens and
Bancshares; employed by
First Citizens National Bank in
1961; served as Executive Vice
President and Secretary of the
Board from 1986 to 1992. She was
made President of Bancshares and
First Citizens in 1992. Ms.
Winchester was elected to the Board
of both First Citizens and
Bancshares in 1990.
H. Hughes Clardy 51 Vice President of First Citizens
Bancshares, Inc.; Senior Vice
President and Senior Trust Officer
of First Citizens National Bank.
Employed by First Citizens National
Bank in 1993. Mr. Clardy was
employed as Vice President and
Senior Trust Officer at Crestar
Bank from January, 1987 to January,
1991 and as a Vice President of
Dominion Trust Company of Tennessee
from 1991 to 1993.
Ralph Henson 52 Vice President of First Citizens
Bancshares, Inc.; Executive Vice
President of Loan Administration
of First Citizens National Bank.
Employed by First Citizens National
Bank in 1964. Mr. Henson served
the Bank as Senior Vice President
and Senior Lending Officer until
his appointment as Executive Vice
President of Loan Administration in
February, 1993.
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BANKING BUSINESS
First Citizens operates a general retail banking business in Dyer
County, Tennessee. All persons who live in the community or who work in or
have a business or economic interest in the community are considered as
forming a part of the area serviced by the Bank. First Citizens provides
customary banking services, such as checking and savings accounts, funds
transfers, various types of time deposits, and safe deposit facilities. It
also finances commercial transactions and makes and services both secured
and unsecured loans to individuals, firms and corporations. Commercial
lending operations include various types of credit services for its
customers. The installment lending department makes direct loans to
individuals for personal, automobile, real estate, home improvement,
business and collateral needs. Mortgage lending makes available long term
fixed and variable rate loans to finance the purchase of residential real
estate. These loans are sold in the secondary market without retaining
servicing rights. Credit cards and open-ended credit lines are available
to both commercial customers and consumers.
First Citizens Financial Plus, Inc., a Bank Service Corporation wholly
owned by First Citizens National Bank is a licensed Brokerage Service.
This allows the bank to compete on a limited basis with numerous non-bank
entities who pose a continuing threat to our customer base, and are free to
operate outside regulatory control.
First Citizens was granted trust powers in 1925 and has maintained an
active Trust Department since that time. Assets as of December 31, 1993
were in excess of $121,000,000. Services offered by the Trust Department
include but are not limited to estate settlement, trustee of living trusts,
testamentary trustee, court appointed conservator and guardian, agent for
investment accounts, and trustee of pension and profit sharing trusts.
During 1991, the Board approved a name change for the Trust Department to
"Investment Management and Trust Services Division". The purpose of this
change was to more accurately reflect actual services provided.
The business of providing financial services is highly competitive.
The competition involves not only other banks but non-financial enterprises
as well. In addition to competing with other commercial banks in the
service area, First Citizens competes with savings and loan associations,
insurance companies, savings banks, small loan companies, finance
companies, mortgage companies, real estate investment trusts, certain
governmental agencies, credit card organizations, and other enterprises.
The following tabular analysis sets forth the competitive position of
First Citizens when compared with other financial institutions in the
service area for the period ending June 30, 1992. Information for the
period ending 6/30/93 will be made available by the Federal Financial
Institutions Examination Council in April, 1994.
Dyer County Market
(All Financial Institutions)
(in thousands)
Total Deposits % of Market Share
Bank Name 06/30/92 06/30/92
First Citizens
National Bank $191,818 49.99%
First Tennessee
Bank 89,149 23.23%
Security Bank 52,449 13.67%
Save-Trust Federal
Savings Bank 32,664 8.51%
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First Exchange Bank 7,391 1.93%
Merchants State Bank 7,903 2.06%
Dyersburg City Employees
Credit Union 2,345 .61%
At December 31, 1993 Bancshares and its subsidiary, First Citizens
National Bank, employed a total of 149 full time equivalent employees.
Having been a part of the local community in excess of 100 years, First
Citizens has been privileged to enjoy a major share of the financial
services market. Dyersburg and Dyer County are growing and with this
growth come demands for more sophisticated financial products and services.
Strategic planning has afforded the Company both the physical resources and
data processing technology necessary to meet the financial needs generated
by this growth.
USURY, RECENT LEGISLATION AND ECONOMIC ENVIRONMENT
Tennessee usury laws limit the rate of interest that may be charged by
banks. Certain Federal laws provide for preemption of state usury laws.
Legislation enacted in 1983 amends Tennessee usury laws to permit interest
at an annual rate of interest four (4) percentage points above the average
prime loan rate for the most recent week for which such an average rate has
been published by the Board of Governors of the Federal Reserve System, or
twenty-four percent (24%), whichever is less (TCA 47-14-102(3)). The "Most
Favored Lender Doctrine" permits national banks to charge the highest rate
permitted by any state lender.
Specific usury laws may apply to certain categories of loans, such as
the limitation placed on interest rates on single pay loans of $1,000.00 or
less for one year or less. Rates charged on installment loans, including
credit cards, are governed by the Industrial Loan and Thrift Companies Act.
Monetary policies of regulatory authorities, including the Federal
Reserve Board, have a significant effect on the operating results of bank
holding companies and their subsidiary banks. The Federal Reserve Board
regulates the national supply of bank credit by open market operations in
United States Government securities, changes in the discount rate on bank
borrowings, and changes in reserve requirements against bank deposits. A
tool once extensively used by the Federal Reserve Board to control growth
and distribution of bank loans, investments and deposits has been
eliminated through deregulation. Competition, not regulation, dictates
rates which must be paid and/or charged in order to attract and retain
customers.
Federal Reserve Board monetary policies have materially affected the
operating results of commercial banks in the past and are expected to do so
in the future. The nature of future monetary policies and the effect of
such policies on the business and earnings of the company and its
subsidiaries cannot be accurately predicted.
ITEM 2. PROPERTIES
First Citizens owns and occupies a six-story building in Dyersburg,
Tennessee containing approximately 50,453 square feet of office space,
bearing the municipal address of First Citizens Place (formerly 200 West
Court). An expansion program completed during 1988 doubled the available
floor space of the existing facility. The space was utilized to combine
all lending and loan related functions. First Citizens owns the Banking
Annex containing total square footage of 12,989, of which approximately
3,508 square feet is rented to various tenants. The municipal address of
the bank occupied portion of the Annex is 213-219 Masonic Street.
The land and building occupied by the Downtown Drive-In Branch located
at 113 South Church Street, Dyersburg, Tennessee is owned by First
Citizens. The building, containing approximately 1,250 square feet, is
located on a lot which measures 120 feet square. Also located at this
address is a separate ATM facility wholly owned by the Bank.
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The Midtown Branch of First Citizens is located at 620 U.S. 51 By-Pass
adjacent to the Green Village Shopping Center. The building contains 1,920
square feet and has been owned by First Citizens since construction. The
land on which this Branch is located, having previously been leased, was
purchased during 1987. In June of 1992 an additional 1.747 acres adjoining
the Midtown Branch property was purchased to accomodate future growth and
expansion. Also located on this property is an ATM.
In addition, the Midtown Branch Motor Bank is located on .9 acres
adjoining the Midtown Branch. This property consists of a servicing
facility and six remote teller stations and is owned in its entirety by the
Bank. A drive-through ATM will be located at this facility during 1994.
The Newbern Branch, also owned by First Citizens, is located on North
Monroe Street, Newbern, Tennessee. The building contains approximately
4,284 square feet and occupies land which measures approximately 1.5 acres.
A separate facility located in Newbern on the corner of Highway 51 and
RoEllen Road houses an ATM. Both land and building are owned by the Bank.
The Super Money Market Branch in the Kroger Supermarket on Highway 78
is operated under a franchise obtained through National Bank of Commerce,
Memphis, Tennessee. While the fixtures are owned by First Citizens, space
is made available from the Kroger Company through the franchise agreement.
1.12 acres of land located at 2211 St. John was purchased in 1993 to
locate a full service banking facility and a drive through ATM.
Architectural plans for construction of the building are currently being
studied by Bank Management.
In November, 1993, First Citizens National Bank leased space in the
Wal-Mart store #677 located at 2650 Lake Road in Dyersburg, Tennessee to
locate an Automatic Teller Machine (ATM). The ATM was installed in
December, 1993.
There are no liens or encumbrances against any of the properties owned
by First Citizens.
ITEM 3. LEGAL PROCEEDINGS
During December, 1989 a lawsuit was brought against First Citizens
Bancshares, Inc. and three other co-defendants claiming that certain
individuals are entitled to a real estate commission of $138,285 on
property sold by the Bank Holding Company. The plaintiffs were seeking
prejudgement interest and punitive damages of $638,285. The lawsuit was
settled in 1993 with the Bank paying settlement costs of $5,000 to the
plaintiffs.
The Bank was also a defendant in a suit filed September 20, 1991 by a
bankruptcy trustee alleging that First Citizens was the recipient of a
preferential transfer under the bankruptcy code in the amount of $689,702
and a preferential transfer in the amount of $1,551,889. The suit sought
recovery of both transfers plus prejudgment interest. The allegations were
being contested by the Bank. The lawsuit was settled in 1993 with no
payments being made by First Citizens National Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the year ending December 31, 1993, there
were no meetings, annual or special, of the shareholders of Bancshares. No
matters were submitted to a vote of the shareholders nor were proxies
solicited by management or any other person.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
As of December 31, 1993 there were 617 active holders of Bancshares'
stock. Bancshares common stock is not actively traded on any market. Per
share prices reflected in the following table are based on records of
actual sales during stated time periods. These records may not include all
sales during these time periods if sales were not reported to First
Citizens for transfer.
Quarter Ended High Low
March 31, 1993 $57.65 $52.50
June 30, 1993 $68.00 $61.00
September 30, 1993 $69.10 $68.00
December 31, 1993 $30.00 $27.64**
March 31, 1992 $55.00 $43.00
June 30, 1992 $55.00 $48.00
September 30, 1992 $55.00 $50.00
December 31, 1992 $55.00 $48.00*
*Declared 10% stock dividend.
**Declared 2.5 for 1 stock split.
Dividends paid each quarter of 1993 were .60 cents (first two
quarters) .65 cents (third quarter); and .25 cents for the fourth quarter.
Fourth quarter dividend also included a 2.5 for 1 stock split in the Common
Capital Stock of First Citizens Bancshares, Inc. The 2.5 for 1 stock split
provided for the issuance of an additional 1.5 shares for each share owned
of record as of October 15, 1993. Annual per share dividends paid in 1993
were $2.10. The adjusted dividend per share in 1993 is referenced in Item
6 Selected Financial Data. Dividends paid in each quarter of 1992 were
57.5 cents per share for an annual per share dividend of $2.30.
Future dividends will depend on Bancshare's earnings and financial
condition and other factors which the Board of Directors of Bancshares
considers relevant.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents information for Bancshares effective
December 31 for the years indicated.
(in thousands)
(except per share data)
1993 1992 1991 1990 1989
Net Interest &
Fee Income $ 10,895 $ 10,389 $ 9,882 $ 9,991 $ 8,901
Gross Interest Income $ 18,156 $ 18,893 $ 21,074 $ 22,261 $ 21,720
Income From
Continuing Operations $ 2,638 $ 2,175 $ 1,961 $ 1,314 $ 1,270
Long Term Obligations $ 0 $ 0 $ 0 $ 0 $ 555
Income Per Share from
Continuing Operations* $ 3.76 $ 3.39 $ 3.06 $ 2.05 $ 1.98
Net Income per
Common Share** $ 3.94 $ 3.39 $ 3.06 $ 2.05 $ 1.98
Cash Dividends Declared
per Common Share** $ .99 $ .94 $ .89 $ .88 $ .84
Total Assets at Year End $234,892 $239,897 $227,017 $218,378 $222,296
* Restated to reflect 10% stock dividend on December 15, 1992.
** Restated to reflect 2.5 for 1 Stock Split on October 15, 1993.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
To understand the following analysis, reference should be made to the
consolidated financial statements and other selected financial data
presented elsewhere in this report. For purposes of the following
discussion, net interest income and net interest margins are presented on a
fully taxable equivalent basis. Per share data is adjusted to reflect all
stock dividends declared through December 31, 1993.
The combination of a favorable interest rate environment reduced
operating expense and improved asset quality resulted in record earnings
for Bancshares for the year just ended. Operating results for 12/31/93
reflect significant improvement when compared to previous years. Net
Income for 1993, 1992 and 1991 was $2,638,459, $2,174,710 and $1,961,203
respectively. Earnings per share were $3.94 in 1993 compared to $3.39 in
1992 and $3.06 in 1991. Earnings per share were adjusted in 1993 to
reflect a 2.5 for 1 stock split approved by the Board of Directors in
September, 1993. Return on average assets for the years ending 12/31/93,
92 and 91 respectively were 1.17%, .95% and .89%. Return on Average Equity
was 8.71% in 1993 compared to 8.07% in 1992 and 7.60% in 1991. Improvement
reflected in the Return on Average Assets and equity comparisons for the
years indicated is due to strategic planning effort to shift the focus from
asset growth to improved profitability. Total Assets declined approximately
$5 million or 2.13% when comparing 1993 to 1992. This decline is
reflective of a run-off in consumer dollars previously invested in CD's
into alternative investment sources providing a higher rate of return. In
the present low rate environment, customers are willing to sacrifice
security in exchange for higher returns.
Net Interest Income after the provision for loan losses increased
5.16% and 7.40% in 1993 and 1992. Net Income improved each year under
comparison due to (1) a decrease in non-earning assets (Non-Accrual Loans
and Other Real Estate Owned), (2) improved income from the Broker Dealer
Subsidiary, (3) sale of annuities (a new product offered in 1993), (4)
insurance commissions, and (5) increased volume in the loan portfolio. The
provision for Loan Losses reflect a continuous decrease for the years under
comparison. Net charge-offs at 12/31/93 was $428,000 compared to $644,000
for the same period in 1992. The ratio of net charge-offs to average net
loans outstanding was .30%, .48% and .43% for 12/31/93, 92 and 91.
Other expenses decreased in 1993 when comparing YTD 1993 to YTD 1992.
The decrease is attributed to a reduction of approximately $600,000 in Data
Processing expenses. In 1992, a decision was made to terminate the
existing Facilities Management Contract with Systematics, Inc. for data
processing services. On September 25, 1992, First Citizens converted to an
in-house IBM AS/400 and Horizon Software. The change enhanced income
significantly in 1993. Salaries and employee benefits increased 5.31% and
6.38% respectively in 1993 and 1992. A further discussion of Salaries and
Benefits is included in the discussion of Non-Interest Expense.
Purchases of investment securities were limited to those having
maturities within guidelines previously established by policy. While
longer maturities would afford an immediate increase in investment income,
it was determined that the long term risk was unacceptable. Competition in
the local market for quality loans led some financial institutions to
extend credit at fixed rates for fifteen years and longer. It was
determined that transactions of this nature violated sound asset liability
management policy and would be entered into on a limited basis, if at all.
On March 4, 1993, the Bank entered into an agreement with Southern
Data Systems, Roswell, Georgia, to install a platform automation system,
"Bank Pro", for deposit and loan document processing. Bank Pro is
completely integrated with the central information file of the Bank's host
system, as well as deposit and loan accounting systems. Installation is
expected to improve customer service as well as stream line loan and
deposit operations. "Bank Pro" was successfully installed September 27,
1993.
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Two changes were made in the composition of the management team during
the first quarter of 1993. Until this time the lending function operated
under the quidance of both a Loan Administrator and a Senior Commercial
Lending Officer. Based on the significant reduction in problem loans,
non-accrual loans, and other real estate owned, coupled with the improved
quality of new loans placed into the portfolio for the past several years,
it was determined that dual leadership was no longer needed. After careful
deliberation of the facts, the responsibilities of Loan Administrator were
assigned to the Senior Lending Officer. Lending duties once assumed by
this individual were delegated to others within the Commercial Lending
area. In addition, an analysis of earnings and other factors within the
Trust Department led management to recommend a change in leadership of this
function. This was also accomplished during the first quarter.
In September, 1993, Bank's management accepted the resignation of the
Mortgage Loan Department Manager and two other bank officers responsible
for originating long term mortgage loans. The position of manager was
filled with a qualified individual with extensive experience in mortgage
lending. The individuals hired as loan originators are equally qualified.
Changes in Financial Accounting Standards
Implementation of FASB No. 109 (Accounting for Income Taxes) has been
accomplished for years beginning after 12/15/92. A major change in the new
statement is the shift to the liability method from the deferred method of
accounting for income taxes. Under the liability method, deferred taxes
are adjusted for tax rate changes, whereas they are not under the deferred
method. Bancshares carries deferred tax assets on its general ledger as of
12/31/93 of $60,000. This asset is primarily the result of a difference in
book and tax deductions for loan losses during the year just ended.
FASB No. 107 entitled "Disclosures about Fair Value of Financial
Instruments" is effective for fiscal years ending after December 15, 1992.
