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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended March 31, 1995 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
Court Street, Dyersburg, Tennessee 38024
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (901) 285-4410
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 3 months and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Of the registrant's only class of common stock ($1.00 par value) there were
720,841 shares outstanding as of March 31, 1995 (net of treasury stock).
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PART I -FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
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FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
March 31, December 31,
1995 1994
(Unaudited) (Note)
ASSETS
Cash and due from banks $8,752,000 $9,784,000
Federal funds sold $2,500,000 $2,900,000
Investment securities
Trading Investments-stated at market $0 $0
Held to maturity-amortized cost-fair value of $56,221,000 $47,295,000
$55,392,000 at March 31, 1995 and $45,151,000
at December 31, 1994.
Available for sale-stated at market $19,333,000 $16,874,000
Loans (Excluding unearned income of $1,502,000
at March 31, 1995 and $1,334,000
at December 31, 1994) $174,450,000 $168,781,000
Less: Allowance for loan losses $2,115,000 $2,054,000
Net Loans $172,335,000 $166,727,000
Premises and equipment $8,584,000 $8,392,000
Other assets $5,166,000 $4,715,000
TOTAL ASSETS $272,891,000 $256,687,000
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits $221,836,000 $209,480,000
Securities sold under agreements
to repurchase $17,220,000 $16,950,000
Long term debt-note 3 (includes long term FHLB) $6,783,000 $4,125,000
Other liabilities $2,313,000 $2,253,000
TOTAL LIABILITIES $248,152,000 $232,808,000
Contingent liabilities--See Note 5
Stockholders' equity
Common stock, $1 par value-2,000,000 authorized;
720,842 issued and outstanding at March
31, 1995; 714,824 issued and outstanding at
Dec 31, 1994 $721,000 $715,000
Surplus $9,222,000 $9,000,000
Retained earnings $14,850,000 $14,423,000
Net unrealized gains (losses) on available
for sale ($54,000) ($259,000)
Total common stock and retained earnings $24,739,000 $23,879,000
Less-treasury 1 share, at cost at March 31,
1995 and 3 at December 31, 1994 $0 $0
TOTAL STOCKHOLDERS' EQUITY $24,739,000 $23,879,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $272,891,000 $256,687,000
NOTE: The balance sheet at December 31, 1994 has been taken from the audited
financial statements at that date and condensed.
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FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Three Month Periods Ended
March 31, March 31,
1995 1994
INTEREST INCOME
Interest and fees on loans $4,020,000 $3,275,000
Interest on investment securities:
Taxable $1,020,000 $707,000
Tax-exempt $125,000 $146,000
Other interest income $45,000 $55,000
Lease financing income $1,000 $1,000
TOTAL INTEREST INCOME $5,211,000 $4,184,000
INTEREST EXPENSE
Interest on deposits $2,258,000 $1,600,000
Other interest expense $269,000 $147,000
TOTAL INTEREST EXPENSE $2,527,000 $1,747,000
NET INTEREST INCOME $2,684,000 $2,437,000
Provision for loan losses $65,000 $99,000
Net interest income after provision $2,619,000 $2,338,000
Other Income
Securities gains (losses) $7,000 $0
Other income $647,000 $948,000
Total Other Income $654,000 $948,000
Other expenses $2,308,000 $2,116,000
Net income before income taxes $965,000 $1,170,000
Provision for income taxes $322,000 $343,000
Net Income $643,000 $827,000
Earnings Per Share $0.90 $1.17
Weighted average number of shares outstanding 717079 706798
The accompanying notes are an integral part of these financial statements.
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FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31
1995 1994 1993
OPERATING ACTIVITIES
Net cash provided by
operating activities $525,000 $528,000 $1,475,000
INVESTING ACTIVITIES
Proceeds of maturities of securities $0 $0 $6,677,000
Proceeds from sales of
investment securities $0 $0 $0
Purchase of investment securities $0 $0 ($8,037,000)
Proceeds of maturities of held to
maturity securities $1,149,000 $8,024,000 $0
Purchase of held to maturity
investments ($10,000,000) ($5,340,000) $0
Proceeds from maturities of
available for sale securities $0 $0 $0
Proceeds from sales of available
for sale securities $0 $0 $0
Purchase of available for sale
securities ($2,133,000) ($2,000,000) $0
Increase in loans-net ($5,673,000) ($3,500,000) ($3,495,000)
Purchases of premises and equipment ($594,000) ($420,000) ($112,000)
Net Cash provided by
investing activities ($17,251,000) ($3,236,000) ($4,967,000)
FINANCING ACTIVITIES
Net Increase (Decrease) in Demand
and Savings Accounts ($4,430,000) $625,000 ($2,882,000)
Increase (Decrease) in Time Accounts $16,786,000 $766,000 ($917,000)
Increase (Decrease) in Long term Debt $2,658,000 $2,295,000 ($33,000)
Treasury Stock Transactions $0 $52,000 $0
Proceeds from Sale of Common Stock $228,000 $20,000 $38,000
Cash Dividends Paid ($218,000) ($188,000) ($169,000)
Net Increase (Decrease) in
Short Term Borrowings $270,000 $946,000 $200,000
Net Cash provided (used) by
Financing Activities $15,294,000 $4,516,000 ($3,763,000)
Increase (Decrease) in Cash and
Cash Equivalents ($1,432,000) ($1,808,000) ($7,255,000)
Cash and Cash Equivalents at
beginning of year $12,684,000 $13,608,000 $17,291,000
Cash and Cash Equivalents at
end of year $11,252,000 $15,416,000 $10,036,000
Cash Payments made for interest and
Income taxes during the years presented
are as follows:
1995 1994 1993
Interest $2,233,000 $1,836,000 $1,933,000
Income Taxes $237,000 $65,000 $261,000
The accompanying notes are an integral part of these financial
statements.
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FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
NOTE 1-CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of March 31, 1995, the consolidated
statements of income for the three month periods ended March 31, 1995,
1994, and 1993, and the consolidated statements of cash flows for the three
month periods then ended have been prepared by the company without an
audit. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments necessary to present fairly
the financial position, results of operations and cash flows at March 31,
1995 and for all periods presented have been made. Operating results for
the reporting periods presented are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the company's annual report on Form 10-K for
the year ended December 31, 1994.
NOTE 2-ORGANIZATION
First Citizens Bancshares, Inc., is a Bank Holding Company chartered on
December 14, 1982, under the laws of the State of Tennessee. On September
23, 1983 all of the outstanding shares of common stock of First Citizens
National Bank were exchanged for an equal number of shares in First
Citizens Bancshares, Inc.
NOTE 3-LONG TERM DEBT
Long term debt for the periods ending March 31 consists of Federal Home
Loan Bank Borrowings with an average life of 10 years. These borrowings
are maturity matched with specific loans and investments. The average
volume, rate and maturity is as follows:
Average Average Average
Volume Rate Maturity
FHLB Borrowings $4,488,000 5.71% 10 years
NOTE 4-STATEMENT OF CASH FLOWS
March March March
1995 1994 1993
Actual payments made
during the periods:
Income taxes $237,000 $65,000 $261,000
Interest $2,233,000 $1,836,000 $1,933,000
NOTE 5-CONTINGENT LIABILITIES
There are no material pending litigations as of the current
reportable date.
NOTE 6-INVESTMENT SECURITIES
The differences between book values of investment securities and
market values at March 31, 1995 and March 31, 1994, total ($829,000)
and ($145,000) respectively. FASB 115 requires banks to classify
securities into held to maturity, available for sale, and trading. First
Citizens has $0 in the trading account. Available for sale securities
values are adjusted to market quarterly and adjustments flow to the capital
section (net of tax). Held to maturity securities are stated at amortized
cost. Available for sale securities reflect a negative ($90,000) decrease the
first quarter of 1995 resulting in a net of tax decrease to capital of $54,000.
