<PAGE> 1
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 June 30, 1995 Commission File Number 2-83542
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 728,607 shares outstanding as of June 30, 1995.
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PART I -FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
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<PAGE> 3
FIRST CITIZENS BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, December 31,
1995 1994
ASSETS
Cash and due from banks $ 11,381,000 $ 9,784,000
Federal funds sold 5,950,000 2,900,000
Investment securities -
Trading Investments-Stated at Market 0 0
Held to Maturity-amortized cost-Fair
Value of $49,186,000 at June 30, 1995
and $45,151,000 at December 31, 1994. 48,776,000 47,295,000
Available for Sale-Stated at Market 19,148,000 16,874,000
Loans (Excluding unearned income of
$1,644,000 at June 30, 1995, and
$1,334,000 at December 31, 1994) 185,360,000 168,781,000
Less: Allowance for loan losses 2,186,000 2,054,000
Net Loans 183,174,000 166,727,000
Premises and equipment 8,711,000 8,392,000
Other assets 5,471,000 4,715,000
TOTAL ASSETS $282,611,000 $256,687,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $231,646,000 $209,480,000
Securities sold under agreement to
repurchase 16,449,000 16,950,000
Federal funds purchased and Other
Short Term Borrowing 0 0
Long-term debt - Note 3 (Includes Long
Term FHLB) 6,740,000 4,125,000
Notes payable of employee stock
ownership plan 0 0
Other liabilities 2,077,000 2,253,000
Total Liabilities 256,912,000 232,808,000
Contingent liabilities - See Note 5
Stockholders' Equity:
Common stock, $1 par value - 2,000,000
authorized; 728,607 issued and
outstanding at June 30, 1995;
714,824 issued and outstanding at
December 31, 1994 729,000 715,000
Surplus 9,520,000 9,000,000
Retained earnings 15,347,000 14,423,000
Obligation of Employee Stock
Ownership Plan 0 0
Net Unrealized Gains (Losses) on Available
for Sale 110,000 (259,000)
Total Common Stock and Retained Earnings 25,706,000 23,879,000
Less-Treasury 161 Shares, at Cost at
June 30, 1995 and 3 at December 31, 1994 (7,000) 0
Total Stockholders' Equity 25,699,000 23,879,000
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $282,611,000 $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 Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Interest Income
Interest and fees
on loans $4,393,000 $3,729,000 $8,413,000 $7,178,000
Interest on investment
securities:
Taxable 1,051,000 774,000 2,071,000 1,481,000
Tax-exempt 118,000 156,000 243,000 302,000
Other interest income 63,000 12,000 108,000 67,000
Lease financing income 1,000 1,000 2,000 2,000
Total Interest Income 5,626,000 4,672,000 10,837,000 9,030,000
Interest Expense
Interest on deposits 2,573,000 1,624,000 4,831,000 3,224,000
Other interest expense 318,000 222,000 587,000 369,000
Total Interest Expense 2,891,000 1,846,000 5,418,000 3,593,000
Net Interest Income 2,735,000 2,826,000 5,419,000 5,437,000
Provision for Loan
Losses 86,000 100,000 151,000 199,000
Net Interest Income
after Provision 2,649,000 2,726,000 5,268,000 5,238,000
Other Income
Securities gains
(losses) 17,000 0 24,000 0
Other income 674,000 523,000 1,321,000 1,297,000
Total Other Income 691,000 523,000 1,345,000 1,297,000
Other expenses 2,251,000 2,133,000 4,559,000 4,249,000
Net income before
income taxes 1,089,000 1,116,000 2,054,000 2,286,000
Provision for income
taxes 366,000 364,000 688,000 707,000
Net income $ 723,000 $ 752,000 $1,366,000 $1,579,000
Earnings per share $ 1.00 $ 1.06 $ 1.89 $ 2.23
Weighted average number of
shares outstanding 721,697 706,905 721,697 706,905
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 FLOW
(UNAUDITED)
Six Months Ended June 30,
1995 1994 1993
Net Cash Provided by Operating
Activities $ 1,347,000 $2,187,000 $ 2,398,000
Investing Activities
Proceeds of Maturities of Held to
Maturity Securities 9,563,000 10,054,000 16,049,000
Purchase of Held to Maturity
Investments (11,000,000)(15,739,000) (9,033,000)
Proceeds from Maturities of
available for Sales Securities 812,000 0 0
Proceeds from Sales of available
for Sale Securities 630,000 0 0
Purchase of available for Sale
Securities (3,133,000) 0 0
Increase in Loans-Net (16,598,000)(15,980,000) (7,386,000)
Purchases of Premises and Equipment (819,000) (692,000) (192,000)
Net Cash Provided by
Investing Activities (20,545,000)(22,357,000) (562,000)
Financing Activities
Net increase (decrease) in Demand
and Savings Accounts (1,212,000) (854,000) (1,530,000)
Increase (decrease) in Time Accounts 23,377,000 8,073,000 (3,031,000)
Increase (decrease) in Long Term Debt 2,615,000 4,220,000 (66,000)
Treasury Stock Transactions (7,000) 60,000 0
Proceeds from Sale of Common Stock 14,000 66,000 72,000
Cash Dividends Paid (441,000) (376,000) (338,000)
Net increase (decrease) in
Short-term Borrowings (501,000) 5,225,000 (2,517,000)
Net Cash Provided (used) by Financing
Activities 23,845,000 16,414,000 (7,410,000)
Increase (decrease) in Cash and Cash
Equivalents 4,647,000 (3,756,000) (5,574,000)
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 $17,331,000 $ 9,852,000 $ 11,717,000
Cash payments made for interest and income taxes during
the years presented are as follows:
1995 1994 1993
Interest $4,877,000 $3,430,000 $3,713,000
Income Taxes 841,000 520,000 387,000
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)
June 30, 1995
Note 1 - Consolidated Financial Statements
The consolidated balance sheet as of June 30, 1995,
the consolidated statements of income for the three
month periods ended June 30, 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 June 30, 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 June 30 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 $2,333,000 5.71% 10 Years
FHLB Borrowings 4,407,000 5.71% 4 Years
Note 4 - Statement of Cash Flows
June 30,
1995 1994 1993
Actual payments made during
the periods:
Income taxes $ 841,000 $ 520,000 $ 387,000
Interest 4,877,000 3,430,000 3,713,000
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<PAGE> 7
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 June 30, 1995 and June 30, 1994,
total $410,000 and ($892,000) 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 the adjustments flow to the capital
section (net of tax). Held to maturity securities are
stated at amortized cost. Available for sale
securities reflect a positive $273,000 increase for
the second quarter of 1995 resulting in a net of tax
increase to capital of $164,000. These movements can
fluctuate with the bond market.