This pronouncement requires disclosure of the "fair value" of all financial
instruments. The definition of "financial instruments" includes
contractual obligations, such as loans and deposits, on which disclosure of
fair value has not previously been required. Disclosure of the methods and
significant assumptions utilized in determining fair values must also be
disclosed. "Fair Value" is defined as "the amount at which the instrument
could be exchanged in a current transaction between willing parties.
FASB No. 115 (Accounting for certain investments in Debts and Equity
Securities) is scheduled to take effect 1/1/94. Subsequent to the
effective date, only those securities contained within either the Trading
or Held for Sale Accounts will be available for sale. This limitation will
alter investment strategy by forcing banks into shorter maturities.
Interim purchases intended for resale within a twelve month period will be
placed in either the Trading or Held for Sale Account.
FASB No. 106 entitled "Employees' Accounting for Postretirement
Benefits other than Pensions" is effective for fiscal years ending after
December 15, 1992. This standard applies primarily to health care benefits
and requires accrual, during the years that the employee renders service,
of the expected cost of providing those benefits to an employee and the
employee's beneficiaries and covered dependents. FASB No. 106 will have no
effect on Bancshares or the Bank since health care benefits are not
provided for its employees after retirement.
Other changes presently proposed in Financial Accounting Standards
will have no direct material effect on the bank.
<PAGE>
<PAGE>12
NON-INTEREST INCOME
The following table reflects non-interest income for the years ending
December 31, 1993, 1992 and 1991:
<TABLE>
December 31
Change from prior year
(in thousands)
<CAPTION>
Total Increase(Decrease) Total Increase(Decrease)
Total
1993 Amount Percentage 1992 Amount Percentage 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Service Charges on
Deposit Accounts $ 440 $ 6 1.38% $ 434 $ (35) (7.46%) $ 469
Other Service Charges,
Commissions & Fees $ 771 $ 212 37.92% $ 559 $ 101 (22.05%) $ 458
Other Income $ 869 $ (136) (13.53%) $1,005 $ 210 26.42% $ 795
TOTAL NON-INTEREST
INCOME $2,080 $ 82 4.10% $1,998 $ 276 16.03% $1,722
</TABLE>
First Citizens consistently outperforms peer group banks in the area
of non-interest income. Total Non-Interest Income reflects an increase of
16.03% and 4.10% when reviewing the years under comparison. Non-Interest
Income for 1992 includes Securities Gains of $159,820. Without the gains
from sale of securities, Non-Interest Income would have increased
$116,000 or 7% above the 1991 total. Other income increased due to
increased sales in Mortgage Loans, Brokerage Services, Accounts
Receivable Factoring and the sale of annuities. Fiduciary income decreased
approximately $50,127 when comparing 1992 to 1991. The decrease was due to
the loss of a large corporate account. Service charges on Deposit Accounts
decreased $35,000 or 7.46% from 1991 to 1992 because of decreased
collections of overdraft and business account analysis income. Non-
interest income is projected to be more in line with peer banks in 1994 due
to a slow down in refinancing of mortgage loans and management's decision
to transfer the sale of annuities from the bank's product listing to
Financial Plus, Inc., a subsidiary of the bank that offers brokerage
services. Offering a new overdraft line of credit product in 1994 is
currently being considered to meet customer needs. A decision to add this
product to the bank's credit product listing could have a slight impact on
fee income. However, Trust Department income is projected to improve over
the next three years. Under new management, the potential for increased
profits is significant.
NON-INTEREST EXPENSE
<TABLE>
December 31
Change from prior year
(in thousands)
<CAPTION>
Total Increase(Decrease) Total Increase(Decrease) Total
1993 Amount Percentage 1992 Amount Percentage 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries & Employee
Benefits $4,750 $ 239 5.30% $4,511 $ 271 6.39% $4,240
Net Occupancy Expense $ 349 $ 39 12.58% $ 310 $ (49) (13.65%) $ 359
Other Operating Expense $3,634 $(292) (7.44%) $3,926 $ 386 10.90% $3,540
TOTAL NON-INTEREST EXPENSE $8,733 $ (14) (.16%) $8,747 $ 608 7.47% $8,139
</TABLE>
<PAGE>
<PAGE>13
Total Non-Interest Expense increased 7.47% when comparing 1992 to
1991, then leveled off in 1993. Salaries and benefits increased 5.30% in
1993 and 6.39% in 1992. Increases can be attributed to budget based
incentive payments totaling approximately $300,000 in 1993, $151,000 in
1992, and $83,000 in 1991. Excluding bonus payments, salaries would have
decreased 9.98% in 1993 when compared to 1992. The decrease is reflective
not only of the bank's strategic efforts to maintain staffing levels
comparable to peer banks, but of efforts made to encourage quality
performance rewarded with an annual bonus payment directly related to
bank's profitability. In 1993, the budget based incentive program was
enhanced to include all employees of the bank. Under the new plan, bonuses
are paid based on the bank's ROA ranging from .85% (minimum payment) to
1.15% (maximum payment) and the employees classification level. The
prebonus ROA in 1993 was 1.24%. Also included in salaries and benefits for
the two current years are retirement benefits totaling $337,500 in 1993 and
$318,000 in 1992. Net Occupancy Expense decreased 13.65% in 1992 due to
decreased data processing cost. Other Operating Expense increased $386,000
or 10.90% when comparing 1992 to 1991. This can be partially attributed to
a $167,000 (74%) increase in FDIC insurance premiums. Total Non-Interest
Expense is closely monitored and tightly controlled by management.
One measure of efficient staffing in the banking industry is the
dollar amount of assets per employee. Peer group banks average $1,900,000.
The following table reflects progress made by First Citizens in attempting
to achieve this level:
(in thousands)
December 31 Assets Per Employee
1993 $1,563
1992 $1,643
1991 $1,393
1990 $1,380
1989 $1,408
It is conceivable that our ratios will remain higher than peer group
banks because of increased staff necessary to support extended banking
hours and non-banking services to our customers. Management's decision to
provide customers with more convenient banking hours by opening drive-in
windows at 7AM, and certain of our branches on Saturdays, mandates
additional staff which would not be necessary for banks operating only
during traditional banking hours. Likewise, the Super Money Market Branch
located in the Kroger Supermarket allows banking until 8PM on weekdays and
6PM on Saturday. Non-banking services include Trust and Brokerage
services. Full time equivalent employees was 149, 146, 163 respectively as
of 12/31/93, 92 and 91. The bank's management is making every effort to
monitor and control staffing levels. The slight increase in 1993 was a
result of management's decision to construct a full service branch bank
located at 2211 St. John near the Industrial Park. Two additional staff
members were employed as replacement for employees selected to transfer to
the branch.
COMPOSITION OF DEPOSITS
The average daily amounts of deposits and rates paid on such deposits
are summarized for the periods indicated:
December 31
(in thousands)
1993 1992 1991
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
Non-Interest
Bearing Demand
Deposits $ 21,922 - $ 18,695 - $ 17,382 -
Savings Deposits $ 65,612 2.58% $ 60,006 2.98% $ 52,916 4.37%
Time Deposits $104,166 4.70% $111,771 5.42% $117,864 6.90%
TOTAL DEPOSITS $191,700 3.44% $190,472 4.12% $188,162 5.55%
<PAGE>
<PAGE>14
The preceding table is reflective of customer response to the current
low interest rate environment. The reluctance to recommit funds into
certificates of deposits had the ultimate effect of reducing time deposits
by $13,698,000 or 13.15% since 1991, while increasing savings and time
balances by $12,696,000 or 23.99%. One factor which is not evident when
reviewing information contained within the table is the growth in "Sweep
Account Funds". Large balance customers are offered a service which
provides for funds to be automatically swept daily from a demand deposit
account into an overnight repurchase agreement. This affords commercial
customers the opportunity to earn interest on excess collected funds while
providing availability of adequate funds to clear large denomination checks
when presented for payment. The sweep balances at December 31, 1993, 1992,
and 1991 were $10,022,000, $19,049,000, $7,847,000 respectively.
During 1993, approximately $5 million was converted from sweep funds to the
bank's Investment Management and Trust Services Division.
The Bank's management is continuously monitoring and enhancing the
bank's product line to retain funds belonging to its existing customers and
to attract new customer relationships. In July, 1993, Generations Gold, a
new checking club program was offered that included discounts on travel,
food, health services, and other major products, as well as savings on bank
services. This account replaced all package accounts previously offered
and should serve to ultimately strengthen deposit totals. A time deposit
product enhanced to attract funds was the "Sweet Sixteen" Certificate of
Deposit offering a 16 month maturity and two rate change options.
The average rate paid on deposits in 1993, 1992 and 1991 was 3.44%, 4.12%
and 5.55%. A slightly higher rate was paid on deposits when compared to
average rates paid in other areas of Tennessee because of competitive
pricing in the bank's market place. Pricing of deposit products is based
on local market and Treasury Bill rates.
MATURITY DISTRIBUTION OF TIME DEPOSITS IN AMOUNTS OF $100,000 AND OVER
December 31
(in thousands)
1993 1992
Amount Percent Amount Percent
Maturing in:
3 months or less $ 6,770 39.48% $ 8,204 46.20%
Over 3 through 6 months $ 5,200 30.32% $ 2,641 14.87%
Over 6 through 12 months $ 2,388 13.92% $ 1,737 9.78%
Over 12 months $ 2,792 16.28% $ 5,176 29.15%
TOTAL $17,150 100.00% $17,758 100.00%
<PAGE>
<PAGE>15
SOURCES AND USES OF FUNDS
(in thousands)
1993 1992 1991
FUNDING USES Average Increase Average Increase Average
Balance (Decrease) % Balance (Decrease) % Balance
Amount Amount Amount
INTEREST-EARNING
ASSETS:
Loans (Net of Unearned Discounts
& Reserve) $141,664 $ 7,150 5.32% $134,514 $ 284 .21% $134,230
Taxable Investment
Securities $ 59,124 $ 614 1.05% $ 58,510 $ 6,590 12.69% $ 51,920
Non-Taxable
Investment
Securities $ 9,800 $ 3,385 52.77% $ 6,415 $ 637 11.02% $ 5,778
Federal Funds
Sold $ 2,387 $(4,632)(65.99%)$ 7,019 $ 74 1.07% $ 6,945
Interest Earning
Deposits In Banks $ 198 $ 198 100% $ 0 $ (112) (100%) $ 112
TOTAL INTEREST-
EARNING ASSETS $213,173 $ 6,715 3.25% $206,458 $ 7,473 3.76% $198,985
Other Uses $ 20,105 $ (17) (.08%)$ 20,122 $ 105 .52% $ 20,017
TOTAL FUNDING USES $233,278 $ 6,698 2.96% $226,580 $ 7,578 3.34% $219,002
1993 1992 1991
FUNDING SOURCES Average Increase Average Increase Average
Balance (Decrease) % Balance (Decrease) % Balance
Amount Amount Amount
INTEREST-BEARING
LIABILITIES:
Savings Deposits $ 65,612 $ 5,606 9.34% $ 60,006 $ 7,090 13.40% $ 52,916
Time Deposits $104,166 $ (7,605)(6.80%)$111,771 $ (6,093)(5.17%) $117,864
Federal Funds
Purchased and Other
Interest Bearing
Liabilities $ 21,204 $ 3,418 19.22% $ 17,786 $ 5,097 40.17% $ 12,689
TOTAL INTEREST-
BEARING LIABILITIES $190,982 $ 1,419 .75% $189,563 $ 6,094 3.32% $183,469
Demand Deposits $ 21,922 $ 3,227 17.26% $ 18,695 $ 1,313 7.55% $ 17,382
Other Sources $ 20,374 $ 2,052 11.20% $ 18,322 $ 171 .94% $ 18,151
TOTAL FUNDING
SOURCES: $233,278 $ 6,698 2.96% $226,580 $ 7,578 3.34% $219,002
SUMMARY - AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS
<PAGE>
<PAGE>16
<TABLE>
(FIRST CITIZENS NATIONAL BANK)
<CAPTION>
Monthly Average Balances and Interest Rates
(in thousands)
1993 1992 1991
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST EARNING
ASSETS:
Loans (1)(2)
(3) $141,591 $ 13,389 9.46% $134,413 $ 13,511 10.05% $134,087 $15,365 11.34%
Investment
Securities:
Taxable $ 59,124 $ 3,571 6.04% $ 58,510 $ 4,014 6.86% $ 51,920 $ 4,172 8.04%
Tax Exempt (4) $ 9,800 $ 677 6.91% $ 6,415 $ 488 7.61% $ 5,778 $ 524 9.07%
Interest Earning
Deposits $ 198 $ 6 3.03% $ 0 $ 0 0% $ 112 $ 7 6.25%
Federal Funds $ 2,387 $ 75 3.14% $ 7,019 $ 257 3.66% $ 6,945 $ 388 5.59%
Sold
Lease Financing $ 73 $ 6 8.22% $ 101 $ 11 10.89% $ 143 $ 17 11.89%
Total Interest
Earning Assets $213,173 $ 17,724 8.31% $206,458 $ 18,281 8.85% $198,985 $20,473 10.29%
</TABLE>
<PAGE>
<PAGE>17
<TABLE>
SUMMARY - AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS (continued)
<CAPTION>
(FIRST CITIZENS NATIONAL BANK)
Monthly Average Balances and Interest Rates
(in thousands)
1993 1992 1991
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NON-INTEREST
EARNING ASSETS:
Cash and Due From
Banks $ 8,373 $ - - $ 7,492 $ - - $ 7,010 $ - -
Bank Premises and
Equipment $ 7,859 $ - - $ 7,664 $ - - $ 7,223 $ - -
Other Assets $ 3,873 $ - - $ 4,966 $ - - $ 5,784 $ - -
Total Assets $233,278 $ - - $226,580 $ - - $219,002 $ - -
LIABILITIES AND
SHAREHOLDERS'
EQUITY:
INTEREST BEARING
LIABILITIES:
Savings Deposits $ 65,612 $ 1,695 2.58% $ 60,006 $ 1,789 2.98% $ 52,916 $ 2,311 4.37%
(5)
Time Deposits $104,166 $ 4,895 4.70% $111,771 $ 6,058 5.42% $117,864 $ 8,132 6.90%
Federal Funds
Purchased and
Other Interest
Bearing
Liabilities $ 21,204 $ 671 3.16% $ 17,786 $ 657 3.69% $ 12,689 $ 741 5.84%
Total Interest
Bearing
Liabilities $190,982 $ 7,261 3.80% $189,563 $ 8,504 4.49% $183,469 $11,184 6.10%
NON-INTEREST
BEARING
LIABILITIES:
Demand Deposits $ 21,922 $ - - $ 18,695 $ - - $ 17,382 $ - -
Other
Liabilities $ 1,908 $ - - $ 1,827 $ - - $ 2,306 $ - -
Total
Liabilities $214,812 $ - - $210,085 $ - - $203,157 $ - -
SHAREHOLDERS'
EQUITY $ 18,466 $ - - $ 16,495 $ - - $ 15,845 $ - -
</TABLE>
<PAGE>
<PAGE>18
<TABLE>
SUMMARY - AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS (continued)
<CAPTION>
(FIRST CITIZENS NATIONAL BANK)
Monthly Average Balances and Interest Rates
(in thousands)
1993 1992 1991
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $233,278 $ - - $226,580 $ - - $219,002 $ - -
NET INTEREST
INCOME $ - $10,463 - $ - $ 9,777 - $ - $ 9,289 -
NET YIELD ON
AVERAGE EARNING
ASSETS $ - $ - 4.91% $ - $ - 4.74% $ - $ - 4.67%
</TABLE>
(1) Loan totals are shown net of interest collected, not earned and
loan loss reserves.
(2) Fee Income is included in interest income and the computations
of the yield on loans. Overdraft Fee Income is excluded from the
totals.
(3) Includes loans on nonaccrual status.
(4) Interest and rates on securities which are non-taxable for Federal
Income Tax purposes are presented on a taxable equivalent basis.
(5) Includes Insured Money Fund, NOW, club accounts, and other savings.
<PAGE>
<PAGE>19
<TABLE>
<CAPTION>
VOLUME/RATE ANALYSIS
(First Citizens 1993 Compared to 1992 1992 Compared to 1991
National Bank) Due to Changes in: Due to Changes in:
Total Total
Average Average Increase Average Average Increase
Volume Rate (Decrease) Volume Rate (Decrease)
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Earned On:
Loans $ 721 $ (843) $ (122) $ 37 $(1,891) $(1,854)
Taxable Investments $ 42 $ (485) $ (443) 530 (688) (158)
Tax Exempt Investment
Securities $ 258 $ (69) $ 189 58 (94) (36)
Interest Bearing
Deposits with Other
Banks 6 0 6 (7) 0 (7)
Federal Funds Sold and
Securities purchased
under agreements to
resell (170) (12) (182) 4 (135) (131)
Lease Financing (3) (2) (5) (5) (1) (6)
TOTAL INTEREST EARNING
ASSETS $ 854 (1,411) (557) $ 617 (2,809) (2,192)
Interest Paid On:
Savings Deposits 167 (261) (94) 310 (832) (522)
Time Deposits (412) (751) (1,163) (420) (1,654) (2,074)
Federal Funds Purchased
and Securities Sold
Under Agreement to
Repurchase 126 (112) 14 298 (382) (84)
TOTAL INTEREST BEARING
LIABILITIES $ (119) (1,124) (1,243) $ 188 (2,868) (2,680)
INTEREST EARNINGS $ 973 (287) 686 $ 429 59 488
</TABLE>
The preceding table summarizes average interest earning assets and
interest bearing liabilities including average yields for each category.