These movements fluctuate with increases or decreases in interest rates.
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FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CON'T)
(UNAUDITED)
MARCH 31, 1994
NOTE 6-INVESTMENT SECURITIES (continued)
FASB 119 effective January 1, 1995 will require banks to identify and
closely monitor Derivative products held in investment portfolio and to
disclose mark downs in book value that will have a material effect on the
balance and income statements. Derivatives listed in the following table
comprise $14,919,000 of the First Citizens Investment Portfolio and are
classified primarily as Government Backed Investments bearing short
maturities. Also listed is a comparison of Book to Market Value reflecting
no material difference. There are no future plans to increase the bank's
exposure by purchasing additional derivatives.
The derivatives at First Citizens consist of:
Stated in ($000) Book Market
CMO's 6464 6201
Strip Coupons 490 477
Structured Notes 7965 7716
Total 14919 14394
NOTE 7-REGULATORY CAPITAL REQUIREMENTS
Regulatory agencies impose certain minimum capital requirements on both
First Citizens Bancshares, Inc., and First Citizens National Bank. On
December 16, 1988, the Federal Reserve Board approved the Risk Based
Capital Guidelines for Bank Holding Companies. Presently, the Holding
Company and First Citizens National Bank exceed the required minimum
standards set by the Regulators.
NOTE 8-DEFERRED INCOME TAXES
First Citizens adopted FASB 109 as of January 1, 1993. The deferred tax
liability account reflects a total balance of $101,000. The timing
differences mainly consist of Reserve for Loan Loss Deductions.
NOTE 9-OTHER BORROWINGS AND DEBT
There were no short term borrowings as of March, 1995.
NOTE 10-OTHER INCOME
The Jackson Tennessee property was sold for a gain of $297,000 during first
quarter of March, 1994. The net of tax effect was $178,000 or $.25 per
share.
NOTE 11-RESERVE FOR LOAN LOSSES
FASB 114 (Accounting by creditors for impairments of loans). Effective
date is fiscal years beginning after December 15, 1994. FASB 114 requires
a bank to recognize impairment of a loan if the present value of expected
future cash flows discounted at the loan's effective interest rate (or
alternatively, the observable market price of the loan or the fair value of
the collateral) is less than the recorded investment. If the fair value
used is at least equal or greater than the recorded amount, there is no
impairment. Impaired loans are usually considered loans in non-accrual
status, 90 days or more past due that will not pay full interest and
principal due, or have been classified as a problem loan. First Citizens
National Bank has implemented procedures that capture average balances of
impaired loans, interest income associated with impaired loans, and
allocations made to the reserve for loan losses associated with impaired
loans. As a result of the implementation of FASB 114, $198,000 was
allocated to the Reserve Account at 3/31/95.
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FASB 118 (Accounting by creditors for impairment of a loan - Income
recognition and disclosures) amends FASB Statement 114 to allow a creditor
to use existing methods for recognizing interest income on impaired loans.
Implementation of procedures discussed in FASB 114 includes accounting
requirements for income recognition on impaired loans.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of the following discussion is to address significant
changes in income and expense accounts when compared to the quarter ending
March 31, 1994. Reference should be made to the Financial Statements
included as ITEM 1 for a more thorough understanding of the analysis. The
discussion relates mainly to activities of First Citizens National Bank
(First Citizens) in its banking business. However, the consolidated
statements of income reflect activities of both First Citizens and First
Citizens Bancshares, Inc. (Bancshares). Limited activities to date by the
Holding Company do not materially affect the income report.
The year of 1995 is proving to be a time of planning and implementation,
laying the foundation for growth and profitability in future years. In
January, the purchase of our Ripley Branch was finalized, adding $8,000,000
to deposit totals and providing a physical presence in Lauderdale County.
Imaging Statements are expected to be available to our customers during the
third quarter, 1995. It is also expected that the bank will announce the
selection of a Debit Card product during the second quarter of 1995. A
Teller Platform "TellerPro Plus" Application purchased from Southern Data
Systems, Roswell Georgia is also scheduled for installation during 1995.
In November, 1994 a grand opening was held at the Industrial Park Branch.
The Industrial Park Branch was constructed to provide a convenient service
location to the bank's existing and potential customers employed at various
plants located in the Dyersburg/Dyer County Industrial Park. An analysis
of customer and work flow volumes indicates a continuous steady growth in
existing and new business.
Multiple changes in the financial services industry continue to offer both
opportunity and challenge. Interstate banking/branching became a reality
by legislation passed September 13, 1994. The Act permits full nationwide
interstate banking one year from enactment and authorized interstate
branching after June 1, 1997. Methods by which regulators measure bank's
compliance with the Community Reinvestment Act will be changing in the
coming year. First Citizens takes pride in having received an
"Outstanding" rating on the most recent CRA examination, and has every
intention of maintaining this designation. The Board, Management and Staff
are committed to providing products and services which meet the financial
needs of all segments of the communities we serve.
A comparison of net income for first quarter 1995 ($643,000) and 1994
($827,000) is distorted by an after tax profit in 1994 of $178,000 derived
from the sale of other real estate in Madison County, Tennessee. Excluding
this profit, first quarter earnings for both years were comparable.
Another factor affecting first quarter earnings was increased operating
expenses of approximately $192,000 in the categories of professional fees,
marketing, and salary cost incurred as a result of opening both the
Industrial Park and Ripley Branches. The decision to expand our branch
network will increase operating costs short term. The long term growth in
loans and deposits will enhance future profitability of the bank. An
analysis of Interest Expense when comparing March '95 to the same time
period in '94 reflects an increase of $780,000. Increases in Interest
Expense was offset with additional net interest income totaling $1,027,000
derived from higher volumes within the loan and investment portfolios. A
quality loan portfolio also allowed for a reduction in the provision for
loan losses, despite continued growth.
Earnings per share at 3/31/91 was $.90 compared to $.89 (excluding income
received from the sale of the Madison County Property) at 12/31/94.
Weighted Average Number of Shares Outstanding changed from 706,798 at year
end '94 to 717,079 at 3/31/95. Shares were issued from previously
authorized unissued stock to satisfy the requirements of the Dividend
Reinvestment and Quarterly Stock Purchase Plan. In February, 1995 the
Board of Directors in consideration of shareholders interest, made a
decision to suspend the Optional Stock Purchase Plan effective March 31,
1995. The decision to suspend was based on inability to purchase stock
from the market place to meet the demands of the program thereby issuing
purchased shares from previously authorized and unissued stock.
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Total Assets grew 6.27% during the first quarter, ending the period at
$272,891,000. Loans increased $5,669,000 or 3.35% while investments grew
$8,900,000 or 11.4%. Total Liabilities were up $15,344,000 or 6.60% when
comparing March 31, 1995 to December 31, 1994 consisting of (1) deposit
growth of $12,356,000 and (2) additional borrowings from the Federal Home
Loan Bank totaling $2,658,000.
A review of the statement of changes in Stockholders' Equity reflects
increases in all categories. Favorable moves in the bond market during the
first quarter caused a net of tax increase totaling $205,000 to the capital
account. Net Unrealized Gains (Losses) on Available for Sale changed from
a loss of $259,000 at 12/31/94 to a loss of only $54,000 at 3/31/95.
