UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the period ended September 30, 1995
Commission File Number: 0-16471
First Citizens BancShares, Inc
(Exact name of Registrant as specified in its charter)
Delaware 56-1528994
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
239 Fayetteville Street, Raleigh, North Carolina 27601
(Address of principal executive offices) (zip code)
(919) 755-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No _____
Class A Common Stock--$1 Par Value--8,933,912 shares
Class B Common Stock--$1 Par Value--1,766,464 shares
(Number of shares outstanding, by class, as of November 13, 1995)
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Condition at
September 30, 1995, December 31, 1994, and September 30, 1994 3-4
Consolidated Statements of Income for the three-month periods ended
September 30, 1995, and September 30, 1994, and for the nine-month
periods ended September 30, 1995, and September 30, 1994 4-5
Consolidated Statements of Changes in Shareholders' Equity
for the nine-month periods ended September 30, 1995,
and September 30, 1994 5
Consolidated Statements of Cash Flows for the nine-month periods
ended September 30, 1995, and September 30, 1994 6
Note to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 7-19
and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. During the quarter ended
September 30, 1995, Registrant filed no Current Reports
on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FIRST CITIZENS BANCSHARES, INC.
(Registrant)
Dated: November 13, 1995 By:
Kenneth A. Black
Vice President, Treasurer,
and Chief Financial Officer
First Citizens BancShares, Inc and Subsidiaries
Third Quarter 1995
<PAGE>
Consolidated Statements of Condition
First Citizens BancShares, Inc. and Subsidiaries
<TABLE>
<CAPTION>
September 30 December 31 September 30
(thousands,except share data) 1995 1994 1994
<S> <C> <C> <C>
Assets
Cash and due from banks $483,627 $455,710 $378,627
Investment securities 1,744,233 1,458,969 1,497,252
Federal funds sold 77,740 6,750 92,750
Loans 4,540,056 4,148,133 3,939,264
Less reserve for loan losses 77,986 72,017 71,537
Net loans 4,462,070 4,076,116 3,867,727
Premises and equipment 206,349 188,824 190,151
Income earned not collected 54,188 45,194 43,910
Other assets 140,565 101,761 113,034
Total assets $7,168,772 $6,333,324 $6,183,451
Liabilities
Deposits:
Noninterest-bearing $945,885 $858,537 $834,985
Interest-bearing 5,282,079 4,659,052 4,575,823
Total deposits 6,227,964 5,517,589 5,410,808
Short-term borrowings 343,101 290,861 231,491
Long-term obligations 23,593 34,542 47,926
Other liabilities 68,240 40,921 54,418
Total liabilities 6,662,898 5,883,913 5,744,643
Shareholders' Equity
Common stock:
Class A - $1 par value (8,923,855;8,419,389;
and 8,421,815 shares issued, respectively) 8,924 8,419 8,422
Class B - $1 par value (1,766,464;1,769,451;
and 1,770,441 shares issued, respectively) 1,767 1,770 1,770
Surplus 105,797 82,631 82,315
Retained earnings 389,386 356,591 346,301
Total shareholders'equity 505,874 449,411 438,808
Total liabilities and shareholders' equity $7,168,772 $6,333,324 $6,183,451
See accompanying Note to Consolidated Financial Statements.