Total Interest Earning Assets increased $6,715,000 or 3.25% and $7,473,000
or 3.76% and $4,574,000 or 2.36% when comparing 1993, 1992 and 1991
respectively. Total Interest Bearing Liabilities increased $1,419,000 or
.75% and $6,094,000 or 3.32% when analyzing the same time periods. Total
Interest Earning Assets averaged $213,173,000 at an average rate of 8.31%
in 1993 while Total Interest Bearing Liabilities averaged $190,982,000 at
an average rate of 3.80%. Net Yield on Average Earning Assets was 4.91% in
1993, 4.74% in 1992, and 4.67% in 1991.
<PAGE>
<PAGE>20
LOAN PORTFOLIO ANALYSIS
COMPOSITION OF LOANS
December 31
(in thousands)
1993 1992 1991 1990 1989
Real Estate Loans:
Construction $ 7,675 $ 5,272 $ 4,879 $ 5,526 $ 6,096
Mortgage $ 84,801 $ 79,376 $76,500 $74,039 $66,696
Commercial, Financial
and Agricultural Loans $ 34,547 $ 33,931 $33,089 $29,786 $30,140
Installment Loans to
Individuals $ 15,901 $ 15,077 $15,901 $17,130 $16,507
Other Loans $ 6,398 $ 2,005 $ 2,697 $ 3,835 $ 4,060
TOTAL LOANS $149,322 $135,661 $133,066 $130,316 $123,499
CHANGES IN LOAN CATEGORIES
December 31, 1993 as compared to December 31, 1992
(in thousands)
% of Increase Amount of Increase
Loan Category (Decrease) (Decrease)
Real Estate 9.25% $ 7,828
Commercial, Financial
and Agricultural 1.82% $ 616
Installment Loans to
Individuals 5.47% $ 824
Other Loans 219.10% $ 4,393
TOTAL LOANS 10.07% $13,661
Improved earnings resulted from several factors, one of which was the
ability to increase loan portfolio totals in excess of $13 million from
1992 to 1993. Low interest rates prompted consumer refinancing of existing
mortgages, adding significantly to the mortgage loan portfolio. In
addition, commercial customers secured outstanding debt with real estate to
take advantage of the lower rates and to provide longer repayment terms.
Growth in the loan portfolio exceeded budget projections for 1993. The
bank's strategic plan calls for loan officers to aggressively seek quality
new loan business. The local economy continues to perform better than other
areas in Tennessee as a result of diversification. Several unrelated
industries and an excellent agricultural base provide stability not present
in less diversified economies. The loan portfolio consists of quality
diversified assets with real estate loans comprising 62%, commercial,
financial and agricultural 23%, and installment and all others 15%. Total
real estate loans outstanding as of 12/31/92 were $84,801,000.
Approximately 55% of this total are residential in nature and the remaining
45% are commercial and agricultural property.
The average yield on loans of First Citizens National Bank for the
years indicated are as follows:
1993 - 9.46%
1992 - 10.05%
1991 - 11.34%
1990 - 12.82%
1989 - 12.76%
<PAGE>
<PAGE>21
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
Due after
Due in one one year but Due after
year or less within five years five years
(in thousands)
Real Estate $12,820 $69,110 $10,546
Commercial, Financial
and Agricultural $16,324 $16,692 $ 1,531
All Other Loans $ 5,357 $13,331 $ 3,611
TOTALS $34,501 $99,133 $15,688
Loans with Maturities After One Year for which:
(in thousands)
Interest Rates are Fixed or Predetermined $86,778
Interest Rates are Floating or Adjustable $28,043
Managing interest rate risk is a primary objective of asset-liability
management. One tool utilized by First Citizens to ensure market rate
return is variable rate loans. Loans totaling $62,544,000 (42% of total
portfolio) are subject to repricing within one year or carry a variable
interest rate. This total is down approximately $10 million from year end,
1992. Loan maturities in the one to five year category increased from
$75,426,000 at 12/31/92 to $99,133,000 at 12/31/93 due to customers demand
to lock in fixed interest rates for a longer period of time. While growth
in the portfolio is an objective, our first priority is ensuring credit
quality. Management considers the portfolio composition to be diversified,
with no concentrations in any one industry.
NON-PERFORMING LOANS
Nonaccrual, Restructured and Past Due Loans and Foreclosed Properties
(First Citizens National Bank)
December 31
(in thousands)
1993 1992 1991 1990 1989
Nonaccrual Loans $1,079 $1,743 $2,058 $1,958 $ 444
Restructured Loans 0 0 0 0 0
Foreclosed Property
Other Real Estate, 98 550 884 1,247 1,597
Other Repossessed Assets 0 0 0 13 24
Total Nonperforming Assets $1,177 $2,293 $2,942 $3,218 $2,065
Loans and leases 90 days
Past due and still
accruing interest $ 322 $ 176 $1,029 $ 877 $ 673
Nonperforming assets as a
percent of loans and
leases plus foreclosed
property at end of year* .79% 1.71% 2.20% 2.45% 1.65%
Allowance as a percent of:
Nonperforming assets 142.40% 74.27% 65.81% 59.48% 66.39%
Nonperforming assets and
loans 90 days past due 111.81% 68.98% 48.76% 46.74% 50.07%
Gross Loans 1.12% 1.27% 1.46% 1.47% 1.11%
<PAGE>
<PAGE>22
Addition to Reserve as a
percent of Net
Charge-Offs 93.69% 63.82% 103.86% 142.49% 82.10%
Loans and leases 90 days
past due as a percent of
loans and leases at year
end* .22% .13% .78% .67% .54%
Recoveries as a percent of
Gross Charge-Offs 28.79% 36.17% 26.64% 10.75% 44.01%
*Net of unearned income
Interest income on loans is recorded on an accrual basis. The accrual
of interest is discontinued on all loans, except consumer loans, which
become 90 days past due, unless the loan is well secured and in the process
of collection. Consumer loans which become past due 90 to 120 days are
charged to the allowance for loan losses. The gross interest income that
would have been recorded for the twelve months ending 12/31/92 if all loans
reported as non-accrual had been current in accordance with their original
terms and had been outstanding throughout the period is $102,000. Interest
income on loans reported as ninety days past due and on interest accrual
status was $30,000 for 1993. Loans on which terms have been modified to
provide for a reduction of either principal or interest as a result of
deterioration in the financial position of the borrower are considered to
be "Restructured Loans". First Citizens has no Restructured Loans for the
period being reported. Total Non-Performing Assets have consistently
decreased since 1991. As of December, 1993, non-performing loans are at
the lowest level since 1985. Total assets in this category as a percent of
loans and leases plus foreclosed property was .79% in 1993, 1.71% in 1992,
and 2.20% in 1991.
Certain loans contained on the bank's Internal Problem Loan List are
not included in the listing of non-accrual, past due or restructured loans.
Management is confident that, although certain of these loans may pose
credit problems, any potential for loss has been provided for by specific
allocations to the Loan Loss Reserve Account. Loan officers are required
to develop a "Plan of Action" for each problem loan within their portfolio.
Adherence to each established plan is monitored by Loan Administration and
re-evaluated at regular intervals for effectiveness.
LOAN LOSS EXPERIENCE & RESERVE FOR LOAN LOSSES (in thousands)
1993 1992 1991 1990 1989
Average Net Loans
Outstanding $141,664 $134,514 $134,230 $126,083 $118,139
Balance of Reserve
for Loan Losses
at Beginning of
Period $ 1,703 $ 1,936 $ 1,914 $ 1,371 $ 1,412
Loan Charge-Offs $ (601) $ (1,009) $ (777) $ (1,432) $ (409)
Recovery of Loans
Previously Charged Off $ 173 $ 365 $ 207 $ 154 $ 180
Net Loans Charged Off $ (428) $ (644) $ (570) $ (1,278) $ (229)
Additions to Reserve
Charged to Operating
Expense $ 401 $ 411 $ 592 $ 1,821 $ 188
Balance at End of
Period $ 1,676 $ 1,703 $ 1,936 $ 1,914 $ 1,371
<PAGE>
<PAGE>23
Ratio of Net Charge-
Offs to Average Net
Loans Outstanding .30% .48% .43% 1.01% .19%
The allowance for possible loan losses is determined by management and
approved by the Board based on previous loan loss experience, existing and
anticipated economic conditions, composition and volume of the loan
portfolio and the level of non-performing assets. A quarterly analysis is
presented to the Board in order that a determination may be made concerning
the sufficiency of the reserves.
The balance of the Loan Loss Reserve account at 12/31/93 was
$1,676,000 representing 1.12% of total loans outstanding and a 15.00%
decrease from the 1991 account balance. Additions to reserve charged
against earnings have reduced significantly since 1990 and are below peer
group levels. Management has adequately provided for potential loan losses
and risk within the bank's loan portfolio. Internal Loan Review performs
an analysis on an annual basis of approximately 75% of the portfolio.
Based on this review, each loan is classified as Pass, Substandard,
Doubtful or Loss. Loans classified as loss are charged monthly against the
Loan Loss Reserve account. Those considered by Loan Review to be
Substandard or Doubtful are included on the bank's internal Problem Loan
List. Problem Loans, as a percentage of total portfolio were 2.92% at
1993, 4.10% at 12/31/92, and 6.57% at 12/31/91.
Quarterly Reports are provided directly to the Board of Directors by
the Loan Review Officer which summarize results of the reviews. New
classifications are analyzed and discussed in detail.
Management estimates the approximate amount of charge-offs for the 12
month period ending 12/31/94 to be as follows:
Domestic Amount
Commercial, Financial & Agricultural $300,000
Real Estate-Construction 0
Real Estate-Mortgage 50,000
Installment Loans to individuals & credit cards 150,000
Lease financing 0
01/01/94 through 12/31/94 Total $500,000
The following table will identify charge-offs by category for the
periods ending December 31 as indicated:
Year Ending December 31
(in thousands)
1993 1992 1991
Charge-offs:
Domestic:
Commercial, Financial & Agricultural $ 415 $ 649 $ 293
Real Estate-Construction 0 0 0
Real Estate-Mortgage 27 115 88
Installment Loans to individuals
& credit cards 159 245 396
Lease financing 0 0 0
Total $ 601 $1,009 $ 777
Recoveries:
Domestic:
Commercial, Financial & Agricultural $ 53 $ 66 $ 97
Real Estate-Construction 0 0 0
Real Estate-Mortgage 11 148 4
Installment Loans to individuals
& credit cards 109 151 106
Lease financing 0 0 0
Total $ 173 $ 365 $ 207
Net Charge-offs $ 428 $ 644 $ 570
<PAGE>
<PAGE>24
COMPOSITION OF INVESTMENT SECURITIES
December 31
(in thousands)
1993 1992 1991 1990 1989
U. S. Treasury &
Government Agencies $42,502 $59,019 $50,919 $43,337 $54,147
State & Political
Subdivisions $12,774 $ 9,300 $ 3,239 $ 7,484 $ 7,522
All Others $ 5,471 $ 6,129 $ 4,944 $ 5,251 $ 5,439
TOTALS $60,747 $74,448 $59,102 $56,072 $67,108
MATURITY AND YIELD ON SECURITIES - DECEMBER 31, 1993
(in thousands)
Maturing Maturing Maturing
Maturing After One Year After Five Years After
Within One Year Within Five Years Within Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
U. S. Treasury
and Government
Agencies $15,400 6.05% $19,532 5.82% $ 3,135 6.48% $ 4,435 6.08%
State and
Political
Subdivisions* $ 1,653 6.72% $ 9,050 6.73% $ 1,971 6.85% $ 100 6.59%
All Others $ 1,900 7.57% $ 3,571 5.31% $ 0 .00% $ 0 .00%
TOTALS $18,953 6.26% $32,153 6.02% $ 5,106 6.62% $ 4,535 6.10%
*Yields on tax free investments are stated herein on a taxable equivalent
basis.
The investment securities portfolio is a major component of First
Citizens' earning assets. It provides a stable long term income stream and
is managed in such a way as to enhance the Company's asset/liability
management program. Investment Securities also serve as collateral for
government and other public funds deposits. Securities contained within
the portfolio consist primarily of U.S. Treasury and other U.S. Government
Agency securities and tax-exempt obligations of states and political
subdivisions. All other investment securities contained therein comprise
approximately 10% of the portfolio.
The investment portfolio, when comparing 1993 to 1992 decreased
approximately $10 million. Since 1989, deposit and capital growth as well
as maturing investments were utilized to fund loan growth. Purchases of
Investments during the third quarter consisted primarily of Tax Free
Municipal Bonds. A 21% increase in tax free investments from 1992 to 1993
is a conscious effort to reduce tax liability in light of increased
earnings.
Maturities within the portfolio are made up of 31.19% within one year
and 52.92% after one year and within five years. Policy provides for 20%
maturities on an annual basis. Management has made a conscious effort to
shorten maturities based on the current interest rate environment and mark
to market rules scheduled to take effect 1/1/94. Beginning in 1994, the
portfolio will be structured to insure that future sales of securities
prior to maturity will be accomplished from either the Trading or Held for
Sale accounts.
<PAGE>
<PAGE>25
During the third quarter of 1993, taxable securities totaling
$4,150,000 bearing maturity or call dates in the calendar year 1993 were
sold. The sale resulted in gross profits of approximately $22,233. Also
sold from the investment portfolio in February, 1993 was a CMO PAC with a
par value of $1,022,500 sold with a net loss of $3,280.32. These
securities were sold due to interest rate risk in a rising rate environment
if held to maturity and to fund loan growth in 1993.
For years ending December 31, 1993, 1992 and 1991 there was no
activity within the trading account. Interest and dividend income was non-
existant for this three year period, with ending balances being zero for
all years under comparison.
Securities in the Held for Sale Account consisted of 24,000 shares of
FHLMC Preferred Stock having a book value of $600,000. Reported in Held
for Sale at 6/30/93 was 12,000 shares of FHLMC Preferred stock valued at
$300,000. An additional 12,000 shares were purchased and placed in this
account during the third quarter 1993. The average and ending balances in
the Held for Sale Account for 12/31/93 were $500,000 and $600,000
respectively. During the fourth quarter, 1993, there were no transfers
between the Trading, Held for Sale, and Investment Accounts.
Gains/Losses reflected in year-end income statements attributable to
trading account securities:
Year Ended
12/31 Gains Losses Net
1993 $ 0.00 $ 0.00 $ 0.00
1992 $ 0.00 $ 0.00 $ 0.00
1991 $ 3,125.00 $ 0.00 $ 3,125.00
The following table allocates by category unrealized Gains/Losses
within the portfolio as of December 31, 1993 (in thousands):
UNREALIZED NET
GAINS LOSSES GAINS/LOSSES
U.S. TREASURY
SECURITIES $ 227 $ 0 $ 227
OBLIGATIONS OF U.S.
GOVERNMENT AGENCIES
AND CORPORATIONS $ 516 $ 35 $ 481
OBLIGATIONS OF STATES
AND POLITICAL
SUBDIVISIONS $ 205 $ 27 $ 178
FEDERAL RESERVE AND
CORPORATE STOCK $ 156 $ 0 $ 156
TOTALS $ 1,104 $ 62 $ 1,042
<PAGE>
<PAGE>26
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is the ability to meet the needs of our customer base for
loans and deposit withdrawals by maintaining assets which are convertible
to cash equivalents with minimal exposure to interest rate risks. The
liquidity ratio which is determined by a comparison of net liquid assets to
net liabilities remains between 10% and 15%. The stability of our deposit
base, sound asset/liability management, a strong capital base and quality
assets assure adequate liquidity. The low interest rate environment has
placed pressure on the ability to retain funds in maturing certificates of
deposit. Many of our customers are, for the first time, looking outside
the traditional bank investment options and investing in annuities, mutual
funds and stocks. Deposits of $100,000 and over tend to be much more
volatile and interest sensitive than smaller consumer deposits which make
up the major portion of our deposit base.
Another factor which must be addressed in the current interest rate
situation is the inclination of our customers to lock in rates for longer
periods of time. In excess of $24,000,000 in loans shifted from less than
one year maturity to the one to five year category. Sound asset/liability
management principals would dictate that investments should and do follow
this trend. To address liquidity concerns, First Citizens became a member
of the Federal Home Loan Bank, thereby opening up an additional liquidity
source should the need arise.
Interest rate sensitivity varies with different types of interest-
earning assets and interest-bearing liabilities. Overnight federal funds,
on which rates change daily, and loans which are tied to the prime rate are
much more sensitive than long-term investment securities and fixed rate
loans. The shorter term interest sensitive assets and liabilities are the
key to measurement of the interest sensitivity gap. Minimizing this gap is
a continual challenge in the present interest rate environment. This is
the primary objective of the asset/liability management program.