The following table compares year-to-date non-interest income, and expense
of First Citizens as of March 31, 1993, 1994 and 1995:
Non-Interest Income
(in thousands)
March 31
% of % of
1995 Change 1994 Change 1993
Service Charges on Deposit
Accounts $272 (5.23%) $287 16.67% $246
Other Income $214 (59.92%) $534 46.70% $364
Trust Income $168 32.28% $127 41.11% $ 90
TOTAL NON-INTEREST INCOME $654 (31.01%) $948 35.43% $700
Total Non-Interest Income decreased approximately $294,000 or 31.01% when
comparing 1995 to 1994. The decrease is primarily attributed to a non-
recurring gain of $297,000 to other income derived from the sale of other
real estate in 1994. Service charge income from the processing of demand
deposit accounts is down $15,000 due to the introduction of a free checking
account product the last half of 1994. The loss of income is projected to
be offset with increased commissions received from the sale of personal
checks and overdraft income. Overdraft income is up approximately $13,000
when comparing 3/31/95 to 3/31/94. In March, 1995 the bank signed a
software agreement with Banking Solutions, Dallas Texas to offer an
improved processing solution for accounts receivable factoring. Under the
new program accounts receivable volumes are projected to increase from
$88,000 to $120,000 in approximately 90 days. Additional fee income
received from increased volumes will add significantly to other income.
Trust income reflects positive changes of 41.11% and 32.28% when reviewing
the years under comparison.
Non-Interest Expense
(in thousands)
March 31
% of % of
1995 Change 1994 Change 1993
Salaries & Employee
Benefits $1,233 5.11% $1,173 4.64% $1,121
Net Occupancy Expense $ 203 28.48% $ 158 8.97% $ 145
Other Operating Expense 872 11.08% $ 785 (2.61%) $ 806
TOTAL NON-INTEREST EXPENSE $2,308 9.07% $2,116 2.12% $2,072
Total Non-Interest Expense reflects a 9.07% change when comparing 1995 to
1994 after indicating a 2.12% change when comparing 1994 to 1993. A 28.48%
change in net occupancy expense is attributed to the cost of opening two
branches within the last 6 months as well as the purchase of equipment and
software associated with the installation of POD and Statement Imaging and
Teller Platform Applications. Other expenses also increased due to
additional cost incurred in professional fees and marketing programs
associated with the acquisition of the Ripley Branch. FDIC Insurance cost
increased in proportion to increases in insured deposits.
Salaries and benefits reflect a continuous effort to increase salaries and
benefits at a manageable level while reducing FTE to be more in line with
peer group levels. Full time equivalent employees as of March 31, 1995 was
151.64 compared to 145 as of March 31, 1994 and 151 in 1993. FTE
increased due to (1) the employment of 4 fulltime employees to staff the
Ripley Branch and 4 fulltime and 2 parttime employees to staff the
Industrial Park Branch; and (2) the employment of 4 parttime tellers to
complete the bank's teller training program. Parttime tellers are hired,
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trained in a comprehensive one month training program, then used to fill
vacancies created by leave of absence or peak customer volumes and special
projects requiring additional staff. Procedures are in place to
continuously monitor the fulltime equivalent in order to maintain staffing
levels comparable to peer group banks. However, it is conceivable that the
FTE ratio will remain higher than peer group banks because of increased
staff necessary to support extended banking hours and additional services
offered to our customers that are not offered by many peer group banks.
Additional services include a Trust Department, in-house Data Processing
and a Mortgage Lending Department. Fulltime equivalent when compared to
total assets is 2.02 at 3/31/95 compared to 1.46 peer group banks.
DEPOSITS
The average daily amount of deposits and average rates paid on such
deposits are summarized for the quarters ending March 31 for the years
indicated:
COMPOSITION OF DEPOSITS
(in thousands)
1995 1994 1993
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
Non Interest
Bearing Demand
Deposits $ 25,465 - $ 24,667 - $ 21,093 -
Savings Deposits $ 65,650 2.96% $ 65,730 2.54% $ 65,019 2.57%
Time Deposits $126,852 5.59% $104,718 4.51% $104,456 4.72%
TOTAL DEPOSITS $217,967 4.64% $195,115 3.58% $190,568 3.84%
Total deposits grew approximately $22.8 million when comparing 1995 to 1994.
Growth is attributed to rising interest rates and the purchase of $8,000,000 in
deposits held by the newly acquired Ripley Branch. An analysis of prior years
is reflective of customer response to low interest rates paid on deposits and
their reluctance to recommit funds into bank Certificates of Deposits. Time
deposit totals are $126,852 at 3/31/95 compared to $104,718 and $104,456 in 1994
and 1993. The average rate paid on time deposits during the quarter was 4.64%
compared to 3.58% and 3.84% in prior years.
Demand deposit accounts have remained relatively flat when comparing 1995 and
1994. However, "Sweep Account Funds" totaling approximately $10 million are not
included in average balances for Non Interest Bearing Demand Deposits. The
"Sweep Account" is a product offered to large balance customers which provides
for funds to automatically sweep 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 account balances as of March 31, 1994 and
1993 were $13,084,636 and $16,144,000.
The following tables set forth the maturity distribution of Certificates of
Deposit and other time deposits of $100,000.00 or more outstanding on the
books of First Citizens on March 31, 1995. The overall totals were
virtually unchanged from 1994 totals.
Maturity Distribution Of Time Certificates Of Deposit
In Amounts of $100,000.00 Or More As Of March 31, 1995
(in thousands)
Maturity Total Amount
3 months or less $ 4,232
3 through 6 months $ 6,022
6 through 12 months $ 4,279
over 12 months $ 5,089
Total $19,622
A summary of average interest earning assets and interest bearing
liabilities is set forth in the following table together with average
yields on the earning assets and average costs on the interest bearing
liabilities. Interest earning assets as of 3/31/95 were $242,023 at an
average rate of 8.57% compared to $215,575 average rate of 7.75% at 3/31/94
and $213,488 with an average rate of 8.19% at 3/31/93. Interest Bearing
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Liabilities totaled $215,122 at 3/31/95 with an average rate of 4.70%
compared to $189,347 average rate of 3.70% and $192,698 average rate of
3.80% at 3/31/94 and 3/31/93 respectively. Net Yield on Average Earning
Assets (annualized) was 4.39%, 4.50% and 4.76% at 3/31/95, '94, and '93
respectively. During the last half of 1994 and first quarter of '95
interest rates started to climb causing net interest margins to shrink.
Maintaining net interest margins achieved in prior years could prove
difficult if interest rates continue to rise in 1995. Sound
asset/liability management policies are in place to protect the company
from the negative effects of volatile swings in interest rates.