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
Consolidated Statements of Income
First Citizens BancShares, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(thousands, except per share data) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest Income
Loans $97,380 $77,360 $282,688 $218,546
Investment securities:
U. S. Government 22,052 16,894 55,567 55,016
State, county and municipal 108 31 302 51
Other 48 26 141 74
Total investment securities income 22,208 16,951 56,010 55,141
Federal funds sold 2,646 943 6,039 2,115
Total interest income 122,234 95,254 344,737 275,802
Interest Expense
Deposits 55,155 34,609 149,463 100,050
Short-term borrowings 4,287 2,048 10,956 5,491
Long-term obligations 416 608 1,277 1,957
Total interest expense 59,858 37,265 161,696 107,498
Net interest income 62,376 57,989 183,041 168,304
Provision for loan losses 1,716 1,159 3,710 1,300
Net interest income after provision 60,660 56,830 179,331 167,004
Noninterest Income
Trust income 2,178 2,041 6,656 6,172
Service charges on deposit accounts 10,249 9,609 29,648 29,241
Credit card income 3,773 3,394 9,840 9,025
Other service charges and fees 5,328 4,326 15,518 12,383
Other 2,032 1,984 6,610 5,424
Total noninterest income 23,560 21,354 68,272 62,245
84,220 78,184 247,603 229,249
Noninterest Expense
Salaries and wages 26,578 24,951 79,491 74,102
Pension and other employee benefits 4,040 3,512 13,124 10,685
Occupancy expense 5,224 4,820 15,235 13,741
Equipment expense 6,286 5,665 18,576 17,229
Other 17,588 18,413 58,529 55,381
Total noninterest expense 59,716 57,361 184,955 171,138
Income before income taxes 24,504 20,823 62,648 58,111
Income taxes 8,686 7,138 22,028 20,071
Net income $15,818 $13,685 $40,620 $38,040
Per Share
Net income $1.49 $1.37 $3.85 $3.86
Cash dividends 0.20 0.175 0.600 0.525
See accompanying Note to Consolidated Financial Statements.
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
Consolidated Statements of Changes in Shareholders' Equity
First Citizens BancShares, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Class A Class B
Common Common Retained Total
(thousands,except share data) Stock Stock Surplus Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $7,986 $1,780 $61,717 $317,567 $389,050
Issuance of 73,128 shares of Class A
common stock pursuant to the Employee
Stock Purchase Plan 73 2,338 2,411
Issuance of 5,100 shares of Class A
common stock pursuant to the
Dividend Reinvestment Plan 5 208 213
Issuance of 433,068 shares of Class A
common stock in connection with
acquisitions 433 18,052 18,485
Redemption of 75,550 shares of Class A
common stock and 9,627 shares of (75) (10) (3,655) (3,740)
Class B common stock
Net income 38,040 38,040
Cash dividends (5,150) (5,150)
Other (501) (501)
Balance at September 30, 1994 $8,422 $1,770 $82,315 $346,301 $438,808
Balance at December 31, 1994 $8,419 $1,770 $82,631 $356,591 $449,411
Issuance of 39,412 shares of Class A
common stock pursuant to the Employee
Stock Purchase Plan 39 1,508 1,547
Issuance of 6,839 shares of Class A
common stock pursuant to the
Dividend Reinvestment Plan 7 298 305
Issuance of 484,821 shares of Class A
common stock in connection with various
acquisitions 485 21,360 21,845
Redemption of 26,606 shares of Class A
common stock and 2,987 shares of
Class B common stock (26) (3) (1,421) (1,450)
Net income 40,620 40,620
Cash dividends (6,404) (6,404)
Balance at September 30, 1995 $8,924 $1,767 $105,797 $389,386 $505,874
See accompanying Note to Consolidated Financial Statements.
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
First Citizens BancShares, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Nine months ended September 30
(thousands) 1995 1994
<S> <C> <C>
Operating Activities
Net income $40,620 $38,040
Adjustments:
Amortization of intangibles 4,235 2,939
Provision for loan losses 3,710 1,300
Deferred tax benefit (21) (610)
Change in current taxes payable 4,298 1,820
Depreciation 12,619 11,661
Change in accrued interest payable 18,843 687
Change in income earned not collected (7,697) 2,291
Origination of loans held for sale (28,771) (68,508)
Proceeds from sale of loans 24,095 112,796
(Gain) loss on sale of mortgage loans (431) 806
Net amortization of premiums and discounts 14,873 21,261
Net change in other assets (12,046) 11,695
Net change in other liabilities 3,271 (5,246)
Net periodic pension cost 510 482
Net cash provided by operating activities 78,108 131,414
Investing Activities
Disposition of premises and equipment 2,940 2,364
Addition to premises and equipment (24,488) (18,384)
Net increase in loans outstanding (217,425) (337,651)
Purchase of investment securities (883,303) (120,433)
Proceeds from maturities of investment securities 624,929 454,175
Net change in federal funds sold (62,318) (69,700)
Purchase of institutions, net of cash acquired 106,092 13,397
Net cash used by investing activities (453,573) (76,232)
Financing Activities
Repurchase of common stock (1,450) (3,740)
Proceeds from issuance of stock, net of related costs 1,716 2,624
Cash dividends paid (6,404) (5,149)
Net change in time deposits 461,154 (78,989)
Net change in demand and other interest-bearing deposits (88,832) 35,253
Net change in short-term borrowings 37,198 (19,406)
Net cash provided (used) by financing activities 403,382 (69,407)
Change in cash and due from banks 27,917 (14,225)
Cash and due from banks at beginning of period 455,710 392,852
Cash and due from banks at end of period $483,627 $378,627
Cash payments for:
Interest $142,853 $106,549
Income taxes 20,115 17,567
Supplemental disclosure of noncash investing and financing activities:
Common stock issued for acquisitions $21,981 $18,485
Long-term obligations issued for acquisitions 2,494 -
See accompanying Note to Consolidated Financial Statements.