The following condensed gap report provides an analysis of interest
rate sensitivity of earning assets and interest bearing liabilities. First
Citizens Asset/Liability Management Policy provides that the cumulative gap
as a percent of assets shall not exceed 10% for the three to six months,
six to twelve months. The Cumulative Gap position in the one to five year
category shall not exceed 20%. As evidenced by the following table, our
current position is significantly below this level, with annual income
exposure determined to be less than $100,000.
<PAGE>
<PAGE>27
<TABLE> CONDENSED GAP REPORT
12/31/93 CURRENT BALANCES
(in thousands)
<CAPTION>
DAILY 0-1 1-2 2-3 3-6 6-12
TOTAL FLOATING MONTHS MONTHS MONTHS MONTHS MONTHS
<S> <C> <C> <C> <C> <C> <C> <C>
CASH AND DUE FROM:
CURRENCY AND COIN 1,880 - - - - - -
DUE FROM BANKS 1,838 - - - - - -
CASH ITEMS 4,724 - - - - - -
TOTAL CASH & DUE FROM 8,442 - - - - - -
INVESTMENTS:
US TREASURIES 16,613 - 1,000 3,000 - 2,000 4,000
US AGENCIES 25,889 - 2,496 1,000 500 1,400 3,950
MUNICIPALS 12,774 - 200 250 - 150 1,053
HELD FOR SALE 600 600 - - - - -
CORP & OTHERS 3,647 - - - - - 1,300
FEDERAL HOME LOAN BANK 1,224 - - - - - -
TOTAL INVESTMENTS 60,747 600 3,696 4,250 500 3,550 10,303
LOANS:
COMMERCIAL FIXED 19,612 - 1,442 528 938 1,256 4,815
COMMERCIAL VARIABLE 14,935 14,935 - - - - -
REAL ESTATE-VARIABLE 21,078 21,078 - - - - -
REAL ESTATE FIXED 65,821 - 815 664 1,538 1,442 2,149
HOME EQUITY LOANS 4,586 4,586 - - - - -
SEC MORTGAGE 992 - 992 - - - -
INSTALLMENT LOANS 15,880 - 208 155 193 655 1,328
INSTALLMENT VARIABLE 21 21 - - - - -
FLOOR PLAN 901 - 901 - - - -
CREDIT CARDS 1,756 - - - - - 1,756
OVERDRAFTS 149 - 149 - - - -
NON-ACCRUAL LOANS 1,079 - - - - - -
FHLB LOANS 2,513 - - - - - -
TOTAL LOANS 149,323 40,620 4,507 1,347 2,669 3,353 10,048
LOAN LOSS RESERVE 1,676 - - - - - -
NET LOANS 147,647 40,620 4,507 1,347 2,669 3,353 10,048
FED FUNDS SOLD 5,200 5,200 - - - - -
TOTAL FED FUNDS SOLD 5,200 5,200 - - - - -
TOTAL EARNING ASSETS 213,594 46,420 8,203 5,597 3,169 6,903 20,351
OTHER ASSETS:
BUILDING, F&F & LAND 7,627 - - - - - -
OTHER REAL ESTATE 98 - - - - - -
OTHER ASSETS 3,062 - - - - - -
TOTAL OTHER ASSETS 10,787 - - - - - -
TOTAL ASSETS 232,823 46,420 8,203 5,597 3,169 6,903 20,351
DEMAND DEPOSITS:
BANKS 39 - - - - - -
DEMAND DEPOSITS 22,392 - - - - - -
OFFICIAL CHECKS 1 - - - - - -
TOTAL DEMAND 22,432 - - - - - -
SAVINGS ACCOUNTS:
REGULAR SAVINGS 18,007 - - - - - -
NOW ACCOUNT 27,154 - - - - - -
IMF-MMDA 12,239 - - - - - -
HIGH YIELD ACCOUNT 3,188 - 3,188 - - - -
GENERATIONS GOLD 5,722 - - - - - -
TOTAL SAVINGS 66,310 - 3,188 - - - -
</TABLE>
<PAGE>
<PAGE>28
CONDENSED GAP REPORT
12/31/93 CURRENT BALANCES
(in thousands)
1-2 2+
YEARS YEARS
CASH AND DUE FROM:
CURRENCY AND COIN - 1,880
DUE FROM BANKS - 1,838
CASH ITEMS - 4,724
TOTAL CASH & DUE FROM - 8,442
INVESTMENTS:
US TREASURIES 2,000 4,613
US AGENCIES 1,993 14,550
MUNICIPALS 2,305 8,816
HELD FOR SALE - -
CORP & OTHERS 1,006 1,341
FEDERAL HOME LOAN BANK - 1,224
TOTAL INVESTMENTS 7,304 30,544
LOANS:
COMMERCIAL FIXED 1,593 9,040
COMMERCIAL VARIABLE - -
REAL ESTATE-VARIABLE - -
REAL ESTATE FIXED 6,204 53,009
HOME EQUITY LOANS - -
SEC MORTGAGE - -
INSTALLMENT LOANS 3,844 9,497
INSTALLMENT VARIABLE - -
FLOOR PLAN - -
CREDIT CARDS - -
OVERDRAFTS - -
NON-ACCRUAL LOANS - 1,079
FHLB LOANS - 2,513
TOTAL LOANS 11,641 75,138
LOAN LOSS RESERVE - 1,676
NET LOANS 11,641 73,462
FED FUNDS SOLD - -
TOTAL FED FUNDS SOLD - -
TOTAL EARNING ASSETS 18,945 104,006
OTHER ASSETS:
BUILDING, F&F & LAND - 7,627
OTHER REAL ESTATE - 98
OTHER ASSETS - 3,062
TOTAL OTHER ASSETS - 10,787
TOTAL ASSETS 18,945 123,235
DEMAND DEPOSITS:
BANKS - 39
DEMAND DEPOSITS - 22,392
OFFICIAL CHECKS - 1
TOTAL DEMAND - 22,432
SAVINGS ACCOUNTS:
REGULAR SAVINGS - 18,007
NOW ACCOUNT - 27,154
IMF-MMDA - 12,239
HIGH YIELD ACCOUNT - -
GENERATIONS GOLD - 5,722
TOTAL SAVINGS - 63,122
<PAGE>
<PAGE>29
<TABLE> CONDENSED GAP REPORT
12/31/93 CURRENT BALANCES
(in thousands)
<CAPTION>
DAILY 0-1 1-2 2-3 3-6 6-12
TOTAL FLOATING MONTHS MONTHS MONTHS MONTHS MONTHS
<S> <C> <C> <C> <C> <C> <C> <C>
TIME DEPOSITS:
FLEX-CD 72,205 - 9,853 6,988 8,175 24,400 9,337
LARGE CD-FLEX 17,150 - 3,133 1,842 1,795 5,200 2,388
IRA-FLOATING 265 265 - - - - -
IRA-FIXED 15,505 - 726 719 536 2,202 2,680
CHRISTMAS CLUB 65 - - - - - 65
TOTAL TIME 105,190 265 13,712 9,549 10,506 31,802 14,470
TOTAL DEPOSITS 193,932 265 16,900 9,549 10,506 31,802 14,470
SHORT TERM BORROWINGS:
TT&L 698 - 698 - - - -
SECURITIES SOLD-SWEEP 10,022 10,022 - - - - -
SECURITIES SOLD-FIXED 6,892 - 1,073 2,107 300 1,077 1,454
TOTAL SHORT TERM BORR. 17,612 10,022 1,771 2,107 300 1,077 1,454
OTHER LIABILITIES:
ACCRUED INT. PAYABLE 1,369 - - - - - -
OTHER LIABILITIES 404 - - - - - -
TOTAL OTHER LIABILITIES 1,773 - - - - - -
TOTAL LIABILITIES 213,317 10,287 18,671 11,656 10,806 32,879 15,924
CAPITAL:
COMMON STOCK 2,000 - - - - - -
SURPLUS 4,000 - - - - - -
UNDIVIDED PROFITS 13,506 - - - - - -
TOTAL CAPITAL 19,506 - - - - - -
TOTAL LIAB'S & CAPITAL 232,823 10,287 18,671 11,656 10,806 32,879 15,924
GAP (SPREAD) - 36,133 -10,468 -6,059 -7,637 -25,976 4,427
GAP % TOTAL ASSETS - 15.52 -4.50 -2.60 -3.28 -11.16 1.90
CUMULATIVE GAP - 36,133 25,665 19,606 11,969 -14,007 -9,580
CUM. GAP % TOTAL ASSETS - 15.52 11.02 8.42 5.14 -6.02 -4.11
SENSITIVITY RATIO - 4.51 1.89 1.48 1.23 0.83 0.90
</TABLE>
<PAGE>
<PAGE>30
CONDENSED GAP REPORT
12/31/93 CURRENT BALANCES
(in thousands)
1-2 2+
YEARS YEARS
TIME DEPOSITS:
FLEX-CD 7,304 6,148
LARGE CD-FLEX 1,342 1,450
IRA-FLOATING - -
IRA-FIXED 2,431 6,211
CHRISTMAS CLUB - -
TOTAL TIME 11,077 13,809
TOTAL DEPOSITS 11,077 99,363
SHORT TERM BORROWINGS:
TT&L - -
SECURITIES SOLD-SWEEP - -
SECURITIES SOLD-FIXED 600 281
TOTAL SHORT TERM BORR. 600 281
OTHER LIABILITIES:
ACCRUED INT. PAYABLE - 1,369
OTHER LIABILITIES - 404
TOTAL OTHER LIABILITIES - 1,773
TOTAL LIABILITIES 11,677 101,417
CAPITAL:
COMMON STOCK - 2,000
SURPLUS - 4,000
UNDIVIDED PROFITS - 13,506
TOTAL CAPITAL - 19,506
TOTAL LIAB'S & CAPITAL 11,677 120,923
GAP (SPREAD) 7,268 2,312
GAP % TOTAL ASSETS 3.12 0.99
CUMULATIVE GAP -2,312 -
CUM. GAP % TOTAL ASSETS -0.99 -
SENSITIVITY RATIO 0.98 1.00
<PAGE>
<PAGE>31
<TABLE>
CONDENSED GAP REPORT
12/31/93 CURRENT BALANCES
(in thousands)
<CAPTION>
AVERAGE DAILY 0-1 1-2 2-3 3-6 6-12
RATE FLOATING MONTHS MONTHS MONTHS MONTHS MONTHS
<S> <C> <C> <C> <C> <C> <C> <C>
CASH AND DUE FROM:
CURRENCY AND COIN - - - - - - -
DUE FROM BANKS - - - - - - -
CASH ITEMS - - - - - - -
TOTAL CASH & DUE FROM - - - - - - -
INVESTMENTS:
US TREASURIES 5.64 - 7.03 5.73 - 5.11 6.04
US AGENCIES 6.02 - 6.38 4.50 5.00 5.33 6.64
MUNICIPALS 6.75 - 6.65 6.01 - 7.25 6.86
HELD FOR SALE 7.17 7.17 - - - - -
CORP & OTHERS 6.16 - - - - - 7.74
FEDERAL HOME LOAN BANK 5.35 - - - - - -
TOTAL INVESTMENTS 6.07 7.17 6.57 5.45 5.00 5.28 6.57
LOANS:
COMMERCIAL FIXED 7.47 - 6.68 7.72 7.09 6.83 7.22
COMMERCIAL VARIABLE 7.70 7.70 - - - - -
REAL ESTATE-VARIABLE 7.74 7.74 - - - - -
REAL ESTATE FIXED 8.34 - 7.88 9.23 8.26 9.50 9.27
HOME EQUITY LOANS 7.10 7.10 - - - - -
SEC MORTGAGE 7.00 - 7.00 - - - -
INSTALLMENT LOANS 10.14 - 9.22 9.69 9.26 9.41 10.89
INSTALLMENT VARIABLE 7.50 7.50 - - - - -
FLOOR PLAN 7.50 - 7.50 - - - -
CREDIT CARDS 14.20 - - - - - 14.20
OVERDRAFTS 0.00 - 0.00 - - - -
NON-ACCRUAL LOANS - - - - - - -
FHLB LOANS 7.50 - - - - - -
TOTAL LOANS 8.20 7.65 7.02 8.69 7.92 8.48 9.36
LOAN LOSS RESERVE - - - - - - -
NET LOANS 8.30 7.65 7.02 8.69 7.92 8.48 9.36
FED FUNDS SOLD 3.00 3.00 - - - - -
TOTAL FED FUNDS SOLD 3.00 3.00 - - - - -
TOTAL EARNING ASSETS 7.54 7.12 6.82 6.23 7.46 6.84 7.95
OTHER ASSETS:
BUILDING, F&F & LAND - - - - - - -
OTHER REAL ESTATE - - - - - - -
OTHER ASSETS - - - - - - -
TOTAL OTHER ASSETS - - - - - - -
TOTAL ASSETS 6.91 7.12 6.82 6.23 7.46 6.84 7.95
DEMAND DEPOSITS:
BANKS - - - - - - -
DEMAND DEPOSITS - - - - - - -
OFFICIAL CHECKS - - - - - - -
TOTAL DEMAND - - - - - - -
SAVINGS ACCOUNTS:
REGULAR SAVINGS 2.76 - - - - - -
NOW ACCOUNT 2.46 - - - - - -
IMF-MMDA 2.73 - - - - - -
HIGH YIELD ACCOUNT 2.73 - 2.73 - - - -
GENERATIONS GOLD 2.16 - - - - - -
TOTAL SAVINGS 2.58 - 2.73 - - - -
</TABLE>
<PAGE>
<PAGE>32
CONDENSED GAP REPORT
12/31/93 CURRENT BALANCES
(in thousands)
1-2 2+
YEARS YEARS
CASH AND DUE FROM:
CURRENCY AND COIN - -
DUE FROM BANKS - -
CASH ITEMS - -
TOTAL CASH & DUE FROM - -
INVESTMENTS:
US TREASURIES 5.10 5.40
US AGENCIES 5.10 6.12
MUNICIPALS 6.89 6.72
HELD FOR SALE - -
CORP & OTHERS 5.16 5.39
FEDERAL HOME LOAN BANK - 5.35
TOTAL INVESTMENTS 5.67 6.12
LOANS:
COMMERCIAL FIXED 8.23 7.70
COMMERCIAL VARIABLE - -
REAL ESTATE-VARIABLE - -
REAL ESTATE FIXED 9.55 8.13
HOME EQUITY LOANS - -
SEC MORTGAGE - -
INSTALLMENT LOANS 11.57 9.55
INSTALLMENT VARIABLE - -
FLOOR PLAN - -
CREDIT CARDS - -
OVERDRAFTS - -
NON-ACCRUAL LOANS - -
FHLB LOANS - 7.50
TOTAL LOANS 10.03 8.12
LOAN LOSS RESERVE - -
NET LOANS 10.03 8.31
FED FUNDS SOLD - -
TOTAL FED FUNDS SOLD - -
TOTAL EARNING ASSETS 8.35 7.66
OTHER ASSETS:
BUILDING, F&F & LAND - -
OTHER REAL ESTATE - -
OTHER ASSETS - -
TOTAL OTHER ASSETS - -
TOTAL ASSETS 8.35 6.47
DEMAND DEPOSITS:
BANKS - -
DEMAND DEPOSITS - -
OFFICIAL CHECKS - -
TOTAL DEMAND - -
SAVINGS ACCOUNTS:
REGULAR SAVINGS - 2.76
NOW ACCOUNT - 2.46
IMF-MMDA - 2.73
HIGH YIELD ACCOUNT - -
GENERATIONS GOLD - 2.16
TOTAL SAVINGS - 2.57
<PAGE>
<PAGE>33
<TABLE>
CONDENSED GAP REPORT
12/31/93 CURRENT BALANCES
(in thousands)
<CAPTION>
DAILY 0-1 1-2 2-3 3-6 6-12
TOTAL FLOATING MONTHS MONTHS MONTHS MONTHS MONTHS
<S> <C> <C> <C> <C> <C> <C> <C>
TIME DEPOSITS:
FLEX-CD 4.61 - 4.37 4.49 4.21 4.46 4.33
LARGE CD-FLEX 4.44 - 3.43 3.74 4.10 4.63 4.40
IRA-FLOATING 3.00 3.00 - - - - -
IRA-FIXED 5.11 - 4.05 4.22 5.05 5.02 3.97
CHRISTMAS CLUB 2.50 - - - - - 2.50
TOTAL TIME 4.65 3.00 4.14 4.33 4.23 4.53 4.26
TOTAL DEPOSITS 3.40 3.00 3.87 4.33 4.23 4.53 4.26
SHORT TERM BORROWINGS:
TT&L 2.10 - 2.10 - - - -
SECURITIES SOLD-SWEEP 2.48 2.48 - - - - -
SECURITIES SOLD-FIXED 4.04 - 4.02 3.10 3.75 4.20 4.60
TOTAL SHORT TERM BORR. 3.08 2.48 3.26 3.10 3.75 4.20 4.60
OTHER LIABILITIES:
ACCRUED INT. PAYABLE - - - - - - -
OTHER LIABILITIES - - - - - - -
TOTAL OTHER LIABILITIES - - - - - - -
TOTAL LIABILITIES 3.35 2.50 3.81 4.10 4.22 4.52 4.29
CAPITAL:
COMMON STOCK - - - - - - -
SURPLUS - - - - - - -
UNDIVIDED PROFITS - - - - - - -
TOTAL CAPITAL - - - - - - -
TOTAL LIAB'S & CAPITAL 3.07 2.50 3.81 4.10 4.22 4.52 4.29
GAP (SPREAD) 3.85 4.63 3.00 2.13 3.24 2.32 3.65
GAP % TOTAL ASSETS
CUMULATIVE GAP
CUM. GAP % TOTAL ASSETS
SENSITIVITY RATIO
</TABLE>
<PAGE>
<PAGE>34
CONDENSED GAP REPORT
12/31/93 CURRENT BALANCES
(in thousands)
1-2 2+
YEARS YEARS
TIME DEPOSITS:
FLEX-CD 5.26 5.90
LARGE CD-FLEX 5.35 6.44
IRA-FLOATING - -
IRA-FIXED 5.23 5.81
CHRISTMAS CLUB - -
TOTAL TIME 5.26 5.92
TOTAL DEPOSITS 5.26 2.45
SHORT TERM BORROWINGS:
TT&L - -
SECURITIES SOLD-SWEEP - -
SECURITIES SOLD-FIXED 5.08 5.80
TOTAL SHORT TERM BORR. 5.08 5.80
OTHER LIABILITIES:
ACCRUED INT. PAYABLE - -
OTHER LIABILITIES - -
TOTAL OTHER LIABILITIES - -
TOTAL LIABILITIES 5.25 2.42
CAPITAL:
COMMON STOCK - -
SURPLUS - -
UNDIVIDED PROFITS - -
TOTAL CAPITAL - -
TOTAL LIAB'S & CAPITAL 5.25 2.03
GAP (SPREAD) 3.10 4.44
GAP % TOTAL ASSETS
CUMULATIVE GAP
CUM. GAP % TOTAL ASSETS
SENSITIVITY RATIO
<PAGE>
<PAGE>35
RETURN ON EQUITY AND ASSETS
FIRST CITIZENS BANCSHARES, INC.