<TABLE>
First Citizens National Bank
Quarter Ending March 31
Monthly Average Balances and Interest Rates
(in thousands)
<CAPTION>
1995 1994 1993
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) $167,931 $4,019 9.57% $149,378 $3,274 8.77% $132,481 $3,223 9.73%
Investment Securities:
Taxable $ 60,262 $ 997 6.61% $ 47,168 $ 707 6.00% $ 67,381 $1,012 6.00%
Tax Exempt (4) $ 10,814 $ 125 4.62% $ 13,005 $ 146 4.49% $ 9,097 $ 98 4.31%
Interest Earning
Deposits $ 163 $ 2 4.91% $ 199 $ 1 2.01% $ 184 $ 1 2.17%
Federal Funds Sold $ 2,819 $ 42 5.96% $ 5,765 $ 47 3.26% $ 4,262 $ 34 3.19%
Lease Financing $ 34 $ 1 11.76% $ 60 $ 1 6.67% $ 83 $ 2 9.64%
Total Interest
Earning Assets $242,023 $5,186 8.57% $215,575 $4,176 7.75% $213,488 $4,370 8.19%
NON-INTEREST
EARNING ASSETS:
Cash and Due From
Banks $ 9,342 $ - -% $ 8,579 $ - -% $ 7,830 $ - -%
Bank Premises and
Equipment $ 8,503 $ - -% $ 7,985 $ - -% $ 7,979 $ - -%
Other Assets $ 3,936 $ - -% $ 3,217 $ - -% $ 3,776 $ - -%
Total Assets $263,804 $ - -% $235,356 $ - -% $233,073 $ - -%
LIABILITIES AND
SHAREHOLDERS' EQUITY:
INTEREST BEARING
LIABILITIES:
Savings Deposits $ 65,650 $ 485 2.96% $ 65,730 $ 418 2.54% $ 65,019 $ 418 2.57%
Time Deposits $126,852 $1,773 5.59% $104,718 $1,182 4.51% $104,456 $1,233 4.72%
Federal Funds
Purchased and
Other Interest
Bearing Liabilities $ 22,620 $ 269 4.76% $ 18,899 $ 151 3.20% $ 23,223 $ 178 3.06%
Total Interest
Bearing Liabilities $215,122 $2,527 4.70% $189,347 $1,751 3.70% $192,698 $1,829 3.80%
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NON-INTEREST
BEARING LIABILITIES:
Demand Deposits $ 25,465 $ - -% $ 24,625 $ - -% $ 21,029 $ - -%
Other Liabilities $ 1,599 $ - -% $ 1,691 $ - -% $ 1,731 $ - -%
Total Liabilities $242,186 $ - -% $215,663 $ - -% $215,458 $ - -%
SHAREHOLDERS'
EQUITY $ 21,618 $ - -% $ 19,693 $ - -% $ 17,615 $ - -%
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $263,804 $ - -% $235,356 $ - -% $233,073 $ - -%
NET INTEREST
INCOME $ - $2,659 -% $ - $2,425 -% $ - $2,541 -%
NET YIELD ON
AVERAGE EARNING
ASSETS $ - $ - 4.39% $ - $ - 4.50% $ - $ - 4.76%
(Annualized)
</TABLE>
(1) Loan totals are shown net of interest collected, not earned
and Loan Loss Reserve.
(2) Nonaccrual loans are included in average total loans.
(3) Loan Fees are included in interest income and the computations
of the yield on loans. Overdraft fees are excluded.
(4) Interest and rates on securities which are non-taxable for
Federal Income Tax purposes are not presented on a taxable
equivalent basis.
COMPOSITION OF LOANS
The Loan Portfolio total at 3/31/95 is $174,450,000 consisting of
$107,220,000 in Mortgage and Construction Loans; $45,467,000 in Commercial,
Financial and Agriculture Loans; $19,885,000 in Installment Loans to
Individual; and $1,878,000 in Other Loans. A comparison of loan growth for
the years of 1995, 1994 and 1993 reflects growth of $21,608,000,
$13,674,000 and $6,425,000 respectively. Loan growth exceeded budget
projections for 1993 and 1994. However, a quality, well diversified loan
portfolio allowed for a reduction in the provision for loan losses, despite
continued growth. A review of loan categories contained within the table
for 1995 reflects the largest percentage of growth centered in Commercial,
Financial Agriculture loans and Installment Loans to Individuals.
Operating loans extended for agricultural purposes are fully funded by June
of each year resulting in seasonal growth reflected in this category.
Increases to installment loans are due to a strategic planning decision to
aggressively seek high quality consumer loans after suppressing growth in
the years of 1991 to 1993. Growth in the loan portfolio is a key
objective, however ensuring credit quality is our first priority. There
are no concentrations of credit contained within the portfolio.
<PAGE>
<PAGE>13
The average yield on loans of First Citizens National Bank as of March 31
in the years indicated is as follows:
Year Yield
1995 9.57%
1994 8.77%
1993 9.73%
1992 10.49%
1991 11.98%
The aggregate amount of unused guarantees, commitments to extend credit and
standby letters of credit was $52,922,000 as of 3/31/95.
The following table sets forth loan totals net of unearned income by
category for the past five years:
March 31
(in thousands)
1995 1994 1993 1992 1991
Real Estate Loans:
Construction $ 11,457 $ 7,598 $ 7,003 $ 4,088 $ 4,927
Mortgage $ 95,763 $ 90,537 $ 87,864 $ 77,000 $ 70,957
Commercial, Financial
and Agricultural Loans $ 45,467 $ 35,784 $ 27,206 $ 33,425 $ 36,885
Installment Loans to
Individuals $ 19,885 $ 16,212 $ 14,976 $ 15,723 $ 17,349
Other Loans $ 1,878 $ 2,711 $ 2,119 $ 2,507 $ 2,570
TOTAL LOANS $174,450 $152,842 $139,168 $132,743 $132,688
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
The degree of risk to which a bank is subjected can be controlled through a
well managed asset/liability program. First Citizens controls interest
rate risk by employing interest sensitive liabilities in assets that are
also interest sensitive. One tool used to ensure market rate return is
variable rate loans. Loans totaling $70,480,000 or 40.40% of the total
portfolio are subject to repricing with one year or carry a variable rate
of interest. The ratio is down from 42% at 3/31/94, 47% at 3/31/93, and
63% at 3/31/92 reflecting efforts of the customer base to lock in lower
interest rates available in those time periods. Maturities in the one to
five year category total $115,779,000 reflecting a modest decrease of
$626,000 when compared to 3/31/94. The trend to lock in interest rates
reflected in previous years comparisons is projected to continue in 1995.
Due after
Due in one one year but Due after
year or less within five years five years
(in thousands)
Real Estate $15,915 $78,215 $13,090
Commercial, Financial
and Agricultural $19,590 $18,944 $ 6,933
All Other Loans $ 3,143 $18,620 $ 0
TOTAL $38,648 $115,779 $20,023
Loans with Maturities After One Year for which:
(in thousands)
Interest Rates are Fixed or Predetermined $103,970
Interest Rates are Floating or Adjustable $31,832
<PAGE>
<PAGE>14
NON-PERFORMING ASSETS
Non performing loans reflect a continuous improvement for the years of 1991
thru 1994. However, a review of 1995 reflects an upward swing of
approximately $635,000 when compared to 1994. The increase is a result of
one credit totaling approximately $900,000 classified as non performing the
second quarter of '94. The credit is expected to be paid in full within
the second quarter of '95. No loss is projected. Without the credit, non
performing assets would have slightly declined from the previous years
total. Non performing loans are below peer group ratios when excluding
this credit.
Categorization of a loan as non-performing is not in itself a reliable
indicator of potential loan loss. Other factors, such as the value of
collateral securing the loan and the financial condition of the borrower
must be considered in judgements as to potential loan loss. Loans that
represent a potential loss to First Citizens are adequately reserved for in
the provision for loan losses.
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 three months ending 3/31/95 if all loans
reported as non-accrual had been current in accordance with their original
terms and had been outstanding throughout the period is $17,000. Interest
income on loans reported as ninety days past due and on interest accrual
status was $34,000 for year-to-date 1994. 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". Restructured loan totals at March
31, 1994 are zero.
Loans classified by regulatory examiners and not reported under non-
accrual, past due or restructured pose no significant credit problems.
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.
The portfolio contained no loans renegotiated to provide a reduction or
deferral of interest or principal because of a deterioration in the
financial position of the borrower as of March 31 for the years under
comparison.