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
NOTE A
ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
statements. Certain amounts for prior periods have been reclassified to conform
with statement presentation for the current period. These reclassifications had
no effect on shareholders' equity or net income. In the opinion of management,
the consolidated statements contain all material adjustments necessary to
present fairly the financial position of First Citizens BancShares, Inc.
("BancShares") as of and for each of the periods presented, and all such
adjustments are of a normal recurring nature. These financial statements should
be read in conjunction with the financial statements and notes included in the
1994 First Citizens BancShares Annual Report, which is incorporated by reference
on Form 10-K.
<PAGE>
Financial Summary
<TABLE>
<CAPTION> Table 1
1995 1994
Third Second First Fourth Third
(thousands, except per share data and ratios) Quarter Quarter Quarter Quarter Quarter
<S>
Summary of Operations <C> <C> <C> <C> <C>
Interest Income $122,234 $116,282 $106,221 $100,203 $95,254
Interest income - taxable equivalent 122,801 116,845 106,774 100,693 95,731
Interest expense 59,858 55,537 46,301 40,628 37,265
Net interest income-taxable equivalent 62,943 61,308 60,473 60,065 58,466
Taxable equivalent adjustment 567 563 553 490 477
Net interest income 62,376 60,745 59,920 59,575 57,989
Provision for loan losses 1,716 1,460 534 1,486 1,159
Net interest income after provision for loan losses 60,660 59,285 59,386 58,089 56,830
Noninterest income 23,560 23,057 21,655 21,080 21,354
Noninterest expense 59,716 62,876 62,363 59,444 57,361
Income before income taxes 24,504 19,466 18,678 19,725 20,823
Income taxes 8,686 6,842 6,500 6,796 7,138
Net income $15,818 $12,624 $12,178 $12,929 $13,685
Selected Average Balances
Total assets $7,053,579 $6,702,692 $6,323,537 $6,227,704 $6,102,964
Investment securities 1,694,776 1,493,415 1,380,424 1,498,143 1,543,548
Loans 4,500,192 4,424,724 4,253,117 3,999,377 3,854,738
Interest-earning assets 6,376,273 6,061,732 5,716,572 5,590,432 5,480,912
Deposits 6,124,360 5,858,280 5,533,654 5,422,018 5,338,095
Interest-bearing liabilities 5,569,496 5,299,570 5,009,276 4,895,564 4,818,665
Long-term obligations 24,595 26,174 32,564 43,854 48,908
Shareholders' equity $498,108 $482,885 $460,695 $443,833 $423,982
Shares outstanding 10,688,019 10,618,902 10,376,351 10,192,150 9,980,530
Profitability Ratios (averages)
Rate of return (annualized) on:
Total assets 0.89% 0.76% 0.78% 0.82% 0.89%
Shareholders' equity 12.60 10.49 10.72 11.56 12.81
Dividend payout ratio 13.42 16.81 17.09 15.75 12.77
Liquidity and Capital Ratios (averages)
Loans to deposits 73.48% 75.53% 76.86% 73.76% 72.21%
Shareholders' equity to total assets 7.06 7.20 7.29 7.13 6.95
Time certificates of $100,000 or more to total
deposits 8.61 8.04 7.30 6.63 6.41
Per Share of Stock
Net income $1.49 $1.19 $1.17 $1.27 $1.37
Cash dividends 0.20 0.20 0.20 0.20 0.175
Book Value at period end 47.32 46.06 45.06 44.11 43.05
</TABLE>
First Citizens BancShares, Inc and Subsidiaries
Third Quarter 1995
<PAGE>