1993 1992 1991 1990 1989
Percentage of Net Income to:
Average Total Assets 1.17% .95% .89% .60% .59%
Average Shareholders Equity 13.48% 11.79% 11.65% 8.43% 8.40%
Percentage of Dividends Declared
Per Common Share to Net Income
Per Common Share 25.62% 27.67% 28.86% 42.57% 43.04%
Percentage of Average Shareholders'
Equity to Average Total Assets 8.71% 8.07% 7.60% 7.27% 7.00%
Improved earnings performance is evident when reviewing the following
table. The "domino effect" is seen in return on assets and equity, and in
improved capital ratios. The company's Strategic Plan addresses objectives
to sustain improved earnings, maintain a quality loan portfolio, and to
maintain market share by providing quality customer service. Management of
the Bank is committed to improving and maintaining earnings that are
comparable to peer banks. Ratios comparing net income to average total
assets and average shareholders equity indicate improvement from prior
years. Return on Assets at 12/31/93 was 1.17%.
Total Shareholders' equity (including Loan Loss Reserve) of First
Citizens Bancshares as of 12/31/93 was $21,700,477 compared to $19,308,975
at 12/31/92. Total Capital (excluding Reserve for Loan Losses) as a
percentage of total assets is presented in the following table for years
indicated.
CAPITAL RESOURCES/TOTAL ASSETS - YEAR-END TOTALS
FIRST CITIZENS BANCSHARES, INC.
1993 1992 1991 1990 1989
9.24% 8.05% 7.75% 7.34% 6.80%
Cash Dividends to Shareholders for 1993 and 1992 were $2.10 and $2.30
per share. This compares to dividends of $2.225 in 1990 and $2.10 per
share paid each year from 1987 thru 1989. In September, 1993 a 2.5 for 1
stock split on the Common Capital Stock of Bancshares was declared to
holders of record as October 15, 1993. The number of shares outstanding
increased proportionately with changes to the capital account. In
addition, a 10% stock dividend was declared payable December 15, 1992 which
provided for the issuance of one share of stock for each 10 shares owned;
with payment for fractional shares being made in cash. 25,158 shares were
issued as a result of this dividend. In 1989, a stock dividend was
declared payable December 15, 1989 which provided for the issuance of one
share of stock for each twenty shares owned. Fractional shares were also
paid in cash. 11,826 shares were issued as a result. Total shares
outstanding were 706,656 at 12/31/93 and 279,247 at 12/31/92. An amendment
to the Articles of Association ratified by the Shareholders in April, 1989
approved an increase in the number of shares authorized from 410,000 to
750,000.
Risk-based capital focuses primarily on broad categories of credit
risk and incorporates elements of transfer, interest rate and market risks.
The calculation of risk-based capital ratio is accomplished by dividing
qualifying capital by weighted risk assets. Effective January 1, 1993, the
minimum risk-based capital ratio increased to 8.00%. At least one-half or
4.00% must consist of core capital (Tier 1), and the remaining 4.00% may be
in the form of core (Tier 1) or supplemental capital (Tier 2). Tier 1
capital/core capital consists of common stockholders equity, qualified
perpetual stock and minority interests in consolidated subsidiaries.
<PAGE>
<PAGE>36
Tier 2 Capital/Supplementary capital consists of the allowance for loan and
lease losses, perpetual preferred stock, term subordinated debt, and other
debt and stock instruments.
Bancshares has historically maintained capital in excess of minimum
levels established by the Federal Reserve Board. The risk-based capital
ratio for Bancshares and First Citizens National Bank as of 12/31/93 was
13.88 percent and 12.73 percent respectively, significantly above the 8.0
percent level as required by regulation. With the exception of the Reserve
for Loan and Lease Losses, all capital is Tier 1 level. Growth in capital
will be maintained through retained earnings. There is no reason to assume
that income levels will not be sufficient to maintain an adequate capital
ratio.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Board of Directors
First Citizens Bancshares, Inc.
Dyersburg, Tennessee 38024
We have audited the accompanying consolidated balance sheets of First
Citizens Bancshares, Inc., and subsidiary as of December 31, 1993 and 1992,
and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years ended December 31, 1993. These
financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of First Citizens
Bancshares, Inc. and Subsidiary as of December 31, 1993 and 1992, and their
results of operations and cash flows for the three years ended December 31,
1993 in conformity with generally accepted accounting principles.
Dyersburg, Tennessee CARMICHAEL, ENOCH & ASSOCIATES
January 25, 1994
<PAGE>
<PAGE>37
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
ASSETS
December 31
1993 1992
Cash and due from banks - Note 12 $ 8,407,663 $ 10,591,316
Federal funds sold 5,200,000 6,700,000
Investment securities - Notes 1 and 2
(market value $61,789,052 at
December 31, 1993, and $75,285,031
at December 31, 1992) 60,747,040 74,447,690
Loans - Notes 1 and 3 (net of unearned income
of $1,065,608 in 1993 and $1,149,319 in
1992) 149,322,178 135,660,731
Less: Allowance for loan losses - Notes 1
and 4 1,676,133 1,703,349
Net Loans 147,646,045 133,957,382
Premises and equipment - Notes 1 and 5 7,778,246 8,214,425
Accrued interest receivable 2,572,669 2,857,664
Other assets - Notes 1 and 6 2,540,369 3,128,812
TOTAL ASSETS $234,892,032 $239,897,289
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits: Note 7
Demand $ 22,324,092 $ 21,302,536
Time 105,189,285 105,759,874
Savings 66,309,872 66,396,924
Total Deposits 193,823,249 193,459,334
Securities sold under agreement to repurchase 16,914,142 25,133,919
Long-term debt - Note 15 30,021 162,964
Notes payable of Employee Stock Ownership
Plan - Note 18 160,000
Other liabilities 2,424,143 1,672,097
Total Liabilities 213,191,555 220,588,314
Stockholders' Equity:
Common stock, $10 Par Value:
Authorized - 750,000 shares:
Issued and Outstanding -
706,656 shares in 1993
279,247 shares in 1992 7,066,560 2,792,470
Surplus 2,356,082 6,394,048
Retained earnings 12,338,242 10,282,457
Less treasury stock, at cost 2,024 shares (60,407)
Obligation of Employee Stock Ownership Plan (160,000)
Total Stockholders' Equity 21,700,477 19,308,975
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $234,892,032 $239,897,289
See accompanying notes and accountants' report.
<PAGE>
<PAGE>38
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1993, 1992, and 1991
1993 1992 1991
Interest Income
Interest and fees on loans $14,029,313 $14,289,129 $16,064,641
Interest and dividends on investment
securities:
Taxable 3,499,964 3,994,589 4,170,801
Tax-exempt 447,114 321,501 345,467
Dividends 91,738 19,245 75,961
Other interest income 81,203 257,470 400,039
Lease financing income 6,426 11,182 16,693
Total Interest Income 18,155,758 18,893,116 21,073,602
Interest Expense
Interest on deposits 6,588,376 7,846,697 10,423,725
Interest on long-term debt 26,557 27,836 26,576
Other interest expense 646,021 629,606 741,213
Total Interest Expense 7,260,954 8,504,139 11,191,514
Net Interest Income 10,894,804 10,388,977 9,882,088
Provision for loan losses - Note 4 401,273 411,001 592,110
Net interest income after
provision for loan losses 10,493,531 9,977,976 9,289,978
Other Income
Income from fiduciary activities 521,284 522,540 572,667
Service charges on deposit accounts 439,756 434,058 469,287
Other service charges, commissions,
and fees 771,024 559,284 458,104
Securities gains (losses) - Net - Note 2 31,758 159,820 2,077
Other income 316,496 322,311 220,254
Total Other Income 2,080,318 1,998,013 1,722,389
Other Expenses
Salaries and employee benefits - Note 8 4,750,184 4,510,654 4,239,795
Net occupancy expenses 348,702 309,921 358,585
Furniture and equipment expense 135,895 148,616 123,157
Depreciation 798,220 596,221 482,645
Data processing expense 154,670 802,398 990,572
Legal and professional fees 128,574 116,959 94,605
Stationary and office supplies 161,796 172,542 185,730
Other expenses 2,254,641 2,089,716 1,664,046
Total Other Expenses 8,732,682 8,747,027 8,139,135
Net income before income taxes 3,841,167 3,228,962 2,873,232
Provision for income tax expense -
Note 9 1,202,708 1,054,252 912,029
Net income for operations 2,638,459 2,174,710 1,961,203
Cumulative change in accounting
principle - Note 9 125,278
Net Income $ 2,763,737 $ 2,174,710 $1,961,203
Earnings Per Common Share - Note 10:
Net income from operations $ 3.76 $ 3.39 $ 3.08
Net income $ 3.94 $ 3.39 $ 3.08
Weighted average shares outstanding 700,958 640,363 635,121
See accompanying notes and accountants' report.
<PAGE>
<PAGE>39
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1993, 1992, and 1991
Common Retained
Stock Surplus Earnings
Balance, January 1, 1991 $2,540,890 $5,324,833 $ 8,635,612
Net income, year ended December 31, 1991 1,961,203
Cash dividends paid - $2.225 per share (566,395)
Balance, December 31, 1991 2,540,890 5,324,833 10,030,420
Net income, year ended December 31, 1992 2,174,710
Cash dividends paid - $2.30 per share (601,878)
Ten percent stock dividend -
December, 1992 - Note 10 251,580 1,069,215 (1,320,795)
Balance, December 31, 1992 $2,792,470 6,394,048 10,282,457
Net income, year ended December 31, 1993 2,763,737
Cash dividends paid-$2.10 per share (707,952)
Sale of Common Stock 47,110 189,014
Stock Split - Note 10 4,226,980 (4,226,980)
Balance, December 31, 1993 $7,066,560 $2,356,082 $12,338,242
See accompanying notes and accountants' report.
<PAGE>
<PAGE>40
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
Years Ended December 31, 1993, 1992, and 1991
1993 1992 1991
Operating Activities
Net income $ 2,763,737 $ 2,174,710 $1,961,203
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 401,273 411,001 592,110
Provision for losses on other
real estate 3,000 7,600 40,339
Provision for depreciation and
amortization 798,220 596,221 508,319
Amortization of investment
security discounts (25,919) (31,849) (60,702)
Deferred income taxes (175,989) 98,684
(Gains) losses on sales of
other real estate (4,289) (13,903) (60,910)
Realized and unrealized investment
security (gains) losses (31,758) (159,820) (2,077)
(Increase) decrease in accrued
interest receivable 284,995 469,832 (46,297)
Increase (decrease) in accrued
interest payable 29,159 (471,601) (291,991)
(Increase) decrease in other assets 765,721 669,033 (723,182)
Increase (decrease) in other
liabilities 722,887 (757,368) 34,225_
NET CASH PROVIDED BY OPERATING
ACTIVITIES 5,531,037 2,893,856 2,049,721
Investing Activities
Proceeds of maturities of securities 10,826,000 17,618,000 15,010,397
Proceeds from sales of trading and
investment securities 5,300,252 10,096,833 14,009,395
Purchase of trading and investment
securities (2,367,925) (42,868,559) (31,537,312)
Increase in loans - net (14,089,936) (3,237,807) (3,446,209)
Purchases of premises and equipment (362,041) (1,545,185) (551,690)
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES $ (693,650) $(19,936,718) $(6,515,419)
See accompanying notes and accountants' report.
<PAGE>
<PAGE>41
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
Years Ended December 31, 1993, 1992, and 1991
1993 1992 1991
Financing Activities
Net increase (decrease) in demand
deposits, NOW Accounts and
savings accounts $ 450,967 $ 12,169,387 $ 1,120,594
Increase (decrease) in time
deposits - net (87,052) (11,773,657) 2,003,393
Payment of principal on long-term debt (132,943) (130,906) (131,647)
Proceeds from sale of common stock 236,124
Cash dividends paid (707,952) (601,878) (566,395)
Net increase (decrease) in short-term
borrowings (8,219,777) 12,271,124 4,509,753
Treasury stock transactions - net (60,407)
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (8,521,040) 11,934,070 6,935,698
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (3,683,653) (5,108,792) 2,470,000
Cash and cash equivalents at beginning
of year 17,291,316 22,400,108 19,930,108
CASH AND CASH EQUIVALENTS AT
END OF YEAR $13,607,663 $ 17,291,316 $ 22,400,108
Cash payments made for interest and income taxes during the years
presented are as follows:
1993 1992 1991
Interest $7,231,795 $8,975,740 $11,483,505
Income taxes 1,131,310 912,156 1,143,750
See accompanying notes and accountants' report.
<PAGE>
<PAGE>42
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
Note 1 - Summary of Significant Accounting and Reporting Policies
The accounting and reporting policies of First Citizens Bancshares,
Inc. and subsidiary conform to generally accepted accounting
principles. The significant policies are described as follows:
BASIS OF PRESENTATION
The consolidated financial statements include all accounts of First
Citizens Bancshares, Inc. and First Citizens National Bank. First
Citizens Bancshares, Inc.'s investment in its subsidiary shown on
the Parent Company Balance Sheet is stated at equity in the
underlying assets. All inter-company items are eliminated in
consolidation.
BASIS OF ACCOUNTING
The consolidated financial statements are presented using the
accrual basis of accounting.
CASH EQUIVALENTS
Cash equivalents include amounts due from banks which do not bear
interest and federal funds sold. Generally, federal funds are
purchased and sold for one day periods.
SECURITIES
Investment securities are carried at cost, adjusted for
amortization of premiums and accretion of discounts, computed
using the straight-line method, which approximates the interest
method. The adjusted cost of the specific security sold is used to
compute gains or losses on the sale of securities.
Trading account securities are carried at market value. Gains and
losses on sales of trading account securities and market value
adjustments to trading account securities are included in net
securities gains and losses on the consolidated statement of income.
Debt securities are classified, when purchased, as an investment
security or a trading account asset based on management's intent.
Securities which are purchased for resale in the foreseeable future
are categorized as trading account assets while those which
management intends to hold for an extended time or until maturity
are classified as investment securities.
ALLOWANCE FOR LOAN LOSSES
The provision for loan losses which is charged to operations is
based on management's assessment of the quality of the loan
portfolio, current economic conditions and other relevant factors.
In management's judgment, the provision for loan losses will
maintain the allowance for loan losses at an adequate level to
absorb potential loan losses which may exist in the portfolio.
PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated
depreciation. The provision for depreciation is computed using
straight-line and accelerated methods for both financial reporting
and income tax purposes. Expenditures for maintenance and repairs
are charged against income as incurred. Cost of major additions
and improvements are capitalized and depreciated over their
estimated useful lives.