The following table sets forth the balance of non-performing loans as of
March 31, for the years indicated:
Non-Performing Loans
March 31
(in thousands)
90 Days Past Due
Year Non-Accrual Accruing Interest Total
1995 $ 721 $1,404 $2,125
1994 $1,051 $ 439 $1,490
1993 $1,517 $ 161 $1,678
1992 $1,952 $1,136 $3,088
1991 $1,750 $ 691 $2,441
LOAN LOSS EXPERIENCE AND
RESERVES FOR LOAN LOSSES
During the quarter just ended activity to the Reserve Account consisted of
(1) loans charge-offs - $60,000 (2) recovery of loans previously charged
off - $56,000 and (3) additions to Reserve - $65,000. Recovery of loans
previously charged off have exceeded loans charged off in the first quarter
of 1994 and 1993. However, recovery of charged off loans was $4,000 under
actual charge offs for the first quarter '95. A high quality loan
portfolio allowed management to reduce allocations made to the Reserve
Account in the first quarter. However, this amount is projected to
increase in direct relationship with growth in the portfolio.
<PAGE>
<PAGE>15
An analysis of the allocation of the allowance for Loan Losses is made on a
fiscal quarter at the end of the month, (February, August, and November)
and reported to the Board at its meeting immediately preceding quarter-end.
Requirements of FASB 114 & 118 have been incorporated into the policy for
Accounting by Creditor for Impairment of a Loan. A loan is impaired when
it is probable that a creditor will be unable to collect all amounts due of
principal and interest according to the original contractional terms of the
loan. First Citizens adopted the following as a measurement of impairment:
(1) Impairment of a loan at First Citizens shall exist when the present
value of expected future cash flows discounted at the loans effective
interest rate impede full collection of the contract; and (2) Fair Value
of the collateral, if the loan is collateral dependent, indicates
unexpected collection of full contract value. The Impairment decision will
be reported to the Board of Directors and other appropriate regulatory
agencies as specified in FASB 114 and 118. The bank will continue to
follow regulatory guidelines for income recognition for purposes of
generally accepted accounting principles, as well as regulatory accounting
principles.
An annual review of the loan portfolio to identify the risks
will cover a minimum of 70% of the gross portfolio less
installment loans. In addition, any single note or series of
notes directly or indirectly related to one borrower which
equals 25% of the bank's legal lending limit will be included
in the review automatically.
For analysis purposes the loans reviewed will be separated
into five classifications:
1. Pass - Loans that have been reviewed and graded high
quality or no major deficiencies.
2. Watch - Loans which, because of unusual circumstances,
need to be supervised with slightly more attention than is
common.
3. Problem - Loans which require additional collection
effort to liquidate both principal and interest.
4. Specific Allocation - Impaired loans, in total or in
part, in which a future loss is possible.
Examples of factors taken into consideration during the review
are: Industry or geographic economic problems, sale of
business, change of or disagreement among management, unusual
growth or expansion of the business, past due for either
principal or interest 90 days, placed on non-accrual or
renegotiated status, renewed four times without principal
reduction, declining financial condition, adverse change in
personal life, frequent overdrafts, lack of cooperation by
borrower, decline in marketability or market value of
collateral, insufficient cash flow, and inadequate collateral
values.
Management estimates the approximate amount of charge-offs for
the 12 month period ending 12/31/95 to be as follows:
Domestic Amount
Commercial, Financial & Agricultural $50,000
Real Estate-Construction None
Real Estate-Mortgage 70,000
Installment Loans to individuals &
credit cards 80,000
Lease financing None
Foreign N/A
01/01/95 through 12/31/95 Total $200,000
The book value of repossessed real property held by Bancshares
was $1,032,000 and $934,000 at 3/31/95 and 3/31/94
respectively. The balance was significantly reduced as a
result of the sale of property in December, 1993 valued at
$1,055,000. The only other property held on the books of
Bancshares is a strip shopping center valued at $685,000. The
remaining balance represents other real estate which is held
by First Citizens National Bank. Efforts to market the
property held by the holding company are on-going.
<PAGE>
<PAGE>16
Accounting for adjustments to the value of other Real Estate when recorded
subsequent to foreclosure is accomplished on the basis of an independent
appraisal. The asset is recorded at the lesser of its appraised value or
the loan balance. Any reduction in value is charged to the allowance for
possible loan losses.
All other real estate parcels are appraised annually and the carrying value
is adjusted to reflect the decline, if any, in its realizable value. Such
adjustments are charged directly to expense.
The following table summarizes the monthly average of net loans
outstanding; changes in the reserve for loan losses arising from loans
charged off and recoveries on loans previously charged off; additions to
the reserve which have been charged to operating expenses; and the ratio of
net loans charged off to average loans outstanding.
<TABLE>
First Citizens National Bank
Loan Loss Experience and Reserve for Loan Losses
(in thousands)
Quarter ending March 31
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Average Net Loans
Outstanding $167,965 $149,438 $132,564 $129,818 $128,671
Balance of Reserve
for Loan Losses
at Beginning of
Period $ 2,054 $ 1,676 $ 1,703 $ 1,936 $ 1,914
Loan Charge-Offs $ (60) $ (24) $ (26) $ (307) $ (123)
Recovery of Loans
Previously Charged Off $ 56 $ 44 $ 38 $ 38 $ 37
Net Loans Charged Off $ (4) $ 20 $ 12 $ (269) $ (86)
Additions to Reserve
Charged to Operating
Expense $ 65 $ 99 $ 117 $ 131 $ 213
Balance at End of
Period $ 2,115 $ 1,795 $ 1,832 $ 1,798 $ 2,041
Ratio of Net Charge-Offs
during quarter to Average
Net Loans Outstanding (.00%) .01% .01% (.21%) (.07%)
</TABLE>
The following table will identify charge-offs by category for the
periods ending 3/31/95, 3/31/94 and 3/31/93:
Charge-offs: 1995 1994 1993
Domestic:
Commercial, Financial and Agricultural $ 0 $ 0 $ 0
Real Estate-Construction 0 0 0
Real Estate-Mortgage 31 0 0
Installment Loans to individuals 29 24 26
Lease financing 0 0 0
Foreign N/A N/A N/A
Total $ 60 $ 24 $ 26
Recoveries:
Domestic:
Commercial, Financial and Agricultural $ 15 $ 16 $ 3
Real Estate-Construction 0 0 0
Real Estate-Mortgage 10 2 1
Installment Loans to individuals 31 26 34
Lease Financing 0 0 0
Foreign N/A N/A N/A
Total $ 56 $ 44 $38
Net Charge-offs $(4) $ 20* $12*
*Recoveries exceeded Charge-offs
<PAGE>
<PAGE>17
Investment Securities
The book value of listed investment securities as of the dates
indicated are summarized as follows:
Composition of Investment Securities
(March 31)
1995 1994 1993 1992 1991
U. S. Treasury & Government Agencies $60,735 $42,353 $61,068 $55,020 $46,856
State & Political Subdivisions $10,426 $13,665 $ 9,057 $ 5,446 $ 6,625
All Others $ 4,393 $ 5,519 $ 5,645 $ 3,944 $ 5,880
TOTALS $75,554 $61,537 $75,770 $64,410 $59,361
A major goal of the bank's investment portfolio management is to maximize
returns from investments while controlling the basic elements of risk. The
second goal is to provide liquidity and meet financial needs of the
community. Investment Securities also serve as collateral for government
and public fund deposits. Investments for the first quarter, 1995 were up
$14 million when compared to the same time period in 1994. 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. Tax Free Investments total
approximately $10,419,915.