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 $14,930,000 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 6416
Strip Coupons 497 489
Structured Notes 7969 7829
Total 14930 14734
We consider these securities to be normal safe
investments over the long term. One half of the CMO's
are matched with funds that are tied to the same rate
index. The step up agencies are considered above
average investments that reprice upward at the change
date.
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 $1,000. The timing differences mainly
consist of Reserve for Loan Loss deductions.
Note 9 - Other Income
The Jackson Tennessee property was sold for a gain of
$297,000 during the quarter ending March, 1994.
Earnings, net of tax effect, were $178,000 or $.25 per
share.
Note 10 - 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. Allocations made for impaired loans
as of June 30, 1995 was $188,000.
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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 June 30, 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.
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. Total Assets as of
6/30/95 were $10,143,000 while loans to deposits ratio
is at 10.73%. The Industrial Park Branch, constructed
and opened in 1994, 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 continues to
expand in development of new and existing business.
Total Assets at June 30, 1995 was $2,469,000. Loan to
deposits is 34.53% for the same time period. In June,
1995 a contract was signed with Internet/Most, Reston,
VA. for ATM and Point of Sale Processing. A business
partnership with Internet/Most will offer First
Citizens National Bank an innovative network for
electronic and remote banking services. Electronic
services provided by the network are ATM and POS
processing while remote banking products include home
banking programs using Personal Computer and Screen
Phone devices as well as bill payments services.
Management believes that a successful
electronic/homebanking program is a key part to
accomplishing strategic planning goals set for the
bank's future service delivery systems. The ATM
switch from Deluxe, Inc. (current ATM network
provider) is expected to be completed by February,
1996, with the introduction of the bank's debit card
product within 90 to 120 days thereafter. The bank
has selected the Visa Check Card offered by Visa,
U.S.A., Inc. as its debit card (POS) solution.
Application to Visa is in process. The Visa Check
Card is considered to be the most widely accepted
debit card by consumers in today's market. Another
strategic element included in the decision to add POS
(Debit) card services was the selection of an online
debit system. The online debit system is the most
common means of communication between the bank and
retailer. When debit transactions are authorized
online the funds are automatically transferred from
the customer's account, eliminating preapproval risk
to the bank. If funds are not available at time of
transaction approval, the transaction is void. An
automated Teller Platform "TellerPro Plus" application
purchased from Southern Data Systems, Roswell Georgia
is scheduled for installation during the third and
fourth quarters of 1995. Online Signature
Verification, considered to be another critical
electronic identification device, was also purchased
from Southern Data Systems and will be installed
concurrently with TellerPro. Signature Verification
will reduce risk in transaction approval as well as
speed up service delivery to the customer. Item and
Statement Imaging installation project continues to be
a primary focus of the bank's Information Systems
division. Imaged statements are expected to be
available to our customers in the third to early
fourth quarter, 1995.
First Citizens will continue to seek new and better
ways to serve the needs of present and future
customers in a highly competitive financial services
market. Board and Management decisions will be driven
by what we perceive to be in the best interest of the
future growth and profitability of the institution.
A comparison of Total Assets for quarters ending June
30, 1995, 1994 and 1993 reflects significant asset
growth of $35,320,000 and $44,945,000. Total assets
have increased approximately $26 million when
comparing June 30, 1995 to December, 31, 1994. Loans
increased approximately $22 million (14.00%) while
Investments increased $8 million or 12.88%.
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Total Liabilities net of equity were up $33,227,000
and $40,757,000 when comparing June 30, 1995 to June
30, 1994 and 1993. Total liabilities have increased
approximately 24 million when comparing June 30, 1995
to December 31, 1994. The substantial growth
reflected when reviewing total liabilities is
attributed to: (1) Acquisition of the Ripley Branch,
Ripley, TN having total assets of $8.7 million (2)
Agressive growth in time deposits brought about by an
increased interest rate environment. Interest rates
paid on time deposits have declined during the last
half of the second quarter bringing deposit growth
more in proportion to the bank's capital plan.
A comparison of net income for quarters ending June,
1995 and 1994 reflects a decline of approximately
$213,000. Net Income total at 6/30/94 of $1,579,000
is distorted due to an after tax profit of $178,000
derived from the sale of other real estate in Madison
County, Tennessee. Excluding this profit, second
quarter earnings in 1995 is more comparable to that of
1994. Other factors affecting net income were
increases in Other Expenses totaling $310,000 in the
categories of salaries and benefits, depreciation and
start up costs for Item and Statement Imaging and
TellerPro Plus. A more detailed explanation is
contained within this section in the discussion of
Non-Interest Expense.
Earnings per share at 6/30/95 were $1.89 compared to
$2.23 at 6/30/94. 1994 earnings per share includes
income received from the sale of the Madison County
Property. Weighted Average Number of Shares changed
from 706,905 to 721,697. Shares were issued from
previously authorized unissued stock to satisfy the
requirements of Quarterly Stock Purchase Plan through
March 31, 1995 and the Dividend Reinvestment Plan. In
February, 1995 the Board of Directors in consideration
of shareholders interest, made a decision to suspend
the Optional Stock Purchase Plan effective 3/31/95.
The decision to suspend was based on inability to
purchase stock from the market place to meet demands
of the program.
The following table compares year-to-date non-interest
income, and expense of First Citizens as of June 30,
1995, 1994, and 1993:
Non-Interest Income
(in thousands)
June 30 June 30 June 30
1995 % of Change 1994 % of Change 1993
Service Charges
on Deposit Accts. $600 5.07% $571 10.65% $516
Other Income $448 (43.36%) $791 21.69% $650
Trust Income $297 6.83% $278 17.79% $236
TOTAL NON-INTEREST
INCOME $1,345 (17.98%) $1,640 16.97% $1,402
Total Non-Interest Income is down $295,000 (17.98%)
when comparing 6/30/95 to 6/30/94. The decrease is
primarily attributed to a one time after tax credit of
$178,000 resulting from the sale of other real estate
during the first quarter of 1994 and a decrease in fee
income of $89,000 received from the Bank's subsidiary,
Financial Plus, Inc. The broker/dealer subsidiary has
undergone a management change, following the abrupt
resignation of its president to open a local branch
for a competitor. Arbitration hearings have been
scheduled to address charges filed against the former
president and his new employer alleging a breach of
fiduciary duty and a violation of confidentiality. A
slow down is also noted in fee income derived from the
mortgage loan division. Overdraft income was removed
from Interest and Fees on Loans and placed into other
income for prior years and restated within the table.