<PAGE>
<PAGE>43
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1992
Note 1 - Summary of Significant Accounting and Reporting Policies
(Continued)
REAL ESTATE ACQUIRED BY FORECLOSURE
Real estate acquired through foreclosure is reflected in other
assets and is recorded at the lower of the related outstanding loan
amount or estimated net realizable value at the date of
acquisition. Adjustments made at the date of foreclosure are
charged to the allowance for loan losses. Expenses incurred in
connection with ownership, subsequent adjustments to book value,
and gains and losses upon disposition are included in other
non-interest expenses.
Adjustments to net realizable value are made annually subsequent to
acquisition based on appraisal.
INCOME TAXES
First Citizens Bancshares, Inc. uses the accrual method of
accounting for federal income tax reporting. Deferred tax assets or
liabilities are computed for significant differences in financial
statement and tax bases of assets and liabilities which result from
temporary differences in financial statement and tax accounting.
LOANS AND INTEREST INCOME ON LOANS
Interest income on commercial and real estate loans is computed on
the basis of the daily principal balance outstanding using the
accrual method. Interest on installment loans is credited to
operations by the rule of 78th method, which does not represent a
significant financial deviation from the interest method.
NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is computed by dividing net
income by the weighted average number of shares of common stock
outstanding during the period, after giving retroactive effect to
stock dividends and stock splits.
INCOME FROM FIDUCIARY ACTIVITIES
Income from fiduciary activities is recorded on the accrual basis.
Note 2 - Investment Securities
The following tables reflect amortized cost, unrealized gains and
losses, and approximate market value for investment securities for each
balance sheet date presented:
December 31, 1993
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $38,515,709 $ 718,878 $ 24,379 $39,210,208
Obligations of states and
political subdivisions 12,773,676 203,304 25,273 12,951,707
Other debt securities 7,442,655 148,426 10,444 7,580,637
Total debt securities 58,732,040 1,070,608 60,096 59,742,552
Other securities
investments 2,015,000 31,500 2,046,500
Total Investment
Securities $60,747,040 $1,102,108 $ 60,096 $61,789,052
<PAGE>
<PAGE>44
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Note 2 - Investment Securities (Continued)
December 31, 1992
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $59,019,011 $ 861,186 $138,798 $59,741,399
Obligations of states and
political subdivisions 9,300,427 58,948 81,108 9,278,267
Other debt securities 4,952,252 137,113 5,089,365
Total debt securities 73,271,690 1,057,247 219,906 74,109,031
Other Securities
Investments 1,176,000 1,176,000
Total Investment
Securities $74,447,690 $1,057,247 $219,906 $75,285,031
The differences between book values of investment securities and
market values at December 31, 1993 and December 31, 1992, total $1,042,012
and $837,341, respectively. These differences are deemed to be temporary
market fluctuations and the securities are expected to mature at par value.
The Corporation has both the intent and ability to hold these investments
to maturity.
The amortized cost and estimated market value of debt securities at
December 31, 1993 and 1992, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
1993 1992
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
Due in one year or less $18,386,816 $18,630,689 $19,562,889 $19,726,509
Due after one year
through five years 26,669,724 27,298,941 43,850,937 44,462,497
Due after five years
through ten years 8,540,010 8,725,285 6,676,589 6,733,668
Due after ten years 5,135,490 5,087,637 3,181,275 3,186,457
$58,732,040 $59,742,552 $73,271,690 $74,109,131
At December 31, 1993 and 1992, investment securities were pledged to
secure government, public and trust deposits as follows:
December 31 Book Value Market Value
1993 $35,310,879 $36,010,041
1992 44,811,189 45,332,386
Securities gains (losses) presented in the consolidated statements of
income consist of the following:
Gross Sales
of Investment
Year Ended December 31 Securities Gains Losses Net
1993 $ 5,300,252 $ 35,038 $ 3,280 $ 31,758
1992 10,096,833 182,301 22,481 159,820
1991 11,799,817 148,178 146,101 2,077
<PAGE>
<PAGE>45
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Note 2 - Investment Securities (Continued)
During the years presented First Citizens Bancshares, Inc.,
experienced the following trading account securities gains and losses which
are included in the caption "Securities gains (losses)" on the consolidated
statements of income:
Year Ended December 31 Gains Losses Net
1993 $ -0- $ -0- $ -0-
1992 -0- -0- -0-
1991 3,125 -0- 3,125
At December 31, 1993 and 1992, no trading account securities were held
as assets.
The Bank classifies certain securities as "held for resale" and during the
year ended December 31, 1992, sales of these securities resulted in losses
of $10,176, which is also included in the caption "securities gains
(losses)." No transactions occurred in securities "held for resale" during
the year ended December 31, 1993.
Note 3 - Loans
Loans outstanding at December 31, 1993 and 1992, were comprised of the
following:
1993 1992
(In Thousands)
Commercial, Financial and Agricultural $ 34,547 $ 33,930
Real Estate - Construction 7,675 5,272
Real Estate - Mortgage 84,801 79,376
Installment 15,901 15,077
Other Loans 6,398 2,005
149,322 135,660
Less: Allowance for possible
loan losses 1,676 1,703
$147,646 $133,957
Note 4 - Allowance for Possible Loan Losses
An analysis of the allowance for possible loan losses during the three
years ended December 31, 1993 is as follows:
1993 1992 1991
Balance, beginning of period $1,703,349 $1,935,544 $1,913,972
Provision for loan losses charged
to operations 401,273 411,001 592,110
Loans charged to allowance, net of
loan loss recoveries of
$173,875, $365,677,
and $206,979 (428,489) (643,196) (570,538)
Balance, end of period $1,676,133 $1,703,349 $1,935,544
For tax purposes, the Corporation deducts the maximum amount allowable.
During the year ended December 31, 1993, the deduction taken was $418,577.
The deductions for tax purposes in 1992 and 1991 were $448,003 and $712,334,
respectively.
<PAGE>
<PAGE>46
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Note 5 - Premises and Equipment
The fixed assets used in the ordinary course of business are
summarized as follows:
Useful Lives
in Years 1993 1992
Land $ 670,743 $ 670,743
Buildings 5 to 50 7,051,184 7,051,378
Furniture and equipment 3 to 20 5,369,850 5,647,600
13,091,777 13,369,721
Less: Accumulated depreciation 5,313,531 5,155,296
$ 7,778,246 $ 8,214,425
Note 6 - Repossessed Real Property
The book value of repossessed real property on the balance sheet is
$1,942,305 at December 31, 1993 and $2,379,525 at December 31, 1992. Both
balances include unimproved commercial property valued at $1,161,627 which
was acquired through foreclosure by First Citizens Bancshares, Inc. in 1987.
In addition, as of December 31, 1991, First Citizens National Bank sold to
First Citizens Bancshares, Inc., a local shopping center which had been
acquired through foreclosure and which is carried on the books of the holding
company at $650,000. The property is occupied and during the years ended
December 31, 1993 and 1992, the Company recognized rental income from its
tenants in the amount of $128,272 and $136,443 respectively.
Subsequent to December 31, 1993, the Corporation was notified that buyers had
exercised their option to purchase the real estate mentioned previously which
is carried at a book value of $1,161,627. The property will be sold at a
price which will result in a profit of $287,284.
The remaining balance of repossessed real property is reflected on the
balance sheet of First Citizens National Bank and is carried in "other
assets."
Note 7 - Deposits
Included in the deposits shown on the balance sheet are the following
time deposits and savings deposits in denominations of $100,000 or more:
1993 1992
(In Thousands)
Time Deposits $17,150 $24,916
Savings Deposits 21,710 14,164
NOW accounts, included in savings deposits on the balance sheet, totaled
$27,153,922 at 12/31/93 and $26,896,000 at 12/31/92.
Note 8 - Employee Stock Ownership Plan
First Citizens National Bank maintains the First Citizens National
Bank of Dyersburg Employee Stock Ownership Plan as an employee benefit.
The plan provides for a contribution annually not to exceed twenty-five
percent of the total compensation of all participants and affords
eligibility for participation to all full-time employees who have completed
at least one year of service. Contributions to the Employee Stock
Ownership Plan totaled $337,541 in 1993, $333,159 in 1992, and $229,024 in
1991.
<PAGE>
<PAGE>47
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Note 9 - Income Taxes
Provision for income taxes is comprised of the following:
1993 1992 1991
Federal income tax expense (benefit)
Current $1,015,549 $ 760,234 $ 660,220
Deferred (174,849) 108,529 83,882
State income tax expense (benefit)
Current 230,470 166,337 153,125
Deferred 6,260 19,152 14,802
$1,077,430 $1,054,252 $ 912,029
The ratio of applicable income taxes to net income before income taxes
differed from the statutory rates of 34%. The reasons for these
differences are as follows:
1993 1992 1991
Tax expense at statutory rate $1,305,997 $1,097,847 $ 976,899
Increase (decrease) resulting from:
State income taxes, net of federal
income tax benefit 155,932 122,423 110,830
Tax exempt interest (159,408) (110,136) (132,316)
Other differences (49,102) (55,882) (43,384)
1,253,419 1,054,252 912,029
Cumulative effect of adoption of
SFAS No. 109, "Accounting for
Income Taxes" (175,989)
$1,077,430 $1,054,252 $ 912,029
Deferred tax liabilities have been provided for taxable temporary
differences related to depreciation, accretion of securities discounts and
other minor items. Deferred tax assets have been provided for deductible
temporary differences related primarily to the allowance for loan losses and
adjustments for loss on repossessed real estate. The net deferred tax assets
in the accompanying consolidated balance sheets include the following
components:
December 31
1993 1992
Deferred tax liabilities $(398,383) $(402,115)
Deferred tax assets 458,496 411,517
Net deferred tax assets $ 60,113 $ 9,402
Effective January 1, 1993, First Citizens Bancshares, Inc. and its
subsidiary adopted SFAS No. 109, "Accounting for Income Taxes", which
requires an asset and liability approach to financial accounting and
reporting for income taxes. Accordingly, the difference between the
financial statement and tax bases of assets and liabilities is determined
periodically. Deferred income tax assets and liabilities are then computed
for those differences that have future tax consequences using the currently
enacted tax laws and rates that apply to the periods in which they are
expected to affect taxable income. Valuation allowances are established, if
appropriate, to reduce the deferred tax asset to the amount which is actually
expected to be realized. Income tax expense is the current tax payable or
refundable for the period plus or minus the net change in the deferred tax
assets or liabilities.
The effect of adopting SFAS No. 109 on 1993 net income from operations
was an increase of $50,711. The cumulative effect of the accounting change
on years prior to January 1, 1993, of $125,278 is included in 1993 income.
<PAGE>
<PAGE>48
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
Note 10 - Stock Dividends
In December, 1992, First Citizens Bancshares, Inc., declared a ten
percent stock dividend. The transaction was recorded by transferring par
value ($10 per share) from retained earnings to the capital stock account
and the balance of market value per share ($52.50) from retained earnings to
surplus.
On October 20, 1993, the Board of Directors declared a 2.5 for 1 stock
split, which was paid on November 15, 1993, in the form of a dividend of one
and one-half additional shares of the Company's common stock for each share
owned by the Stockholders of record on October 15, 1993. Par value remained
at $10 per share. The split resulted in the issuance of 422,698 additional
shares of common stock from authorized but unissued shares and in the
transfer of $4,226,980 from surplus to common stock, representing the par
value of the shares issued.
All references to earnings per share and to weighted average shares
outstanding have been restated to give retroactive recognition to an
equivalent change in capital structure in those periods.
Note 11 - Regulatory Capital Requirements
First Citizens Bancshares, Inc., is subject to minimum capital
requirements imposed by the Federal Reserve Bank and which are designed to
measure capital adequacy in terms of credit risk. The regulations require
that total capital equal at least 8.0% of weighted risk assets as of
December 31, 1993.
In the case of First Citizens Bancshares, Inc., capital consists of
common stockholders' equity and the allowance for loan losses of which in
excess of 90% is stockholders' equity or Tier I capital. At December 31,
1993, the Corporation's risk-based capital ratio is 12.89%.
Note 12 - Restrictions on Cash and Due From Bank Accounts
The Corporation's bank subsidiary maintains cash reserve balances as
required by the Federal Reserve Bank. Average required reserve balances
during 1993 and 1992 were $362,000 and $268,000 respectively.
Note 13 - Restrictions on Capital and Payment of Dividends
The Corporation is subject to capital adequacy requirements imposed by
the Federal Reserve Bank. In addition, the Corporation's National Bank
Subsidiary is restricted by the Office of the Comptroller of the Currency
from paying dividends in any years which exceed the net earnings of the
current year plus retained profits of the preceding two years. As of
December 31, 1993, approximately $5.7 million of retained earnings was
available for future dividends from the subsidiary to the parent corporation.
The 1993 cash dividends reflected $2.10 per share ($.60, $.60, $.65,
$.25). The 4th quarter dividend of $.25 was subsequent to the 2.5 for 1
stock split. The adjusted cash dividends per share for those years affected
are as follows:
1993 1992 1991 1990 1989
$.99 $.92 $.89 $.88 $.84
<PAGE>
<PAGE>49
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
Note 14 - Condensed Financial Information
First Citizens Bancshares, Inc.
(Parent Company Only)
BALANCE SHEETS
December 31
1993 1992
ASSETS
Cash $ 109,175 $ 42,891
Investment in subsidiary 19,506,591 17,349,341
Real estate owned 1,995,500 1,980,540
Other assets 161,552 104,869
TOTAL ASSETS $21,772,818 $19,477,641
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Note Payable of ESOP $ $ 160,000
Accrued Expenses 12,341 8,666
Option Deposit 60,000
TOTAL LIABILITIES 72,341 168,666
STOCKHOLDERS' EQUITY 21,700,477 19,308,975
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $21,772,818 $19,477,641
STATEMENTS OF INCOME
December 31
1993 1992
INCOME
Dividends from bank subsidiary $ 546,000 $ 690,000
Other income 159,923 155,688
TOTAL INCOME 705,923 845,688
EXPENSES
Other expenses 153,978 124,472
TOTAL EXPENSES 153,978 124,472
Income before income taxes and equity in
undistributed net income of bank subsidiary 551,945 721,216
Income tax expense (benefit) (54,542) (34,225)
606,487 755,441
Equity in undistributed net income of bank
subsidiary 2,157,250 1,419,269
NET INCOME $ 2,763,737 $ 2,174,710
<PAGE>
<PAGE>50
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993
Note 14 - Condensed Financial Information (continued)
(Parent Company Only)
STATEMENTS OF CASH FLOW
Years Ended December 31
1993 1992
Operating Activities
Net income $ 2,763,737 $ 2,174,710
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 23,443 21,236
Undistributed income of subsidiary (2,157,250) (1,419,269)
(Increase) decrease in other assets (56,683) (20,853)
Increase (decrease) in other liabilities 63,675 8,666
NET CASH PROVIDED BY OPERATING ACTIVITIES 636,922 764,490
Investing Activities
Purchase of other real estate (38,403) (152,650)
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (38,403) (152,650)
Financing Activities
Payment of dividends and payments in lieu of
fractional shares (707,952) (601,878)
Sale of Common Stock 236,124
Treasury Stock transactions - net (60,407)
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (532,235) (601,878)
INCREASE (DECREASE) IN CASH 66,284 9,962
Cash at beginning of year 42,891 32,929
CASH AT END OF YEAR $ 109,175 $ 42,891
Note 15 - Capital Leases
During the year ended December 31, 1989, First Citizens National Bank
placed in service furniture, fixtures, and equipment with a total cost of
$520,964 which were acquired through capital leases. These leases became
effective at various dates ranging from January, 1989 through October,
1989, and each lease extends for a term of sixty months. The total
liability on these leases as originated was $655,232 with $30,021 remaining
to be paid as of December 31, 1993. Future minimum lease payments according
to these leases are as follows:
Years Ending
December 31, 1994 $ 30,021
Less: amount representing interest 7,014
Present value of net minimum lease payments $ 23,007
<PAGE>
<PAGE>51
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Note 16 - Subsequent Events
During the year ended December 31, 1993, the Corporation executed an
agreement to purchase certain real estate in Dyersburg, Tennessee, as a site
for a proposed branch location. On January 5, 1994, the land was acquired by
First Citizens National Bank at a total cost of $336,219.
Note 17 - Noncash Investing and Financing Activities
During the periods presented, the Corporation engaged in the following
non-cash investing and financing activities:
Investing 1993 1992 1991
Other real estate acquired in satisfaction
of loans $ 61,729 $542,510 $591,415
Note 18 - Notes Payable of Employee Stock Ownership Plan
On March 21, 1988, First Citizens National Bank Employee Stock
Ownership Plan and Trust borrowed the sum of $800,000 from another
financial institution to acquire additional stock of First Citizens
Bancshares, Inc. At December 31, 1992, the outstanding principal balance was
$160,000 which was due in one installment on June 15, 1993. The note was
retired during 1993.
Note 19 - Financial Instruments with Off-Balance Sheet Risk
First Citizens National Bank is a party to financial instruments with
off-balance sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit. These
instruments involve, to varying degrees, elements of credit risk which are
not recognized in the statement of financial position.