Purchases made during the first quarter, 1995 totaled $12,570,000
consisting of Government Backed and Municipal Securities. Securities
totaling $10,000,000 were placed in the Held-To-Maturity Account while
securities totaling $2,070,000 were booked in the Available for Sale
account. No securities were sold prior to maturity during the first
quarter.
FASB 115 required banks to maintain separate investment portfolio for Held-
To-Maturity, Available-For-Sale, and Trading Account Investments. As of
March 31, 1995 approximately 74.41% of the total portfolio was placed in
the Held-To-Maturity account. The remaining 25.59% was book in the
Available-For-Sale account. FASB 115 also required banks to Mark to Market
the Available for Sale and Trading Account Investments at the end of each
calendar quarter. Held-To-Maturity Account Investments are stated at
amortized cost on the balance sheet. Mark to Market resulted in a negative
capital entry of $72,547.
As of 3/31/95, the securities portfolio held $14,919,258 in "Derivative"
products which consisted of $6,463,562 CMO's (Collateralized Mortgage
Obligations), $490,426 Strip Coupon, and $7,965,270 Structured Notes.
"Derivative" are non-traditional securities that derive value from the
price action of other assets. Total investments in Derivative products
constitutes 19.74% of the investment portfolio and are government backed
securities bearing short maturities. These securities do no represent a
high level of concentration or an abnormal amount of market risk to the
overall portfolio.
Maturities in the portfolio are made up of 14.14% within one year, 61.20%
after one year and within five years, and 24.53% after five years. Policy
provides for 20% maturities on an annual basis. Management made a
conscious effort to shorten maturities in 1994 based on volatility in
interest rates and mark to market rules. Maturities on investments
purchased in 1995 will be structured to meet loan demand as well as
projected changes in interest rates.
During the quarter just ended there were no transfers between the
investment portfolio accounts. The Trading Account for the entire quarter
maintained a zero balance.
<PAGE>
<PAGE>18
Investment Securities
Held to Maturity Available for Sale
March 31, 1995
(in thousands)
Amortized Fair Amortized Fair
Cost Value Cost Value
U.S. Treasury Securities $12,394 $12,335 $ 5,988 $ 5,893
U.S. Government agency
and corporation obligations
(exclude mortgage-backed
securities):
Issued by U.S. Government
agencies (2) 251 246 0 0
Issued by U.S. Government-
sponsored agencies (3) 25,963 25,664 7,318 7,369
Securities issued by states
and political subdivisions
in the U.S.:
General obligations 6,333 6,203 372 373
Revenue obligations 2,749 2,656 330 329
Industrial development and
similar obligations 0 0 641 641
Mortgage-backed securities (MBS):
Pass-through securities:
Guaranteed by GNMA 599 601 1,170 1,163
Issued by FNMA and FHLMC 1,289 1,274 0 0
Privately-issued 0 0 0 0
CMOs and REMICs:
Issued by FNMA and FHLMC 5,052 4,823 812 762
Privately-issued and
collateralized by MBS
issued or guaranteed by
FNMA, FHLMC, or GNMA 600 617 0 0
All other privately-issued 0 0 0 0
Other debt securities:
Other domestic debt securities 991 973 550 555
Foreign debt securities 0 0 0 0
Equity securities:
Investments in mutual funds - - 1,747 1,748
Other equity securities with
readily determinable fair
values - - 0 0
All other equity securities (1) - - 2,248 2,248
Total 56,221 55,392 19,429 19,333
(1) Includes equity securities without readily determinable fair values
at historical cost.
(2) Includes Small Business Administration "Guaranteed Loan Pool
Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than pass-through securities, CMOs, and
REMICs) issued by the Farm Credit System, the Federal Home Loan Bank
System, the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association, the Financing Corporation, Resolution
Funding Corporation, the Student Loan Marketing Association, and the
Tennessee Valley Authority.
<PAGE>
<PAGE>19
<TABLE>
Maturity and Yield on Securities March 31, 1995
(in thousands)
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U. S. Treasury and
Government Agencies $ 9,138 6.68% $38,915 6.59% $ 7,646 6.49% $5,036 5.74%
State and Political
Subdivisions* $ 1,322 7.15% $ 6,094 6.78% $ 3,010 6.82% $ - -%
All Others $ 300 9.00% $ 1,240 6.53% $ 2,253 5.61% $ 600 9.14%
TOTALS $10,760 6.80% $46,249 6.61% $12,909 6.40% $5,636 6.10%
</TABLE>
* Yields on tax free investments are stated herein on a taxable equivalent
basis.
Return on Equity and Assets
The table below presents for Bancshares certain operating ratios
for the quarters ending March 31st: (Not Annualized)
1995 1994 1993 1992 1991
Percentage of Net Income to:
Average Total Assets .24% .35% .32% .17% .18%
Average Shareholders Equity 2.64% 3.74% 3.84% 2.14% 2.42%
Percentage of Dividends Declared
Per Common Share to Net Income
Per Common Share 33.90% 22.73% 22.41% 38.89% 35.90%
Percentage of Average Shareholders'
Equity** to Average Total Assets 9.18% 10.03% 9.10% 8.76% 8.30%
Improved earnings are reflected when reviewing the financial ratios for the
years of 1990 thru 1994. Management has made ongoing efforts to control
expenses and maximize earnings to achieve earnings comparable to peer group
banks. An analysis of return on assets at March 31, 1995 reflects a slight
decline when compared to 3/31/94 and 3/31/93. Accelerated asset growth
over the past twelve months coupled with rising rates paid on interest
bearing deposits had a significant impact on earnings in the first quarter
of '95. A comparison of total assets at 3/31/95 and 3/31/94 reflects an
average growth rate in excess of 13%.
Increased expenses during the 1st quarter can be attributed to the addition
of two branch banks opened in November, 1994 and January, 1995 and the
installation cost of POD and Statement Imaging and a Teller Platform
System.
The company's strategic plan addresses objectives to sustain improved
earnings, maintain a quality loan and investment portfolio and to maintain
market share by providing quality customer service. The Bank's management
and employees are rewarded with incentive compensation based on the level
of ROA achieved at year end. A return on assets of 1.25% is required if
maximum benefits are to be realized.
Total Shareholder's equity (including Loan Loss Reserve) of First Citizens
Bancshares as of 3/31/95 was $24,739,000 compared to $23,879,000 at
12/31/94.
Percentage of Dividends declared per common share to net income per common
share increased from 22.41% and 22.73% to 33.90% when comparing 1993, 1994
and 1995 respectively. While dividends per share have trended upward,
improved earnings serve to reduce the comparative ratio. A 10% stock
dividend declared on October 21, 1992 was payable to shareholders of record
December 15, 1992, thereby increasing outstanding shares. Earnings per
share were adjusted accordingly. During the third quarter, of 1993 a 2.5
for 1 stock split was declared to holders of record as of October 15, 1993
on the common capital stock of Bancshares. The numbers of shares
outstanding increased proportionately with no effect on capital. An
amendment to the Company's Charter by the shareholders in April 1994
approved an increase in the number of shares authorized from 750,000 to
2,000,000.
<PAGE>
<PAGE>20
A Stock repurchase program has been approved by the Board of Directors
effective the fourth quarter, 1994. The purpose of this action is to
acquire shares to service the Dividend Reinvestment program. Under the
terms of the program, the company will repurchase up to $200,000 of
Bancshares' stock in a calendar quarter on a first come, first served
basis.