Securities gains totaling $24,000 received from the
sale of securities during the first 6 months was also
credited to other income. Further explanation of
securities sales are detailed within the section
titled Investment Portfolio. Income received from
Accounts Receivable Factoring is projected to increase
in subsequent quarters as a result of the introduction
of a new program during the second quarter. Trust
Income continues to improve when comparing June, 1995
to previous years.
Non-Interest Expense
1995 % of Change 1994 % of Change 1993
Salaries & Employee Benefits $2,427 4.34% $2,326 3.93% $2,238
Net Occupancy Expense $ 358 12.22% $ 319 9.62% $ 291
Other Operating Expense $1,774 10.59% $1,604 (2.55%) $1,646
TOTAL NON-INTEREST EXPENSE $4,559 7.29% $4,249 1.77% $4,175
<PAGE> 10
Non-Interest Expense increased 7.29% and 1.77% when
comparing the three years included in the table.
Salaries and Benefits reflect continuous efforts to
maintain salaries and benefits at a manageable level
while reducing FTE to be more in line with peer group
banks. Full time equivalent employees as of June 30,
1995 was 149 compared to 145 and 149 at June 30, 1994
and 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 the addition of 4 college
students employed as summer vacation staff. The
decision to expand our branch network increased
operating cost short term, however long term growth in
loans and deposits will enhance future profitability
of the bank. FTE is projected to increase slightly in
the third quarter due to the scheduling of a teller
training program. Parttime tellers are 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 banks.
However, it is conceivable that the FTE ratio will
remain higher than peer 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 mortgage lending. Fulltime equivalent
when compared to total assets is 1.8 at 6/30/95
compared to 2.02 at 3/30/95 and l.46 for peer banks.
Deposits
The average daily amount of deposits and average
rates paid on such deposits is summarized for the
quarter ending June 30 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 $ 25,348 - $ 24,361 - $ 21,111 -
Savings Deposits $ 64,485 3.03% $ 65,059 2.64% $ 65,136 2.57%
Time Deposits $138,484 6.01% $106,319 4.50% $103,820 4.65%
TOTAL DEPOSITS $228,317 4.50% $195,739 3.32% $190,067 3.42%
A review of Composition of Deposits for the years of
1993, 1994 and 1995 reflect total deposit growth of
$32.9 and $5.6 million when comparing 1995 to 1994 and
1993. Approximately $32 Million in deposit growth is
centered primarily in the time deposit category.
Other factors contributing to substantial deposit
growth in 1995 is rising interest rates and the
purchase of approximately $8 million in deposits held
by the newly acquired Ripley Branch. An analysis of
prior years is reflective of customers response to low
interest rates paid on deposits and their reluctance
to recommit funds into bank certificates of deposits.
The average rate paid on time deposits during the
quarter was 6.01% compared to 4.50% for the same time
period in 1994 and 4.65% in 1993. The average rate
paid on total deposits as of June 30, 1995 was 4.50%
compared to 3.32% and 3.42% in previous years.
Demand Deposit accounts have remained relatively flat
when reviewing composition of deposits. However,
"Sweep Account Funds" totaling $10,070,000 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. Sweep account totals at 6/30/94 were
$10,626,000. Customer demand for the "Sweep Account"
product increased in 1994 and is projected to continue
increasing in future years. Also not included in
total deposits are Fixed Repurchase Agreements
totaling $6,379,000.
The following tables set forth the maturity
distribution of Certificates of Deposits and other
time deposits of $100,000 or more outstanding on the
books of First Citizens on June 30, 1995. The overall
total reflects an increase of $3,569,000 when
comparing to June, 1994 total.
<PAGE> 11
Maturity Distribution Of Time Certificates Of
Deposit In Amounts of $100,000.00 Or More As Of June 30, 1995
(in thousands)
Maturity Total Amount
3 months or less $7,073
3 through 6 months $5,832
6 through 12 months $3,736
over 12 months $7,560
Total $24,201
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. Average rate on total interest
earning assets at 6/30/95 was 8.79% compared to 8.09%
and 8.16% at 1994 and 1993 respectively. During 1993
and first six months of 1994 rates charged on loans
were lower than rates charged in 1995 as a result of
market conditions and the competitive loan environment
in the bank's market place. The average rate on total
interest bearing liabilities was 5.08%, 3.78% and
3.75% at 6/30/95, '94, and '93. Net yield on average
earning assets (annualized) was 4.24%, 4.75%, and
4.79% reflecting an upward swing in interest rates
beginning the first half of 1994 and continuing into
1995. Maintaining interest rate margins achieved in
prior years is proving more difficult in the current
interest rate environment. Asset/ Liability policies
are in place to protect the company from the negative
effects of volatile swings in interest rates.
Interest margins are well managed to maintain profits
and return on equity within policy guidelines.