Financial Summary
<TABLE>
<CAPTION> Table 1
Nine Months Ended
September 30
(thousands, except per share data and ratios) 1995 1994
<S>
Summary of Operations <C> <C>
Interest Income $344,737 $275,802
Interest income - taxable equivalent 346,420 277,165
Interest expense 161,696 107,498
Net interest income-taxable equivalent 184,724 169,667
Taxable equivalent adjustment 1,683 1,363
Net interest income 183,041 168,304
Provision for loan losses 3,710 1,300
Net interest income after provision for loan losses 179,331 167,004
Noninterest income 68,272 62,245
Noninterest expense 184,955 171,138
Income before income taxes 62,648 58,111
Income taxes 22,028 20,071
Net income $40,620 $38,040
Selected Average Balances
Total assets $6,700,778 $6,067,841
Investment securities 1,524,023 1,633,744
Loans 4,393,583 3,729,439
Interest-earning assets 6,053,942 5,434,562
Deposits 5,840,928 5,305,807
Interest-bearing liabilities 5,294,890 4,819,603
Long-term obligations 27,298 55,413
Shareholders' equity $479,744 $408,424
Shares outstanding 10,562,232 9,860,370
Profitability Ratios (averages)
Rate of return (annualized) on:
Total assets 0.81% 0.84%
Shareholders' equity 11.32 12.45
Dividend payout ratio 15.58 13.60
Liquidity and Capital Ratios (averages)
Loans to deposits 75.22% 70.29%
Shareholders' equity to total assets 7.16 6.73
Time certificates of $100,000 or more to total
deposits 8.00 6.33
Per Share of Stock
Net income $3.85 $3.86
Cash dividends 0.60 0.525
Book Value at period end 47.32 43.05
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
Acquisitions
<TABLE>
<CAPTION> Table 2
(thousands)
Total Total
Date Institution/Location Assets Deposits
<S> <S> <C> <C>
June 1995 Bank of White Sulphur Springs $64,589 $59,174
White Sulphur Springs, West Virginia
May 1995 9 NationsBank of Virginia branches 25,482 143,494
Southern Virginia
March 1995 State Bank 49,700 41,238
Fayetteville, North Carolina
February 1995 First-Citizens Bank & Trust Company 58,660 53,303
(formerly Pace American Bank)
Lawrenceville, Virginia
February 1995 First Investors Savings Bank, Inc. SSB 44,426 40,846
Whiteville, North Carolina
December 1994 First Rebublic Savings Bank, FSB 53,661 42,998
Roanoke Rapids, North Carolina
September 1994 Bank of Marlinton 51,646 46,647
Marlinton, West Virginia
August 1994 Edgecombe Homestead Savings Bank 39,181 30,195
Tarboro, North Carolina
March 1994 Bank of Bladenboro 21,316 19,515
Bladenboro, North Carolina
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
Outstanding Loans by Type
<TABLE>
<CAPTION> Table 3
1995 1994
Third Second First Fourth Third
(thousands) Quarter Quarter Quarter Quarter Quarter
<S>
Real estate: <C> <C> <C> <C> <C>
Construction and land development $ 109,597 $ 111,285 $ 107,197 $ 100,708 $ 106,206
Mortgage:
1-4 family residential 1,456,076 1,399,023 1,357,256 1,296,713 1,223,687
Commercial 744,811 743,367 741,948 720,407 601,887
Equity Line 394,088 395,412 385,581 349,092 302,478
Other 130,952 124,682 116,444 109,069 80,612
Commercial and industrial 455,781 459,446 415,968 373,947 469,145
Consumer 1,173,740 1,171,441 1,163,348 1,119,994 1,076,256