The Bank's exposure to credit loss in the event of non-performance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. The same policies are utilized in making
commitments and conditional obligations as are used for creating on-balance
sheet instruments. Ordinarily, collateral or other security is not
required to support financial instruments with off-balance sheet risk.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Loan commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many commitments are
expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. Each customer's
credit-worthiness is evaluated on a case-by-case basis and collateral
required, if deemed necessary by the bank upon extension of credit, is based
on management's credit evaluation of the counter party. At December 31,
1993, First Citizens National Bank had outstanding loan commitments of
$46,655,000. Of these commitments, none had an original maturity in excess
of one year.
Standby letters of credit and financial guarantees are conditional
commitments issued by the Bank to guarantee the performance of a customer
to a third party. Those guarantees are issued primarily to support public
and private borrowing arrangements, and the credit risk involved is
essentially the same as that involved in extending loans to customers. The
bank requires collateral to secure these commitments when it is deemed
necessary. At December 31, 1993, outstanding standby letters of credit
totaled $2,144,000.
<PAGE>
<PAGE>52
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Note 19 - Financial Instruments with Off-Balance Sheet Risk (Continued)
In the normal course of business, First Citizens National Bank extends
loans which are subsequently sold to other lenders, including agencies of
the U.S. Government. Certain of these loans are conveyed with recourse
creating off-balance sheet risk with regard to the collectibility of the
loan. At December 31, 1993, the Bank had loans sold totaling $2,144,124.
Note 20 - Significant Concentrations of Credit Risk
First Citizens National Bank grants agribusiness, commercial,
residential and personal loans to customers throughout a wide area of the
mid-southern United States. A large majority of the Bank's loans, however,
are concentrated in the immediate vicinity of the Bank or northwest
Tennessee. Although the Bank has a diversified loan portfolio, a
substantial portion of its debtors' ability to honor their obligations is
dependent upon the agribusiness and industrial economic sectors of that
geographic area.
Note 21 - Disclosure of Fair Value of Financial Instruments
The following assumptions were made and methods applied to estimate the fair
value of each class of financial instruments reflected on the balance sheet
of the Corporation:
CASH AND CASH EQUIVALENTS
For instruments which qualify as cash equivalents, as described in Note
1 of Notes to Financial Statements, the carrying amount is assumed to be
fair value.
INVESTMENT SECURITIES
Fair value for investment securities is based on quoted market price, if
available. If quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.
LOANS RECEIVABLE
Fair value of variable-rate loans with no significant change in credit
risk subsequent to loan origination is based on carrying amounts. For
other loans, such as fixed rate loans, fair values are estimated
utilizing discounted cash flow analyses, applying interest rates
currently offered for new loans with similar terms to borrowers of
similar credit quality. Fair values of loans which have experienced
significant changes in credit risk have been adjusted to reflect such
changes.
The fair value of accrued interest receivable is assumed to be its
carrying value.
DEPOSIT LIABILITIES
DEMAND DEPOSITS
The fair values of deposits which are payable on demand, such as
interest-bearing and non-interest bearing checking accounts, passbook
savings and certain money market accounts are equal to the carrying
amount of the deposits.
VARIABLE-RATE DEPOSITS
The fair value of variable-rate money market accounts and certificates
of deposit approximate their carrying value at the balance sheet date.
<PAGE>
<PAGE>53
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1992
Note 21 - Disclosure of Fair Value of Financial Instruments (Continued)
FIXED-RATE DEPOSITS
For fixed-rate certificates of deposit, fair values are estimated using
discounted cash flow analyses which apply interest rates currently being
offered on certificates to a schedule of aggregated monthly maturities
on time deposits.
SHORT-TERM BORROWINGS
Carrying amounts of short-term borrowings, which include securities sold
under agreement to repurchase and notes payable of the employee stock
ownership plan which matures June 15, 1993, approximate their fair
values at December 31, 1992.
LONG-TERM DEBT
The fair value of the Corporation's long-term debt is estimated using
the discounted cash flow approach, based on the institution's current
incremental borrowing rates for similar types of borrowing arrangements.
At December 31, 1993, the long-term debt interest rate equals the fair
market rate and, as a result, the carrying value of long-term debt
approximates its fair value.
OTHER LIABILITIES
Other liabilities consist primarily of accounts payable, accrued
interest payable and accrued taxes. These liabilities are short-term
and their carrying values approximate their fair values.
<PAGE>
<PAGE>54
The estimated fair values of the Corporation's financial instruments
are as follows:
1993 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial Assets:
Cash and cash
equivalents $ 13,607,663 $ 13,607,663 $ 17,291,316 $ 17,291,316
Investment securities 60,747,040 61,789,052 74,447,690 75,285,031
Loans 149,322,178 135,660,731
Less: Allowance for
loan losses (1,676,133) (1,703,349)
Loans, net of allowance $147,646,045 $143,637,321 $133,957,382 $129,943,000
Accrued interest
receivable 2,572,669 2,572,669 2,857,664 2,857,664
Financial Liabilities:
Deposits $193,823,249 $184,104,215 $193,459,334 $187,727,210
Short-term borrowings 16,914,142 16,620,133 25,293,919 25,293,919
Long-term debt 30,021 30,021 162,964 162,964
Other liabilities 2,424,143 2,424,143 1,672,097 1,672,097
Unrecognized financial
instruments:
Commitments to extend
credit 46,655,000 46,655,000 16,622,000 16,622,000
Standby letters of
credit 2,144,000 2,144,000 2,441,000 2,441,000
<PAGE>
<PAGE>55
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
<TABLE>
Note 22 - Amounts Receivable From Certain Persons
<CAPTION>
Year Ended December 31, 1993
(In Thousands)
Column A Column B Column C Column D Column E
Balance at Balance at
Beginning End of
Period Additions Deductions Period
Amounts
Amounts Written Not
Collected Off Current Current
<S> <C> <C> <C> <C> <C> <C>
Aggregate indebtedness
to First Citizens
National Bank of
Directors and Executive
Officers of First
Citizens Bancshares,
Inc. (20) $2,708 $1,310 $1,222 $ -0- $2,796 $ -0-
Aggregate indebtedness
to First Citizens
National Bank of
Directors and Executive
Officers of First
Citizens National
Bank (21) $2,732 $1,341 $1,226 $ -0- $2,847 $ -0-
Year Ended December 31, 1992
Aggregate indebtedness
to First Citizens
National Bank of
Directors and Executive
Officers of First
Citizens Bancshares,
Inc. (19) $2,999 $ 513 $804 $ -0- $2,708 $ -0-
Aggregate indebtedness
to First Citizens
National Bank of
Directors and Executive
Officers of First
Citizens National
Bank (21) $3,038 $ 513 $819 $ -0- $2,732 $ -0-
</TABLE>
<PAGE>
<PAGE>56
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1993
Note 22 - Amounts Receivable From Certain Persons (Continued)
Indebtedness shown represents amounts owed by directors and executive
officers of First Citizens Bancshares, Inc., and First Citizens National
Bank and by businesses in which such persons are general partners or have
at least 10% or greater interest and trust and estates in which they have a
substantial beneficial interest. All loans have been made on substantially
the same terms, including interest rates and collateral as those prevailing
at the time for comparable transactions with others and do not involve
other than normal risks of collectibility.
<PAGE>
<PAGE>57
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Bancshares had no disagreements regarding accounting procedures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information appearing in Bancshares' definitive 1991 Proxy Statement
regarding directors and officers is incorporated herein by reference in
response to this Item (See pages 3 through 6 of the Proxy Statement).
ITEM 11. EXECUTIVE COMPENSATION
The information required under this Item is set forth in the 1991
definitive Proxy Statement, and is incorporated by reference. (See page 6
of the Proxy Statement).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Ownership of Bancshares' common stock by certain beneficial owners and
by management is set forth in Bancshares' definitive 1991 Proxy Statement
for the Annual Meeting of Shareholders to be held April 15, 1991, in the
sections entitled Voting Securities and Election of Directors and is
incorporated herein by reference. (See pages 1 through 4 of the Proxy
Statement).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Officers, Directors and principal shareholders of the holding company
(and their associates) have deposit accounts and other transactions with
First Citizens National Bank. These relationships are covered in detail on
page 7 of the Proxy Statement under "Certain Relationships and Related
Transactions" and incorporated herein by reference. Additional information
concerning indebtedness to Bancshares and First Citizens by Directors
and/or their affiliates is included herein under Part III, Page 43 "Amounts
Receivable from Certain Persons."
<PAGE>
<PAGE>58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
FIRST CITIZENS BANCSHARES, INC.
By /s/Stallings Lipford
Stallings Lipford,
Chairman & CEO
By /s/Jeff Agee
Jeff Agee
Vice President & Principal
Financial Officer
Dated: 02/24/94
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 22nd of February, 1991:
/s/Stallings Lipford /s/Mary Frances McCauley
Stallings Lipford Mary Frances McCauley
Director Director
/s/Eddie Anderson /s/L. D. Pennington
Eddie Anderson L. D. Pennington
Director Director
/s/Sam Bradshaw /s/G. W. Smitheal, Jr.
Sam Bradshaw, Jr. G. W. Smitheal, Jr.
Director Director
/s/James H. Carver /s/H. P. Tigrett, Jr.
James H. Carver H. P. Tigrett, Jr.
Director Director
/s/William C. Cloar /s/P. H. White, Jr.
William C. Cloar P. H. White, Jr.
Director Director
/s/Richard Donner /s/Dwight Steven Williams
Richard W. Donner Dwight Steven Williams
Director Director
/s/J. E. Heckethorn /s/Katie Winchester
John E. Heckethorn Katie Winchester
Director Director
/s/E. H. Lannom, Jr. /s/Billy S. Yates
E. H. Lannom, Jr. Billy S. Yates
Director Director
/s/M. Eugene Magee
M. Eugene Magee
Director
<PAGE>
<PAGE>1
PART IV - EXHIBIT INDEX
Page No
(3) Subsidiaries of the registrant * 54
(22) Articles of Incorporation and By-Laws * 62
* Filed with current report
<PAGE>
<PAGE>1
Subsidiaries
The Company has one subsidiary, First Citizens National Bank,
Dyersburg, Tennessee. The Company is the sole shareholder of the Bank.
First Citizens National Bank is a National Bank organized under the
authority of the Comptroller of the Currency.
On January 28, 1985, First Citizens Financial Plus, Inc. was chartered
in the State of Tennessee as a wholly-owned subsidiary of First Citizens
National Bank for the purpose of providing investment advisory service to
the community. The Corporation's registration with the Securities and
Exchange Commission as an investment advisor was effective February 21,
1985.
On December 19, 1988 First Citizens Financial Plus, Inc. received
notification from the National Association of Securities Dealers that the
Company's registration as a broker/dealer was effective. As a result, in
addition to being an investment advisor, the Company is now a full service
introducing broker/dealer.
<PAGE>
<PAGE>1
CHARTER
OF
FIRST CITIZENS BANCSHARES, INC.
The undersigned natural person or persons, having capacity to contract
and acting as the incorporator or incorporators of a corporation under the
Tennessee General Corporation Act, adopt the following charter for such
corporation:
l. The name of the corporation is First Citizens Bancshares, Inc.
2. The duration of the corporation is perpetual.
3. The address of the principal office of the corporation in the
State of Tennessee shall be Court and Mill Streets, Dyersburg,
Tennessee, County of Dyer.
4. The corporation is for profit.
5. The principal purpose for which the corporation is organized is to
engage in banking and non-banking activities of a bank holding
company which is registered with the Board of Governors of the
Federal Reserve System under the Federal Bank Holding Company Act
of 1956, as amended. This corporation may engage in any and all
lawful businesses allowed for such a bank holding company under
state and federal law.
6. The maximum number of shares which the corporation shall have the
authority to issue is Seven Hundred Fifty Thousand (750,000)
shares which shall have a par value of Ten Dollars ($10.00).
7. The corporation will not commence business until consideration of
an amount not less than One Thousand Dollars ($1,000.00) has been
received for the issuance of shares.
8. The capital stock of the corporation may be issued for valid
corporate purposes upon authorization by the Board of Directors of
the corporation without prior stockholder approval.
9. The affirmative vote of the holders of not less than eighty
percent (80%) of the outstanding voting stock of the corporation
is required in the event that the Board of Directors of the
corporation does not recommend to the stockholders of the
corporation a vote in favor of (1) a merger or consolidation of
the corporation with, or (2) a sale, exchange or lease of all or
substantially all of the assets of the corporation to, any person
or entity. For purposes of this provision, substantially all of
the assets shall mean assets having a fair market value or book
value, whichever is greater, of 25 percent or more of the total
assets as reflected on a balance sheet of the corporation as of a
date no earlier than 45 days prior to any acquisition of such
assets. The affirmative vote of the holders of not less than
eighty percent (80%) of the outstanding voting stock of the
corporation is required to amend or repeal the provisions of this
Section 9.
<PAGE>
<PAGE>2
10. The Board of Directors of the corporation shall consist of a
maximum of twenty-two (22) stockholders of the corporation. The
affirmative vote of the holders of not less than eighty percent
(80%) of the outstanding voting stock of the corporation is
required to amend or repeal the provisions of this Section 11.
11. The holders of the shares of the corporation shall have no
preemptive right, as defined in Section 48-713 of the Tennessee
General Corporation Act.
Dated December 13, 1982
<PAGE>
<PAGE>3
ARTICLES OF AMENDMENT TO THE CHARTER
OF
FIRST CITIZENS BANCSHARES, INC.
Pursuant to the provisions of Section 48-303 of the Tennessee General
Corporation Act, the undersigned corporation adopts the following articles
of amendment to its Charter:
l. The name of the corporation is First Citizens Bancshares, Inc.
2. The amendments adopted are:
a. The corporation hereby adopts the following article as Article
12 of its Charter:
At all times each holder of common stock of the corporation shall be
entitled to one vote for each share of such stock standing in his name
on the books of the corporation. At all elections of directors of the
corporation, each holder of common stock shall be entitled to as many
votes as shall equal the number of votes which (except for this
provision) he would then be entitled to cast for the election of
directors with respect to his shares multiplied by the number of
directors upon whose election he is then entitled to vote, and he may
cast all of such votes for a single candidate or may distribute them
among some or all of the candidates, as he may see fit.
b. The corporation hereby adopts the following amendment to
Section 10 of its Charter:
The reference to "Section 11" in the last line of Section 10 of the
corporation's Charter is amended to read "Section 10."
3. The amendment was duly adopted by unanimous written consent of the
shareholders on June 14, 1983.
4. The amendment shall be effective upon the filing of these Articles
with the Secretary of State.
Dated June 17, 1983.
FIRST CITIZENS BANCSHARES, INC.
By: (Stallings Lipford)
Stallings Lipford,
President
<PAGE>
<PAGE>4
AMENDMENTS TO ARTICLES OF ASSOCIATION
OF
FIRST CITIZENS BANCSHARES, INC.
CONTROL NUMBER 0123149
Pursuant to the provisions of Section 48-303 of the Tennessee
General Corporation Act, the undersigned corporation adopts the
following articles of amendment to its Charter:
1. The name of the corporation is First Citizens Bancshares, Inc.
2. The amendments adopted are:
a. The corporation hereby adopts the following amendment to
Article 6 of its Charter by restating as follows:
Article 6: The maximum number of shares which the Corporation
shall have the authority to issue is seven-hundred fifty thousand
(750,000) shares which shall have a par value of Ten Dollars
($10.00).
b. The Corporation hereby adopts the following as Article 13
of its Charter:
Article 13: Indemnification of Directors and Officers.
Section 1. Right to Indemnification. Each person who was or
is made a party or is threatened to be made a party to or is
otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter
a "proceeding"), by reason of the fact that he or she is or
was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or
officer of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director or
officer or in any other capacity while serving as a director
or officer shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by applicable
Federal and state law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to
provide broader indemnification rights than such law
permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines ERISA excise
taxes or penalties and amounts paid in settlement) reasonably
incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a director or officer and
shall inure to the benefit of the indemnitee's heirs,
executors and administrators provided, however, that, except as
provided in Section 2 hereof with respect to proceedings to
enforce rights to indemnification, the Corporation shall
<PAGE>
<PAGE>5
indemnify any such indemnitee in connection with a proceeding (or
part thereof) initiated by such indemnitee only if such proceeding (or
part thereof) was authorized by the board of directors of the
Corporation. The right to indemnification conferred in this Article
shall be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that if the
applicable Federal and state law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as
a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including,
without limitation, service to an employee benefit plan)
shall be made only upon the following:
(i) delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of
such indemnitee, to repay all amounts so advanced if
it shall ultimately be determined by final judicial
decision from which there is no further right to
appeal (hereinafter a "final adjudication"), that such
indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise;
(ii) delivery to the Corporation by the indemnitee of a
written affirmation by the indemnitee of his good
faith belief that he has (a) conducted himself in good
faith; and (b) he reasonably believed in the case of
his official capacity with the Corporation, that his
conduct was in its best interest; (c) he reasonably
believed in all other cases, that his conduct was at
least not opposed to its best interest; and (d) in the
case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful;
(iii) a determination is made on the facts then known to
those making the determination would not preclude
indemnification under Tennessee law.