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. Liquidity is
determined by a comparison of net liquid assets to net liabilities and
consistently 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. Low interest rates during 1993 and the
first 9 months of 1994 placed pressure on the bank's ability to retain
funds in maturing certificates of deposit. Many of our customers were
seeking alternate investment options in annuities, mutual funds, and
stocks. Deposits over $100,000 are more volatile and interest sensitive
than smaller consumer deposits which make up the major portion of our
deposit base. During the last half of 1994 interest rates started to climb
upward causing consumers to move funds from Annuities and Mutual Funds into
bank Certificates of Deposits. Liquidity became less of a concern for the
bank's management with accelerated growth in long term deposits. Another
factor that has had an impact on liquidity was the demand to lock in low
interest rates charged on loans for longer periods of time. When comparing
the first quarter, 1995 to the same time period in 1994 loans with
maturities of one to five years increased approximately $14,650,000. Also
the category of fixed or predetermined interest rates increased in excess
of $15,400,000.
To address liquidity concerns the bank became a member of the Federal Home
Loan Bank, thereby opening up an additional liquidity source totaling $11.5
million should the need arise. In 1995 Federal Home Loan Bank Borrowings
totaled $6,783,000. These borrowings are maturity matched with specific
loans and investments on the books of the bank. Other sources that are
available to meet liquidity needs are (1) Loans in excess of $38,648,000
and Investment Securities totaling $10,760,000 maturing within one year and
(2) Lines of Credit with correspondent banks totaling $7.5 million.
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 and is a primary objective of the asset/liability
management program.
The following condensed gap report provides an analysis of interest rate
sensitivity of earning assets and costing liabilities. First Citizens
Asset/Liability Management Policy provides that the cumulative gap as a
percent of assets shall not exceed 10% for categories up to 12 months and
one to two year categories and 20% for categories in excess of two years.
As evidenced by the following table, our current position is significantly
below this level, with annual income exposure determined to be less than
the $150,000 exposure limitation set by policy.
<PAGE>
<PAGE>21
<TABLE>
CONDENSED GAP REPORT
--------------------
CURRENT BALANCES
--------------------
03/31/95
(in thousands)
<CAPTION>
DAILY 0-1 1-2 2-3 3-6 6-12 1-2 2+
TOTAL FLOATING MONTH MONTHS MONTHS MONTHS MONTHS YEARS YEARS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH AND DUE FROM
CURRENCY AND COIN 2,209 - - - - - - - 2,209
DUE FROM BANKS 1,815 - - - - - - - 1,815
CASH ITEMS 4,566 - - - - - - - 4,566
MONEY MARKET 162 162 - - - - - - -
TOTAL CASH & DUE FROM 8,752 162 - - - - - - 8,590
INVESTMENTS 75,554 - - 1,351 3,320 14,224 9,116 11,328 36,215
LOANS
COMMERCIAL FIXED 21,038 - 1,927 369 599 1,997 5,772 3,046 7,328
COMMERCIAL VARIABLE 20,407 20,407 - - - - - - -
REAL ESTATE VARIABLE 20,601 20,601 - - - - - - -
REAL ESTATE FIXED 82,064 - 2,354 1,925 571 1,204 3,779 9,548 62,683
HOME EQUITY LOANS 4,502 4,502 - - - - - - -
SEC MORTGAGE 53 - 53 - - - - - -
INSTALLMENT LOANS 19,630 - 322 182 284 618 1,542 3,451 13,231
INSTALLMENT VARIABLE 255 255 - - - - - - -
FLOOR PLAN 1,030 - 1,030 - - - - - -
CREDIT CARDS 1,691 - - - - - - - 1,691
OVERDRAFTS 187 - 187 - - - - - -
NON-ACCRUAL LOANS 721 - - - - - - - 721
FHLB LOANS 2,271 - - - - - - - 2,271
TOTAL LOANS 174,450 45,765 5,873 2,476 1,454 3,819 11,093 16,045 87,925
LOAN LOSS RESERVE 2,115 - - - - - - - 2,115
NET LOANS 172,335 45,765 5,873 2,476 1,454 3,819 11,093 16,045 85,810
FED FUNDS SOLD 2,500 2,500 - - - - - - -
TOTAL EARNING ASSETS 250,389 48,265 5,873 3,827 4,774 18,043 20,209 27,373 122,025
OTHER ASSETS
BUILDING, F&F AND LAND 8,584 - - - - - - - 8,584
OTHER REAL ESTATE 218 - - - - - - - 218
OTHER ASSETS 4,948 - - - - - - - 4,948
TOTAL OTHER ASSETS 13,750 - - - - - - - 13,750
TOTAL ASSETS 272,891 48,427 5,873 3,827 4,774 18,043 20,209 27,373 144,365
DEMAND DEPOSITS
BANKS 39 - - - - - - - 39
DEMAND DEPOSITS 24,012 - - - - - - - 24,012
TOTAL DEMAND 24,051 - - - - - - - 24,051
</TABLE>
<PAGE>
<PAGE>22
<TABLE>
CONDENSED GAP REPORT
--------------------
CURRENT BALANCES
--------------------
<CAPTION>
03/31/94
(in thousands)
DAILY 0-1 1-2 2-3 3-6 6-12 1-2 2+
TOTAL FLOATING MONTH MONTHS MONTHS MONTHS MONTHS YEARS YEARS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAVINGS ACCOUNTS
REGULAR SAVINGS 17,832 - - - - - - - 17,832
NOW ACCOUNT 24,737 - - - - - - - 24,737
IMF-MMDA 11,157 11,157 - - - - - - -
HIGH YIELD ACCOUNT 6,578 6,578 - - - - - - -
DOGWOOD CLUB 4,104 - - - - - - - 4,104
TOTAL SAVINGS 64,408 17,735 - - - - - - 46,673
TIME DEPOSITS
FLEX-CD 93,279 - 7,049 6,425 6,950 23,631 18,831 15,894 14,499
LARGE CD-FLEX 19,622 - 1,929 1,344 959 6,022 4,279 2,789 2,300
IRA-FLOATING 188 188 - - - - - - -
IRA-FIXED 20,103 - 281 359 281 1,325 2,958 3,484 11,415
CHRISTMAS CLUB 185 - - - - - 185 - -
TOTAL TIME 133,377 188 9,259 8,128 8,190 30,978 26,253 22,167 28,214
TOTAL DEPOSITS 221,836 17,923 9,259 8,128 8,190 30,978 26,253 22,167 98,938
SHORT TERM BORROWINGS
TT&L 427 427 - - - - - - -
SECURITIES SOLD-SWEEP 10,398 10,398 - - - - - - -
SECURITIES SOLD-FIXED 6,822 - - 1,702 400 3,513 815 112 280
FHLB-LIBOR INVESTMENT 4,407 4,407 - - - - - - -
FHLB-LONG TERM 2,376 - - - - - - - 2,376
TOTAL SHORT TERM BORR. 24,430 15,232 - 1,702 400 3,513 815 112 2,656
OTHER LIABILITIES
ACCRUED INT PAYABLE 1,564 - - - - - - - 1,564
OTHER LIABILITIES 322 - - - - - - - 322
TOTAL OTHER LIAB. 1,886 - - - - - - - 1,886
TOTAL LIABILITIES 248,152 33,155 9,259 9,830 8,590 34,491 27,068 22,279 103,480
CAPITAL
COMMON STOCK 721 - - - - - - - 721
SURPLUS 9,222 - - - - - - - 9,222
UNREALIZED GAIN(LOSSES) -54 - - - - - - - -54
UNDIVIDED PROFITS 14,850 - - - - - - - 14,850
TOTAL CAPITAL 24,739 - - - - - - - 24,739
TOTAL LIAB. & CAPITAL 272,891 33,155 9,259 9,830 8,590 34,491 27,068 22,279 128,219
GAP (SPREAD) - 15,272 -3,386 -6,003 -3,816 -16,448 -6,859 5,094 16,146
GAP % TOTAL ASSETS - 5.60 -1.24 -2.20 -1.40 -6.03 -2.51 1.87 5.92
CUMULATIVE GAP - 15,272 11,886 5,883 2,067 -14,381 -21,240 -16,146 -
CUMM. GAP % TOTAL ASSETS - 5.60 4.36 2.16 0.76 -5.27 -7.78 -5.92 -
SENSITIVITY RATIO - 1.46 1.28 1.11 1.03 0.85 0.83 0.89 1.00
</TABLE>
<PAGE>
<PAGE>23
Capital Resources
Total shareholders' equity of First Citizens Bancshares as of March
31, 1995, was $24,739,000. Capital as a percentage of total assets for the
quarter ending March 31 is presented in the following table for the years
indicated (excluding Loan Loss Reserves):
1995 1994 1993 1992 1991
9.06% 9.37% 8.41% 7.87% 7.45%
Increasing the capital base of the Company is a vital part of
strategic planning. Although the present capital to asset ratio remains
well in excess of the level required by Regulators for banks our size,
management is aware of the importance of this base.