<TABLE>
First Citizens National Bank
Quarter Ending June 30
Monthly Average Balances and Interest Rates
<CAPTION>
(in thousands)
1995 1994 1993
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S>
ASSETS
INTEREST EARNING
ASSETS:
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans (1)(2)(3) $178,914 $4,395 9.82% $156,607 $3,561 9.10% $140,335 $3,290 9.38%
Investment Securities:
Taxable $ 62,072 $1,030 6.63% $ 50,265 $ 757 6.02% $61,481 $ 932 6.06%
Tax Exempt (4) $ 10,165 $ 118 4.64% $ 13,725 $ 155 4.52% $8,306 $ 95 4.58%
Interest Earning
Deposits $ 164 $ 2 4.87% $ 102 $ 1 3.92% $ 185 $ 1 2.16%
Trading Account $ 0 $ 0 0% $ 100 $ 0 - - - -
Federal Funds Sold $ 3,211 $ 49 6.11% $ 921 $ 10 4.34% $ 2,140 16 2.99%
Lease Financing $ 10 $ 1 40.00% $ 51 $ 1 7.84% $ 75 $ 2 10.67%
Total Interest
Earning Assets $254,536 $5,595 8.79% $221,771 $4,485 8.09% $212,522 $4,336 8.16%
NON-INTEREST
EARNING ASSETS:
Cash and Due From
Banks $ 9,263 $ - - $ 8,853 $ - - $ 7,898 $ - -
Bank Premises and
Equipment $ 8,595 $ - - $ 7,911 $ - - $ 7,921 $ - -
Other Assets $ 4,707 $ - - $ 3,246 $ - - $ 3,815 $ - -
Total Assets $277,101 $ - - $241,781 $ - - $232,156 $ - -
</TABLE>
<PAGE>
<PAGE> 12
<TABLE>
<CAPTION>
Quarter Ending June 30
Monthly Average Balances and Interest Rates(Continued)
(in thousands)
1995 1994 1993
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S>
LIABILITIES AND
SHAREHOLDERS'
EQUITY:
INTEREST BEARING
LIABILITIES:
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Savings Deposits $ 64,485 $ 490 3.03% $ 65,059 $ 430 2.64% $ 65,136 $ 418 2.57%
Time Deposits $138,484 $2,084 6.01% $106,319 $1,196 4.50% $103,820 $1,206 4.65%
Federal Funds
Purchased and
Other Interest
Bearing
Liabilities $ 24,410 $ 317 5.19% $ 24,237 $ 224 3.70% $ 22,129 $ 168 3.04%
Total Interest
Bearing
Liabilities $227,379 $2,891 5.08% $195,615 $1,850 3.78% $191,085 $1,792 3.75%
NON-INTEREST
BEARING
LIABILITIES:
Demand Deposits $ 25,348 $ - - $ 24,361 $ - - $ 21,027 $ - -
Other Liab. $ 1,979 $ - - $ 1,503 $ - - $ 1,837 $ - -
Total Liab. $254,706 $ - - $221,479 $ - - $213,949 $ - -
SHAREHOLDERS'
EQUITY $ 22,395 $ - - $ 20,302 $ - - $ 18,207 $ - -
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $277,101 $ - - $241,781 $ - - $232,156 $ - -
NET INTEREST
INCOME $ - $2,704 - $ - $2,635 - $ - $2,544 -
NET YIELD ON
AVERAGE EARNING
ASSETS
(ANNUALIZED) $ - $ - 4.24% $ - $ - 4.75% $ - $ - 4.79%
<FN>
(1) Loan totals are shown net of interest collected, not earned and
Loan Loss Reserve.
(2) Non-accrual loans are included in average total loans.
(3) Loan Fees are included in interest income and the computations of
the yield on loans.
(4) Interest and rates on securities which are non-taxable for
Federal Income Tax purposes are not presented on a taxable
equivalent basis.
</TABLE>
<PAGE>
<PAGE> 13
COMPOSITION OF LOANS
The loan portfolio is First Citizens National Bank's largest
earning asset. Total loans at 6/30/95 was $185,360,000
consisting of $114,854,000 Mortgage and Construction loans;
$48,010,000 in Commercial, Financial, Agriculture; $20,518,000
installment loans to individuals; and $3,998,000 other loans.
A comparison of the composition of the loan portfolio
indicates the largest percentage of growth is centered in the
Real Estate Loan category. Mortgage and construction loan
totals increased $14,663,000 or 5.71% when compared to 1994
due to substantial growth in both population and number of
households recorded in Dyer County over the past decade.
First Citizens is located in the Dyersburg/Dyer County Trade
Area, population of 40,000. The entire trade area has
outpaced both the state and the nation in per capita personal
income growth since the early 1980's The State of Tennessee
projects that per capita income in the area will be greater
than the national average by the year of 2000. The mix of
industry in the local economy has provided stable, growing
employment opportunities for residents under all economic
conditions. The Dyer County distribution of employment
consists primarily of services employers of 14.9%, government
14.7%, trade 19.3% and manufacturing of 40.5%. First Citizens
National Bank was the bank of choice for providing financing
for personal residence of new and existing customers. The
loan portfolio is made up of quality loans, and is well
diversified with no concentrations of credit in any one
industry. A reduction was made in the provision to loan
losses in 1995 despite loan growth due to a continued
reduction in Problem and Watch loans. Problem Loans totaled
$2,932,031 or 1.52% of total loans at 6/30/95, while Watch
Loans total was only approximately $57,000 (consisting of two
loans). Past Due Loan totals are being maintained slightly
above or at peer group levels.
The aggregate amount of unused guarantees, commitments to
extend credit and standby letters of credit was $22,695,000 as
of 6/30/95.
The average yield on loans of First Citizens National Bank for
the second quarter of the years indicated is as follows:
1995 - 9.82%
1994 - 9.10%
1993 - 9.38%
1992 - 10.05%
1991 - 11.70%
The following table sets forth loan totals net of unearned
income by category for the past five years:
June 30
(in thousands)
1995 1994 1993 1992 1991
Real Estate Loans:
Construction $ 12,619 $ 8,681 $ 6,881 $ 4,712 $ 4,629
Mortgage $102,235 $ 91,510 $ 83,383 $ 79,695 $ 78,606
Commercial, Financial
and Agricultural Loans $ 48,010 $ 44,164 $ 35,433 $ 34,428 $ 35,306
Installment Loans to
Individuals $ 20,518 $ 16,953 $ 15,233 $ 15,579 $ 17,129
Other Loans $ 1,978 $ 3,998 $ 2,098 $ 2,459 $ 2,572
TOTAL LOANS $185,360 $165,306 $143,028 $136,873 $138,242
<PAGE>
<PAGE> 14
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 $77,423,000 or
41.80% of the total portfolio are subject to repricing within
one year or carry a variable rate of interest. The ratio is
down from 43.37% at 6/30/94 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
$113,582 reflecting a modest increase of $13,000 when compared
to 6/30/94. 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 $19,396 $79,671 $15,787
Commercial, Financial
and Agricultural $28,235 $14,666 $ 5,109
All Other Loans $ 3,215 $19,245 $ 36
TOTAL $50,846 $113,582 $20,932
Loans with Maturities After One Year for which:
(in thousands)
Interest Rates are Fixed or Predetermined $107,937
Interest Rates are Floating or Adjustable $ 26,577
NON-PERFORMING ASSETS
A review of Non-performing assets reflects a continuous
reduction for the years after 6/30/92. Loans classified in
this category significantly increased in 1991 due to the
addition of one credit in the amount of $1,000,000 placed on
non-accrual status. Total non performing loans at 6/30/95
were $1,359,000 or .73% of the bank's total loan portfolio.