Section 2. Right of Indemnitee to Bring Suit.
If a claim under Section 1 of this Article is not paid in
full by the Corporation within sixty days after a written
claim has been received by the Corporation, except in the
case of a claim for an advancement of expenses, in which case
the applicable period shall be twenty days, the indemnitee
may at any time thereafter bring suit against the Corporation
to recover the unpaid amount of the claim. If successful in
whole or in part in any such suit, or in a suit brought by
the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall
be entitled to be paid also the expense of prosecuting or
defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder
(but not in a suit brought by the indemnitee to enforce a
right to an advancement of expenses) it shall be a defense
that, and (ii) in any such suit by the Corporation to recover
an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has
not met the application standard of conduct set forth in the
Tennessee law. Neither the failure of the Corporation
(including its board of directors, independent legal counsel,
or its stockholders) to have made a determination prior to
the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the
indemnitee has met the application standard of conduct set
forth in the Tennessee law, nor an actual determination by
the Corporation (including its board of directors,
<PAGE>
<PAGE>6
independent legal counsel, or its stockholders) that the
indemnitee has not met such applicable standard of conduct,
shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such a
suit brought by the indemnitee, be a defense to such suit.
In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
Section 3. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of
expenses conferred in this Article shall not be exclusive of
any other right which any person may have or hereafter
acquire under any statute, the Corporation's Articles of
Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 4. Insurance.
The Corporation may maintain insurance, at its expense, to
protect itself and any director or officer of the Corporation
or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to
indemnify such person against such expense, liability of loss
under Tennessee Business Corporations Law.
Section 5. Indemnification of Employees and Agents of the
Corporation.
The Corporation may, to the extent authorized from time to
time by the board of directors, grant rights to
indemnification, and to the advancement of expenses to any
employee or agent of the Corporation to the fullest extent of
the provisions of this Section with respect to the
indemnification and advancement of expenses of directors and
officers of the Corporation.
c. The Corporation hereby adopts the following as Article 14
of its Charter:
Article 14: Elimination of Liability of Directors for Monetary
Damages for Certain Alleged Breaches of Fiduciary Duty
A director of this corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law; (iii) or under TCA 48-18-304. No provision
will eliminate or limit the liability of a director for any act or
omission occurring prior to the date when such provisions become
effective.
3. The amendments were duly adopted by a majority vote of the
shareholders on April 18, 1989.
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<PAGE>7
4. The amendment shall be effective upon the filing of these
Articles with the Secretary of State.
Dated May 2, 1989.
FIRST CITIZENS BANCSHARES, INC.
By: (Stallings Lipford)
Stallings Lipford,
President
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<PAGE>8
BYLAWS OF
FIRST CITIZENS BANCSHARES, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
l. Annual Meeting. The annual meeting of the shareholders of First
Citizens Bancshares, Inc. (the "Corporation") shall be held on the second
Tuesday in April of each year at its principal office unless a different
time or place, either within or without Tennessee, is designated by the
Directors.
2. Special Meetings. Special meetings of the shareholders may be
called by any director and/or the President and Chief Executive Officer;
provided, however, that a special meeting at which a tender offer or
exchange offer, a merger or consolidation of the Corporation with or into
another corporation, or any offer to purchase or otherwise acquire all or
substantially all of the assets of the Corporation are to be considered may
be called only by the President and Chief Executive Officer of the
Corporation. The place of such meetings shall be designated by the
directors.
3. Notice of Shareholder Meetings. Written or printed notice stating
the place, day, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called and the
person or persons calling the meeting, shall be delivered either personally
or by mail by or at the direction of the President, Secretary, officer, or
person calling the meeting, to each shareholder entitled to vote at the
meeting. If mailed, such notice shall be mailed not less than ten (10) nor
more than sixty (60) days before the date of the meeting, by depositing
such notice in the United States mail addressed to the shareholder at his
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid. If delivered personally, such notice shall be
delivered not less than five (5) nor more than sixty (60) days before the
date of the meeting, and shall be deemed delivered when actually received
by the shareholder. The person giving such notice shall certify that the
notice required by this paragraph has been given.
4. Quorum Requirements. A majority of the shares entitled to vote
shall constitute a quorum for the transaction of business. A meeting may
be adjourned despite the absence of a quorum, and notice of an adjourned
meeting need not be given if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken.
When a quorum is present at any meeting, a majority in interest of the
stock there represented shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of
this Corporation's charter, these bylaws, or by the laws of Tennessee, a
larger or different vote is required, in which case such express provisions
shall govern the decision of such question.
5. Voting and Proxies. Every shareholder entitled to vote at a
meeting may do so either in person or by written proxy, which proxy shall
be filed with the secretary of the meeting before being voted. Such proxy
shall entitle the holders thereof to vote at any adjournment of such
meeting, but shall not be valid after the final adjournment thereof. No
proxy shall be valid after the expiration of eleven (11) months from the
date of its execution unless otherwise provided in the proxy.
<PAGE>
<PAGE>9
ARTICLE II
BOARD OF DIRECTORS
l. Qualification and Election of Directors. Directors must be share-
holders. The terms of the initial Board of Directors elected by the share-
holder(s) shall be set so as to implement staggered terms, i.e. the terms
of one-third (or as near one-third as possible) of the directors shall be
one year, the terms of one-third shall be two years and the terms of
one-third shall be three years. Thereafter, one-third of the directors
shall be elected by a majority of the votes cast at each annual meeting of
the shareholders, or by similar vote at any special meeting called for the
purpose, to serve three year terms. Each director shall hold office until
the expiration of the term for which he is elected, except as stated above,
and thereafter until his successor has been elected and qualified. Any
vacancy occurring in the Board of Directors shall be filled by appointment
by the remaining directors, and any director so appointed shall serve until
the next election, for the remainder of the term of the director being
replaced, or for a full term, at the option of the directors.
2. Number. The maximum number of directors is fixed by the Charter
and may be altered only by amendment thereto, but shall never be less than
the number required by law. The Board of Directors may, by a vote of the
majority of the full Board, between annual meetings of the shareholders,
increase the membership of the Board up to the maximum number set out in
the Charter and by like vote appoint qualified persons to fill the
vacancies created thereby.
3. Meetings. The annual meeting of the Board of Directors shall be
held immediately after the adjournment of the annual meeting of the
shareholders, at which time the officers of the Corporation shall be
elected. The Board may also designate more frequent intervals for regular
meetings. Special meetings may be called at any time by any one director
or any two officers of the Corporation.
4. Notice of Directors' Meetings. The annual and all regular Board
Meetings may be held without notice. Special meetings shall be held with
not less than one hour notice of such meeting to be given to each director,
which notice shall be given on a best efforts basis by those calling the
meeting.
5. Quorum and Vote. The presence of a majority of the directors
shall constitute a quorum for the transaction of business. A meeting may
be adjourned despite the absence of a quorum, and notice of an adjourned
meeting need not be given if the time and place to which the meeting is
adjourned are fixed at the meeting at which the adjournment is taken, and
if the period of adjournment does not exceed thirty (30) days in any one
adjournment. The vote of a majority of the directors present at a meeting
at which a quorum is present shall be the act of the Board, unless the vote
of a greater number is required by the charter, these bylaws, or by the
laws of Tennessee.
6. Appointment of Chairman, Executive and Other Committees. The
Chairman of the Board of Directors of the corporation shall also serve as
an officer of the corporation. The Board of Directors, by a resolution
adopted by a majority of its members, may designate an executive committee,
consisting of two or more directors, and other committees, consisting of
two or more persons, who may or may not be directors, and may delegate to
such Chairman, committee or committees any and all such authority as it
deems desirable, including the right to delegate to an executive committee
the power to exercise all the authority of the Board of Directors in the
management of the affairs and property of the corporation.
<PAGE>
<PAGE>10
7. Powers. In addition to other powers specifically set out herein
or that apply under Tennessee or other applicable law, the Board of
Directors shall have the power to manage and administer the affairs of the
Corporation and to do and perform all lawful acts with respect to the
affairs of the Corporation except those that may be specifically reserved
to the shareholders under Tennessee or other applicable law.
8. Contracts with Interested Directors. No contract or other
transaction between this Corporation and any other corporation shall be
affected by the fact that any director of this Corporation is interested
in, or is a director or officer of, such other corporation, and any
director, individually or jointly, may be a party to, or may be interested
in, any contract or transaction of this Corporation or in which this
Corporation is interested; and no contract, or other transaction, of this
Corporation with any person, firm, or corporation, shall be affected by the
fact that any director of this Corporation is a party to, or is interested
in, such contract, act, or transaction, or is in any way connected with
such person, firm, or corporation and every person who may become a
director of this Corporation is hereby relieved from any liability that
might otherwise exist from contracting with the Corporation for the benefit
of himself or any firm, association, or corporation in which he may be in
any way interested.
9. Special Considerations by Directors. The directors of this
Corporation shall consider all factors they deem relevant in evaluating any
proposed tender offer or exchange offer for the Corporation's stock, any
proposed merger or consolidation of the Corporation with or into another
Corporation and any proposal to purchase or otherwise acquire all of the
assets of the Corporation. The directors shall evaluate whether the pro-
posal is in the best interests of the Corporation by considering the best
interests of the shareholders and other factors the directors determine to
be relevant, including the social, legal and economic effects on employees,
customers and the communities served by the Corporation and its subsidiary
or subsidiaries. The directors shall evaluate the consideration being
offered to the shareholders of the Corporation in a freely negotiated
transaction, and the directors' estimate of the future value of shares of
the Corporation as an independent entity.
ARTICLE III
OFFICERS
l. Number. The Corporation shall have a President, a Chairman of the
Board, a Secretary, and such other officers as the Board of Directors shall
from time to time deem necessary. Any two or more offices may be held by
the same person, except the offices of president and secretary.
2. Election and Term. The officers shall be elected by the Board at
its annual meeting for terms of one year. Each officer shall serve until
the expiration of the term which he is elected, and thereafter until his
successor has been elected and qualified.
3. Duties. All offices shall have such authority and perform such
duties in the management of the Corporation as are normally incident to
their offices and as the Board of Directors may from time to time provide.
<PAGE>
<PAGE>11
ARTICLE IV
RESIGNATIONS, REMOVALS AND VACANCIES
l. Resignations. Any officer or director may resign at any time by
giving written notice to the Chairman of the Board of Directors, the
president, or the secretary. Any such resignation shall take effect at the
time specified therein, or, if no time is specified, then upon its
acceptance by the Board of Directors.
2. Removal of Officers. Any officer or agent may be removed by the
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby.
3. Removal of Directors. Any or all of the directors may be removed
with cause by a proper vote of the shareholders or with cause by a majority
vote of the entire Board of Directors.
4. Vacancies. Newly created directorships resulting from an increase
in the number of directors, and vacancies occurring in any office or
directorship for any reason, including removal of an officer or director,
may be filled by the vote of a majority of the directors then in office,
even if less than a quorum exists.
ARTICLE V
CAPITAL STOCK
l. Stock Certificates. Every shareholder shall be entitled to a
certificate or certificates of capital stock of the Corporation in such
form as may be prescribed by the Board of Directors. Unless otherwise
decided by the Board of Directors, such certificates shall be signed by two
officers of the Corporation.
2. Transfer of Shares. Any share or shares of stock may be transfer-
red on the books of the Corporation by delivery and surrender of the
properly assigned certificate, but subject to any restrictions on transfer
imposed by either the applicable securities laws or any shareholder
agreement.
3. Loss of Certificates. In the case of the loss, mutilation, or
destruction of a certificate of stock, a duplicate certificate may be
issued upon such terms as the Board of Directors shall prescribe.
ARTICLE VI
ACTION BY CONSENT
Whenever the shareholders or directors are required or permitted to
take any action by vote, such action may be taken without a meeting on
written consent, setting forth the action so taken, signed by all the
persons or entities entitled to vote thereon.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he
or she is or was a director or officer of the Corporation as a director or
officer of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to an employee benefit
plan (hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any
other capacity while serving as a director or officer shall be indemnified
and held harmless by the Corporation to the fullest extend authorized by
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<PAGE>12
Tennessee law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys fees, judgements, fines
ERISA excise taxes or penalties and amounts paid in settlement) reasonably
incurred or suffered by such indemnitee in connection therewith and such
indemnification shall continue as to an indemnitee who has ceased to be a
director or officer and shall inure to the benefit of the indemnitee's
heirs, executors and administrators; provided, however, that, except as
provided in Section 2 hereof with respect to proceedings to enforce rights
to indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the board of
directors of the corporation.
The right to indemnification conferred in this Article shall be a
contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its
final disposition (hereinafter an "advancement of expenses"); provided,
however, that if the Tennessee law requires, an advancement of expenses
incurred by an indemnitee in his or her capacity as a director or officer
(and not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon the following:
(i) delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal
(hereinafter a "final adjudication"), that such indemnitee is not
entitled to be indemnified for such expenses under this Section or
otherwise;
(ii) delivery to the Corporation by the indemnitee of a written affirma-
tion by the indemnitee of his good faith belief that he has (a)
conducted himself in good faith; and (b) he reasonably believed in
the case of his official capacity with the Corporation, that his
conduct was in its best interest; (c) he reasonably believed in all
other cases, that his conduct was at least not opposed to its best
interest; and (d) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful;
(iii) a determination is made on the facts then known to those making the
determination would not preclude indemnification under Tennessee
law.
2. Right of Indemnitee to Bring Suit. If a claim under Section 1 of
this Article is not paid in full by the Corporation within sixty days after
a written claim has been received by the Corporation, except in the case of
a claim for an advancement of expenses, in which case the applicable period
shall be twenty days, the indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by
the Corporation to recover an advancement of expenses pursuant to the terms
of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in
a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any such suit by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking the Corporation shall be entitled to recover such expenses
upon a final adjudication that, the indemnitee has not met the application
standard of conduct set forth in the Tennessee law. Neither the failure of
the Corporation (including its board of directors, independent legal
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<PAGE>13
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper
in the circumstances because the indemnitee has met the application
standard of conduct set forth in the Tennessee law, nor an actual
determination by the Corporation (including its board of directors,
independent legal counsel, or its stockholders) that the indemnitee has not
met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the
case of such a suit brought by the indemnitee, be a defense to such suit.
In any suit brought by the indemnitee to enforce a right to indemnification
or to an advancement of expenses hereunder, or by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking,
the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article or
otherwise shall be on the Corporation.
3. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses conferred
in this Article shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, the Corporation's Articles
of Incorporation, bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
4. Insurance.
The Corporation may maintain insurance, at its expense, to protect itself
and any director or officer of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability of loss under
Tennessee Business Corporations Law.
5. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the
board of directors, grant rights to indemnification, and to the advancement
of expenses to any employee or agent of the Corporation to the fullest
extent of the provisions of this Section with respect to the
indemnification and advancement of expenses of directors and officers of
the Corporation.
ARTICLE VIII
AMENDMENT OF BYLAWS
These bylaws may be amended, added to, or repealed by vote of two-
thirds (2/3) of the directors at a regular or special meeting of the Board
of Directors. Any change in the bylaws made by the Board of Directors,
however, may be amended or repealed by the shareholders.
CERTIFICATION
I certify that these Bylaws were adopted at the shareholder's meeting
of the Corporation held on the 4th day of January, 1983.
(Katie S. Winchester)
Secretary
<PAGE>
<PAGE>1
DATA STATED IN THOUSANDS
VOLUNTARY SCHEDULE - CERTAIN FINANCIAL INFORMATION
REGULATION STATEMENT CAPTION 1993 1992 1991
5-02 (1) Cash and Cash Items 8407 10591 9800
5-02 (2) Marketable Securities 60747 74448 59102
5-02 (3)(b)(1) Notes Receivable 149322 135661 133066
5-02 (4) Allowance for Doubtful Accounts 1676 1703 1936
5-02 (15) Total Assets 234892 239897 227017
5-02 (24) Other Liabilities 213191 220588 209441
5-02 (30) Common Stock 7007 2792 2541
5-02 (31)(a)(2) Additional Capital Other 2356 6394 5325
5-02 (31)(a)(3)(ii) Retained Earnings - Unappropriated 12338 10122 9710
5-03 (b)(1)(e) Other Revenues 20236 20891 22796
5-03 (b)(2)(e) Cost of Other Revenues 9134 9158 8731
5-03 (b)(8) Interest and Amortization of
Debt Discount 7261 8504 11192
5-03 (b)(10) Income Before Taxes and Other Items 3841 3229 2873
5-03 (b)(11) Income Tax Expense (Benefit) 1202 1054 912
5-03 (b)(14) Income/Loss from Continuing
Operations 2639 2175 1961
5-03 (b)(17) Cumulative Change in Accounting
Principle 125 0 0
5-03 (b)(19) Net Income or Loss 2764 2175 1961