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. The minimum risk-based capital
ratio established by the Federal Reserve is 8%. At least one-half or 4%
must consist of core capital (Tier 1), and the remaining 4% 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. 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' capital consists entirely of Tier 1
components, with the exception of the allowance for loan and lease losses.
Bancshares has historically maintained capital in excess of minimum levels
established by the Federal Reserve Board. The risk-based capital ratio
reflects continuous improvement when reviewing the years included in the
above table. Risk-based capital ratio as of 3/31/95 was 14.06%,
significantly in excess of the 8% mandated by the Regulatory Authorities.
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.
Effects of Inflation
Inflation has a significant impact on the growth of total assets in
the banking industry, resulting in a need to increase equity capital in
order to maintain an appropriate equity to asset ratio.
Operating expenses are directly affected by increases in salaries and
employee benefits, supplies, legal, audit and professional fees, utilities,
advertising and insurance. Now that interest rates have been deregulated,
inflation and competition are major keys to the cost of acquiring and
retaining deposits.
A well managed asset/liability management program can maximize net interest
income; and at the same time, reduce the impact of inflation on earnings.
<PAGE>
<PAGE>24
Part II - Other Information
Item 1. Legal Proceedings
Information dealing with legal proceedings as disclosed in Part I, Item 1,
in Footnote five (5) of the notes to financial statements is incorporated
herein by reference.
Item 2. Changes in Securities
Dividends paid to Shareholders of First Citizens Bancshares, Inc. are
funded by dividends to the Bank Holding Company from First Citizens
National Bank. Federal Reserve Bank regulators would be critical of a bank
holding company that pays cash dividends that are not covered by earnings
or that are funded from borrowings or unusual or non recurring gains, such
as the sale of property or assets. Under rules set forth by the
Comptroller of the Currency in Interpretive Ruling 7.6100, the board of
directors of a national bank may declare dividends as it may judge to be
expedient, subject to statutory limitations which deal with the balance of
the surplus account, sufficiency of net profits, dividend payments on
preferred stock, and default of any assessment due to the Federal Deposit
Insurance Corporation.
Item 6(b) No reports on Form 8-K were filed for the quarter ended 3/31/95.
<PAGE>
<PAGE>25
SIGNATURES
Pursuant to the requirements of Sections 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, thereunto duly authorized.
First Citizens Bancshares, Inc.
(Registrant)
Date: May 12, 1995 Stallings Lipford
Stallings Lipford, Chairman &
CEO
Date: May 12, 1995 Jeff Agee
Jeff Agee, Vice President &
Chief Financial Officer
First Citizens National Bank
(Principal Subsidiary)
<PAGE>1
<TABLE>
DATA STATED IN THOUSANDS
VOLUNTARY SCHEDULE - CERTAIN FINANCIAL INFORMATION
REGULATION STATEMENT CAPTION FIRST QTR. FIRST QTR. TO DATE
1995 1994 1995 1994
<S> <C> <C> <C> <C>
5-02 (1) Cash and Cash Items 11252 15416 11252 15416
5-02 (2) Marketable Securities 75554 61537 75554 61537
5-02 (3)(b)(1) Notes Receivable 174450 152842 174450 152842
5-02 (4) Allowance for Doubtful
Accounts 2115 1795 2115 1795
5-02 (15) Total Assets 272891 239918 272891 239918
5-02 (24) Other Liabilities 248152 217449 248152 217449
5-02 (30) Common Stock 721 7065 721 7065
5-02 (31)(a)(2) Additional Capital Other 9222 2370 9222 2370
5-02 (31)(a)(3)(ii) Retained Earnings -
Unappropriated 14796 13034 14796 13034
5-03 (b)(1)(e) Other Revenues 5865 5132 5865 5132
5-03 (b)(2)(e) Cost of Other Revenues 2373 2215 2373 2215
5-03 (b)(8) Interest and
Amortization of Debt
Discount 2527 1747 2527 1747
5-03 (b)(10) Income Before Taxes
and Other Items 965 1170 965 1170
5-03 (b)(11) Income Tax Expense 322 343 322 343
5-03 (b)(14) Income/Loss from
Continuing Operations 643 827 643 827
5-03 (b)(19) Net Income or Loss 643 827 643 827
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-END> MAR-31-1995 MAR-31-1994
<CASH> 8,752,000 10,841,000
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 2,500,000 4,575,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 19,333,000 16,289,000
<INVESTMENTS-CARRYING> 56,221,000 45,248,000
<INVESTMENTS-MARKET> 0 0
<LOANS> 174,450,000 152,842,000
<ALLOWANCE> 2,115,000 1,795,000
<TOTAL-ASSETS> 272,891,000 239,918,000
<DEPOSITS> 221,836,000 195,214,000
<SHORT-TERM> 17,220,000 17,860,000
<LIABILITIES-OTHER> 2,313,000 2,050,000
<LONG-TERM> 6,783,000 2,325,000
<COMMON> 721,000 7,073,000
0 0
0 0
<OTHER-SE> 24,018,000 15,396,000
<TOTAL-LIABILITIES-AND-EQUITY> 272,891,000 239,918,000
<INTEREST-LOAN> 4,021,000 3,276,000
<INTEREST-INVEST> 1,145,000 853,000
<INTEREST-OTHER> 45,000 55,000
<INTEREST-TOTAL> 5,211,000 4,184,000
<INTEREST-DEPOSIT> 2,258,000 1,600,000
<INTEREST-EXPENSE> 2,527,000 1,747,000
<INTEREST-INCOME-NET> 2,684,000 2,437,000
<LOAN-LOSSES> 65,000 99,000
<SECURITIES-GAINS> 7,000 0
<EXPENSE-OTHER> 2,308,000 2,116,000
<INCOME-PRETAX> 965,000 1,170,000
<INCOME-PRE-EXTRAORDINARY> 965,000 1,170,000
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 643,000 827,000
<EPS-PRIMARY> 0.90 1.17
<EPS-DILUTED> 0.90 1.17
<YIELD-ACTUAL> 4.25 4.45
<LOANS-NON> 721,000 1,051,000
<LOANS-PAST> 1,404,000 439,000
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 3,752,000 5,225,000
<ALLOWANCE-OPEN> 2,054,000 1,676,000
<CHARGE-OFFS> 60,000 24,000
<RECOVERIES> 56,000 44,000
<ALLOWANCE-CLOSE> 2,115,000 1,795,000
<ALLOWANCE-DOMESTIC> 2,115,000 1,795,000
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