Peer Group Banks reported .62% of total loans as non-
performing.
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 six months ending 6/30/95 if
all loans reported as non-accrual had been current in
accordance with their original terms and had been outstanding
throughout the period is $42,000. Interest income on loans
reported as ninety days past due and on interest accrual
status was $29,000 for year-to-date 1995. 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 total at June 30, 1995
was 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 reevaluated 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
June 30 for the years under comparison.
<PAGE>
<PAGE> 15
The following table sets forth the balance of non-performing
loans as of June 30, for the years indicated:
Non-Performing Loans
June 30
(in thousands)
90 Days Past Due
Year Non-Accrual Accruing Interest Total
1995 $ 869 $ 490 $1,359
1994 $ 889 $ 520 $1,409
1993 $1,466 $ 142 $1,608
1992 $2,239 $ 801 $3,040
1991 $2,167 $ 572 $2,739
LOAN LOSS EXPERIENCE AND
RESERVES FOR LOAN LOSSES
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 loan portfolio will be separated
into four classifications:
1. Pass - Loans that have been reviewed and graded high
quality with no major deficiencies.
2. Watch - Loans which, because of unusual circumstances,
need to be closely 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 of either
principal or interest for 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.
The book value of repossessed real property held by Bancshares
was $1,025,000 and $941,000 at 6/30/95 and 6/30/94. The
balance was significantly reduced as a result of the sale of
property in December, 1993 valued at $1,055,000. Property
held on the books of Bancshares is a strip shopping center
valued at $685,000 and a parcel purchased for expansion of the
Midtown Branch in 1988. Expansion plans were abandoned after
a decision was made to construct the Industrial Park Branch.
This property valued at $151,000 has been classified as ORE
and is being offered for sale. 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.
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.
<PAGE> 16
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.
Management estimates charge-offs for period ending 12/31/95 to
be as follows:
Domestic Amount
Commercial, Financial & Agricultural $ 50,000
Real Estate-Construction -0-
Real Estate- Mortgage 70,000
Installment Loans to individuals & credit cards 80,000
Lease financing -0-
Foreign N/A
01/01/95 through 12/31/95 Total $200,000
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. Changes to the
Reserve Account for the quarter just ended consisted of (1)
Loans Charged-off - $56,000; (2) Recovery of loans previously
charged-off - $41,000; and (3) Additions to reserve totaling
$86,000.
<PAGE>
<PAGE> 17
First Citizens National Bank
Loan Loss Experience and Reserve for Loan Losses
Quarter ending June 30
(in thousands)
1995 1994 1993 1992 1991
Average Net Loans
Outstanding $178,924 $156,658 $140,410 $135,014 $133,109
Balance of Reserve
for Loan Losses
at Beginning of
Period $ 2,115 $ 1,795 $ 1,832 $ 1,798 $ 2,041
Loan Charge-Offs $ (56) $ (50) $ (69) $ (271)$ (151)
Recovery of Loans
Previously Charged Off $ 41 $ 34 $ 38 $ 100 $ 31
Net Loans Charged Off $ (15) $ (16) $ (31) $ (171)$ (120)
Additions to Reserve
Charged to Operating
Expense $ 86 $ 100 $ 119 $ 130 $ 132
Balance at End of
Period $ 2,186 $ 1,879 $ 1,920 $ 1,757 $ 2,053
Ratio of Net Charge-
Offs during quarter
to Average Net Loans
Outstanding (.01%) (.01%) (.02%) (.13%) (.09%)
The following table will identify charge-offs by category for the
period ending 6/30/95.
Charge-Offs:
Domestic
Commercial, Financial and Agricultural $ 17
Real Estate - Construction 0
Real Estate - Mortgage 8
Installment Loans to Individuals 31
Lease Financing 0
Total $(56)
Recoveries:
Domestic:
Commercial, Financial and Agricultural $ 6
Real Estate - Construction 0
Real Estate - Mortgage 5
Installment Loans to Individuals 30
Lease Financing 0
Total $ 41
Net $(15)
<PAGE>
<PAGE> 18
INVESTMENT SECURITIES
The book value of listed investment securities as of the dates
indicated are summarized as follows:
Composition of Investment Securities
June 30
(in thousands)
1995 1994 1993 1992 1991
U. S. Treasury &
Government Agencies $53,754 $46,480 $53,792 $56,452 $49,001
State & Political
Subdivisions $10,019 $14,093 $ 8,496 $ 6,143 $ 6,389
All Others $ 4,151 $ 6,021 $ 5,144 $ 4,769 $ 6,052
TOTALS $67,924 $66,594 $67,432 $67,364 $61,442
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 second quarter,
1995 increased slightly 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
$10,019,000.
Purchases made during the second quarter, 1995 total
$2,000,000 consisting of Government Backed Securities. All
securities purchased were placed in the Held-To-Maturity
account. Sale of investments totaled $6,630,000 consisting
of: (1) Fannie Mae Par Value $500,000, sold May 9, 1995 with
a profit of $10,000.00. (2) U.S. Treasury, Par Value
$6,000,000 sold June 5, 1995 at a profit of $11,014.62 and (3)
Maury City Health and Education, Par Value $130,000 sold June
12, 1995 at a profit of $666.25. All investments were sold
prior to maturity. The Fannie Mae and Maury City Health and
Education was sold from the Available for Sale account. The
U.S. Treasury was sold from the Held to Maturity account 90
days prior to the stated maturity date as a qualified
exemption provided for in FASB 115. The U. S. Treasury was
sold to meet loan demand and liquidity needs.
FASB 115 required banks to maintain separate investment
portfolios for Held-to-Maturity, Available-for-Sale, and
Trading Account Investments. As of June 30, 1995
approximately 75% of the total portfolio was placed in the
Held-to-Maturity account. The remaining 25% was booked in the
Available-for-Sale account. FASB 115 also requires 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 positive
capital entry of $7,000. Mark to Market impact to capital on
6/30/94 was a negative $6,000.
As of 6/30/95, the securities portfolio held $14,930,000 in
"Derivative" products which consisted of $6,464,000 CMO's
(Collateral Mortgage Obligations), $497,000 Strip Coupon, and
$7,969,000 Structured Notes. "Derivative" are non-traditional
securities that derive value from the price action of other
assets. Total investment in Derivative products constitutes
21.98% of the investment portfolio and are government backed
securities bearing short maturities. These securities do not
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 5% within one year,
73% after one year and within five years, and 17% 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 liquidity needs 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> 19
Investment Securities
Held to Maturity
Available for Sale
June 30, 1995
(in thousands)
Amortized Fair Amortized Fair
Cost Value Cost Value
U.S. Treasury Securities $ 6,442 $ 6,573 $ 5,511 $ 5,516
U.S. Government agency
and corporation obligations
(exclude mortgage-backed
securities):
Issued by U.S. Government
agencies (2) 250 249 0 0
Issued by U.S. Government-
sponsored agencies (3) 24,881 25,224 7,821 7,971
Securities issued by states
and political subdivisions
in the U.S.:
General obligations 6,114 6,081 321 322
Revenue obligations 2,752 2,716 330 330
Industrial development and
similar obligations 0 0 501 501
Mortgage-backed securities (MBS):
Pass-through securities:
Guaranteed by GNMA 531 546 1,145 1,165
Issued by FNMA and FHLMC 1,160 1,175 0 0
Other pass-through securities 0 0 0 0
CMOs and REMICs:
Issued or guaranteed by FNMA,
FHLMC, or GNMA 5,053 5,009 812 784
All other mortgage-backed
securities 0 0 0 0
Collateralized by MBS issued
or guaranteed by FNMA,
FHLMC, RGNMA 600 620 0 0
Other debt securities:
Other domestic debt securities 993 993 250 254
Foreign debt securities 0 0 0 0
Equity securities:
Investments in mutual funds 0 0 0 0
Other equity securities with
readily determinable fair
values 0 0 0 0
All other equity securities (1) 0 0 2,278 2,305
Total 48,776 49,186 18,969 19,148
(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 mortgage back) 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.
(4) Includes Parent and Subsidiary.
<PAGE>
<PAGE> 20
Investment Securities
Unrealized Gains/(Losses)
June 30, 1995
Unrealized Unrealized Net
Gains Losses Gains/Losses
U.S. Treasury Securities 196 59 137
Obligations of U.S. Government
Agencies and Corp 809 286 527
Obligations of States and
Political Subdivisions 39 107 (68)
Fed Reserve & Corp Stock 5 1 (4)
Totals 1050 458 592
Maturity and Yield on Securities June 30, 1995
(in thousands)
After One Year After Five Years After
Within One Year Within Five Years Within Ten Years Ten Years
Amount % Amount % Amount % Amount %
6/30/95 $ 3,279 (5%) $49,381 (73%) $11,609 (17%) $ 3,655 (5%)
6/30/94 $16,058 (24%) $31,208 (47%) $13,604 (20%) $ 5,724 (9%)
6/30/93 $17,023 (25%) $41,179 (61%) $ 1,407 (2%) $ 7,823 (12%)
6/30/92 $21,115 (31%) $33,229 (49%) $11,901 (18%) $ 1,119 (2%)
6/30/91 $18,882 (31%) $27,054 (44%) $ 9,905 (16%) $ 5,601 (9%)
<TABLE>
<CAPTION>
Maturity and Yield on Securities June 30, 1995
(in thousands)
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 $1,654 7.07% $41,928 6.46% $ 7,117 6.53% $ 3,055 7.09%
State and Political
Subdivisions* $1,375 7.02% $ 6,405 6.61% $ 2,239 6.84% $ - -
All Others $ 250 8.00% $ 1,048 6.16% $ 2,253 5.61% $ 600 9.14%
TOTALS $3,279 7.10% $49,381 6.47% $11,609 6.41% $ 3,655 7.43%
<FN>
*Yields on tax free investments are stated herein on a taxable
equivalent basis.
</TABLE>
*Parent Company's investments are included in the table.
<PAGE>
<PAGE> 21
Return on Equity and Assets
Return on Assets at 6/30/95 posted levels slightly below those recorded at
6/30/94. Efforts continue to focus on positioning the company for future
growth and profitability through improvements in technology, solid growth
in the deposit base and efficient utilization of the branch distribution
system. Accelerated asset growth over the past twelve months coupled with
rising rates paid on interest bearing deposits had a significant impact on
earnings the first half of 1995. Rates paid on deposits have dropped
since June, 1995. A comparison of total assets at 6/30/95 and 6/30/94
reflect asset growth in excess of 12%. Operating Expenses increased due
to the addition of two branch banks opened in November, 1994 and January,
1995 as well as the installation cost of Item Capture and Statement
Imaging software 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 Shareholders's equity (Including Loan Loss Reserve) of First
Citizens Bancshares, as of 6/30/95 was $25,699,000 compared to $23,879,000
at 12/31/94.
Percentage of Dividends Declared Per Common Share to Net Income Per Common
Share has trended upward since 1993. Number of shares outstanding
continues to increase due to shares of stock issued on a quarterly basis
to service the Dividend Reinvestment Program. A stock repurchase program,
approved by the Board of Directors in 1994 for the purpose of acquiring
shares on the open market to service the Dividend Reinvestment Program
continues to be ineffective. Shareholders continue to express an interest
in buying additional stock rather than selling shares. Under the terms of
the repurchase program, the company will repurchase up to $200,000 of
Bancshares'stock in a calendar quarter on a first come, first served
basis.
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.
The table below presents for First Citizens Bancshares, Inc. certain
operating ratios year-to-date as of June 30: (not annualized)
1995 1994 1993 1992
Percentage of Net Income to:
Average Total Assets .50% .65% .62% .35%
Average Shareholders Equity 5.51% 7.06% 7.24% 4.45%
Percentage of Dividends Declared
Per Common Share to Net Income
Per Common Share 32.28% 23.81% 23.36% 36.89%
**Percentage of Average
Shareholders' Equity to
Average Total Assets 9.98% 9.92% 8.53% 7.83%
**Represents primary capital - including reserve for loan losses account
<PAGE>
<PAGE> 22
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. Other factors that have had an affect on liquidity are (1)
Customer demand in 1994 to lock in low interest rates charged on loans for
longer periods of time and (2) Operating lines of credit for agriculture
purposes are fully funded by June 30 of each year. In June, 1995
securities totaling $6,000,000 were sold to meet an increasing loan
demand. When comparing the second quarter, 1995 to the same time period
in 1994, loans with maturities of one to five years increased
approximately $13,000,000. Also, the category of fixed or predetermined
interest rates increased in excess of $13,186,000.
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 approximately $6,000,000. 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 $50,846,000 and Investment Securities totaling
$3,279,000 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 $150,000 exposure limitation set by policy.
<PAGE>
<PAGE> 23
<TABLE>
CONDENSED GAP REPORT
FIRST CITIZENS NATIONAL BANK
DYERSBURG, TN --------------------
CURRENT BALANCES
--------------------
06/30/95
(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 2,318 - - - - - - - 2,318
DUE FROM BANKS 1,616 - - - - - - - 1,616
CASH ITEMS 6,287 - - - - - - - 6,287
MONEY MARKET 171 171 - - - - - - -
TOTAL CASH & DUE FROM 10,392 171 - - - - - - 10,221
INVESTMENTS 66,927 - - 999 3,341 1,706 2,165 16,000 42,716
TOTAL INVESTMENTS 66,927 - - 999 3,341 1,706 2,165 16,000 42,716
LOANS
COMMERCIAL FIXED 21,190 - 1,472 420 932 4,678 3,608 3,231 6,849
COMMERCIAL VARIABLE 25,165 25,165 - - - - - - -
REAL ESTATE VARIABLE 20,104 20,104 - - - - - - -
REAL ESTATE FIXED 89,942 - 691 1,491 805 3,186 5,858 9,387 68,524
HOME EQUITY LOANS 4,627 4,627 - - - - - - -
SEC MORTGAGE 181 - 181 - - - - - -
INSTALLMENT LOANS 20,301 - 332 241 150 698 1,475 3,692 13,713
INSTALLMENT VARIABLE 217 217 - - - - - - -
FLOOR PLAN 786 786 - - - - - - -
CREDIT CARDS 1,672 - - - - - 1,672 - -
OVERDRAFTS 306 - 306 - - - - - -
NON-ACCRUAL LOANS 869 - - - - - - - 869
TOTAL LOANS 185,360 50,899 2,982 2,152 1,887 8,562 12,613 16,310 89,955
LOAN LOSS RESERVE 2,186 - - - - - - - 2,186
NET LOANS 183,174 50,899 2,982 2,152 1,887 8,562 12,613 16,310 87,769
FED FUNDS SOLD 5,950 5,950 - - - - - - -
TOTAL FED FUNDS SOLD 5,950 5,950 - - - - - - -
TOTAL EARNING ASSETS 256,051 56,849 2,982 3,151 5,228 10,268 14,778 32,310 130,485
OTHER ASSETS
BUILDING, F&F AND LAND 8,711 - - - - - - - 8,711
OTHER REAL ESTATE 224 - - - - - - - 224
OTHER ASSETS 4,369 - - - - - - - 4,369
TOTAL OTHER ASSETS 13,304 - - - - - - - 13,304
TOTAL ASSETS 279,747 57,020 2,982 3,151 5,228 10,268 14,778 32,310 154,010
DEMAND DEPOSITS
BANKS 39 - - - - - - - 39
DEMAND DEPOSITS 27,601 - - - - - - - 27,601
TOTAL DEMAND 27,640 - - - - - - - 27,640
</TABLE>
<PAGE>
<PAGE> 24
<TABLE>
CONDENSED GAP REPORT
--------------------
CURRENT BALANCES
--------------------
<CAPTION>
06/30/95
(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 18,202 - - - - - - - 18,202
NOW ACCOUNT 23,361 - - - - - - - 23,361
BUSINESS CHECKING 13 13 - - - - - - -
IMF-MMDA 10,666 10,666 - - - - - - -
HIGH YIELD ACCOUNT 7,682 7,682 - - - - - - -
DOGWOOD CLUB 4,139 - - - - - - 4,139 -
TOTAL SAVINGS 64,063 18,361 - - - - - 4,139 41,563
TIME DEPOSITS
FLEX-CD 94,860 - 9,491 8,357 6,866 23,604 14,323 22,032 10,187
LARGE CD-FLEX 24,201 - 2,062 2,402 2,609 5,832 3,736 2,860 4,700
IRA-FLOATING 179 179 - - - - - - -
IRA-FIXED 20,439 - 491 699 431 1,542 3,675 3,906 9,695
CHRISTMAS CLUB 289 - - - - - 289 - -
TOTAL TIME 139,968 179 12,044 11,458 9,906 30,978 22,023 28,798 24,582
TOTAL DEPOSITS 231,671 18,540 12,044 11,458 9,906 30,978 22,023 32,937 93,785
SHORT TERM BORROWINGS
TT&L 177 177 - - - - - - -
SECURITIES SOLD-SWEEP 10,070 10,070 - - - - - - -
SECURITIES SOLD-FIXED 6,379 - 1,231 2,564 942 1,085 165 392 -
FHLB-LIBOR INVESTMENT 4,407 4,407 - - - - - - -
FHLB-LONG TERM 2,333 - - - - - - - 2,333
TOTAL SHORT TERM BORR. 23,366 14,654 1,231 2,564 942 1,085 165 392 2,333
OTHER LIABILITIES
ACCRUED INT PAYABLE 1,638 - - - - - - - 1,638
OTHER LIABILITIES 209 - - - - - - - 209
TOTAL OTHER LIABILITIES 1,847 - - - - - - - 1,847
TOTAL LIABILITIES 256,884 33,194 13,275 14,022 10,848 32,063 22,188 33,329 97,965
CAPITAL
COMMON STOCK 2,000 - - - - - - - 2,000
SURPLUS 4,000 - - - - - - - 4,000
UNREALIZED GAIN(LOSSES) 110 - - - - - - - 110
UNDIVIDED PROFITS 16,753 - - - - - - - 16,753
TOTAL CAPITAL 22,863 - - - - - - - 22,863
TOTAL LIAB. & CAPITAL 279,747 33,194 13,275 14,022 10,848 32,063 22,188 33,329 120,828
GAP (SPREAD) - 23,826 -10,293 -10,871 -5,620 -21,795 -7,410 -1,019 33,182
GAP % TOTAL ASSETS - 8.52 -3.68 -3.89 -2.01 -7.79 -2.65 -0.36 11.86
CUMULATIVE GAP - 23,826 13,533 2,662 -2,958 -24,753 -32,163 -33,182 -
CUMM. GAP % TOTAL ASSETS - 8.52 4.84 0.95 -1.06 -8.85 -11.50 -11.86 -
SENSITIVITY RATIO - 1.72 1.29 1.04 0.96 0.76 0.74 0.79 1.00
</TABLE>
<PAGE>
<PAGE> 25
Capital Resources
Total shareholders' equity of First Citizens Bancshares as of June 30,
1995, was $25,699,000. Capital as a percentage of total assets for the
quarter ending June 30, is presented in the following table for the years
indicated (excluding Loan Loss Reserves):
1995 1994 1993 1992 1991
9.09% 9.14% 8.82% 7.92% 7.53%
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 6/30/95 was 13.60%,
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 is a major key 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.
Part II - Other Information
Item 1. 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 6/30/95.
<PAGE> 26
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: August 11, 1995 /s/Stallings Lipford
Stallings Lipford, Chairman & CEO
Date: August 11, 1995 /s/Jeff Agee
Jeff Agee, Vice President &
Chief Financial Officer
First Citizens National Bank
(Principal Subsidiary)
<PAGE> 1
DATA STATED IN THOUSANDS
VOLUNTARY SCHEDULE - CERTAIN FINANCIAL
INFORMATION
SECOND SECOND YEAR
REGULATION STATEMENT CAPTION QTR. QTR. TO DATE
1995 1994 1995 1994
5-02 (1) Cash and Cash Items 11381 9852 11381 9852
5-02 (2) Marketable Securities 67924 66594 67924 66594
5-02 (3)(b)(1) Notes Receivable 185360 165306 185360 165306
5-02 (4) Allowance for Doubtful
Accounts 2186 1879 2186 1879
5-02 (15) Total Assets 282611 252080 282611 252080
5-02 (24) Other Liabilities 25692 229044 256912 229044
5-02 (30) Common Stock 729 709 729 709
5-02 (31)(a)(2) Additional Capital Other 9520 8780 9520 8780
5-02 (31)(a)(3)(ii) Retained Earnings -
Unappropriated 15457 13535 15457 13535
5-03 (b)(1)(e) Other Revenues 6317 5195 12182 10327
5-03 (b)(2)(e) Cost of Other Revenues 2337 2233 4710 3593
5-03 (b)(8) Interest and Amortization
of Debt Discount 2891 1846 5418 4448
5-03 (b)(10) Income Before Taxes and
Other Items 1089 1116 2054 2286
5-03 (b)(11) Income Tax Expense 366 364 688 707
5-03 (b)(14) Income/Loss from Continuing
Operations 723 752 1366 1579
5-03 (b)(19) Net Income or Loss 723 752 1366 1579
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000719264
<NAME> FIRST CITIZENS BANCSHARES
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 JUN-30-1995 DEC-31-1994 JUN-30-1994
<PERIOD-END> JUN-30-1995 JUN-30-1995 JUN-30-1994 JUN-30-1994
<CASH> 11,381,000 11,381,000 8,452,000 8,452,000
<INT-BEARING-DEPOSITS> 0 0 0 0
<FED-FUNDS-SOLD> 5,950,000 5,590,000 1,400,000 1,400,000
<TRADING-ASSETS> 0 0 100,000 100,000
<INVESTMENTS-HELD-FOR-SALE> 19,148,000 19,148,000 18,429,000 18,429,000
<INVESTMENTS-CARRYING> 48,776,000 48,776,000 48,065,000 48,065,000
<INVESTMENTS-MARKET> 0 0 0 0
<LOANS> 185,360,000 185,360,000 165,306,000 165,306,000
<ALLOWANCE> 2,186,000 2,186,000 1,879,000 1,879,000
<TOTAL-ASSETS> 282,611,000 282,611,000 252,080,000 252,080,000
<DEPOSITS> 231,646,000 231,646,000 201,042,000 201,042,000
<SHORT-TERM> 16,449,000 16,449,000 22,453,000 22,453,000
<LIABILITIES-OTHER> 2,077,000 2,077,000 1,299,000 1,299,000
<LONG-TERM> 6,740,000 6,740,000 4,250,000 4,250,000
<COMMON> 729,000 729,000 709,000 709,000
0 0 0 0
0 0 0 0
<OTHER-SE> 24,970,000 24,970,000 22,327,000 22,327,000
<TOTAL-LIABILITIES-AND-EQUITY> 282,611,000 282,611,000 252,080,000 252,080,000
<INTEREST-LOAN> 4,394,000 8,415,000 3,561,000 6,837,000
<INTEREST-INVEST> 1,169,000 2,314,000 930,000 1,783,000
<INTEREST-OTHER> 63,000 108,000 12,000 67,000
<INTEREST-TOTAL> 5,626,000 10,837,000 4,503,000 8,687,000
<INTEREST-DEPOSIT> 2,573,000 4,831,000 1,624,000 3,224,000
<INTEREST-EXPENSE> 2,891,000 5,418,000 1,846,000 3,593,000
<INTEREST-INCOME-NET> 2,735,000 5,419,000 2,657,000 5,094,000
<LOAN-LOSSES> 86,000 151,000 100,000 199,000
<SECURITIES-GAINS> 17,000 24,000 0 0
<EXPENSE-OTHER> 2,251,000 4,559,000 2,133,000 4,249,000
<INCOME-PRETAX> 1,089,000 2,054,000 1,116,000 2,286,000
<INCOME-PRE-EXTRAORDINARY> 723,000 1,366,000 752,000 1,579,000
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 723,000 1,366,000 752,000 1,579,00
<EPS-PRIMARY> 1.00 1.89 1.06 2.23
<EPS-DILUTED> 1.00 1.89 1.06 2.23
<YIELD-ACTUAL> 4.22 4.18 4.56 4.37
<LOANS-NON> 902,000 902,000 889,000 889,000
<LOANS-PAST> 375,000 375,000 50,000 50,000
<LOANS-TROUBLED> 0 0 0 0
<LOANS-PROBLEM> 2,770,000 2,770,000 3,971,000 3,971,000
<ALLOWANCE-OPEN> 2,115,000 2,054,000 1,795,000 1,676,000
<CHARGE-OFFS> 56,000 116,000 50,000 74,000
<RECOVERIES> 41,000 97,000 34,000 78,000
<ALLOWANCE-CLOSE> 2,186,000 2,186,000 1,879,000 1,879,000
<ALLOWANCE-DOMESTIC> 2,186,000 2,186,000 1,879,000 1,879,000
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0 0
</TABLE>