Lease financing 58,013 58,464 58,364 60,598 53,835
Other 16,998 17,115 16,863 17,605 25,158
Total loans 4,540,056 4,480,235 4,362,969 4,148,133 3,939,264
Less reserve for loan losses 77,986 76,887 73,897 72,017 71,537
Net loans $4,462,070 $4,403,348 $4,289,072 $4,076,116 $3,867,727
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
Investment Securities
<TABLE>
<CAPTION>
Table 4
September 30, 1995 September 30, 1994
Average Taxable Average Taxable
Book Market Maturity Equivalent Book Market Maturity Equivalent
(thousands) Value Value (Yrs./Mos.) Yield Value Value (Yrs./Mos.) Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U. S. Government:
Within one year $ 950,133 $ 947,448 0/6 4.86% $ 730,097 $ 724,059 0/7 4.21%
One to five years 773,616 774,519 1/8 6.01 757,585 734,870 1/6 4.43
Five to ten years 2,403 2,330 7/8 5.95 3,383 2,597 13/8 5.70
Over ten years 6,736 6,718 19/3 7.24 779 779 17/9 8.04
Total 1,732,888 1,731,015 1/2 5.39 1,491,065 1,461,526 1/1 4.32
State, county and municipal:
Within one year 1,326 1,333 0/6 7.27 562 568 0/5 8.18
One to five years 4,058 4,109 2/7 6.67 1,874 1,891 3/1 7.27
Five to ten years 2,776 2,868 5/8 7.35 2,657 2,647 7/1 7.30
Over ten years 195 195 12/11 9.00 779 779 17/11 8.03
Total 8,355 8,505 3/11 7.05 5,872 5,885 4/10 7.38
Other
One to five years 2,935 2,905 2/8 8.63 260 260 3/0 8.75
Five to ten years 55 55 6/5 8.00 55 55 7/5 8.00
Total 2,990 2,960 2/2 8.62 315 315 3/0 8.74
Total investment securities $1,744,233 $1,742,480 1/2 5.40% $1,497,252 $1,467,726 1/1 4.34%
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Third Quarter
<TABLE>
<CAPTION> Table 5
1995 1994 Increase (decrease) due to
Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Yield/ Total
(thousands) Balance Expense Rate Balance Expense Rate Volume Rate Change
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans:
Secured by real estate $2,795,987 $ 59,992 8.47% $2,251,162 $45,135 7.98% $11,518 $3,339 $14,857
Commercial and industrial 462,375 10,821 9.26 473,858 9,520 7.92 (264) 1,565 1,301
Consumer 1,166,488 25,494 8.73 1,051,439 21,725 8.25 2,440 1,329 3,769
Lease financing 57,906 1,117 7.58 53,048 985 7.43 101 31 132
Other 17,436 464 8.46 25,231 456 7.16 (108) 116 8
Total loans 4,500,192 97,888 8.64 3,854,738 77,821 8.04 13,687 6,380 20,067
Investment securities:
U. S. Government 1,683,096 22,052 5.20 1,539,885 16,894 4.35 1,715 3,443 5,158
State, county and municipal 8,688 168 7.67 2,367 47 7.88 124 (3) 121
Mortgage-backed 2,992 47 6.23 1,296 26 7.96 30 (9) 21
Total investment securities 1,694,776 22,267 5.21 1,543,548 16,967 4.36 1,869 3,431 5,300
Federal funds sold 181,305 2,646 5.79 82,626 943 4.53 1,284 419 1,703
Total interest-earning assets $6,376,273 $122,801 7.65% $5,480,912 $95,731 6.95% $16,840 $10,230 $27,070
Liabilities
Deposits:
Checking With Interest $ 825,813 $ 3,324 1.60% $ 794,433 $ 3,418 1.71% $ 131 ($225) ($94)
Savings 705,058 4,045 2.28 701,358 3,951 2.23 13 81 94
Money market accounts 737,178 6,058 3.26 776,667 4,988 2.55 (287) 1,357 1,070
Time deposits 2,937,613 41,728 5.64 2,264,533 22,252 3.90 8,080 11,396 19,476
Total interest-bearing deposits 5,205,662 55,155 4.20 4,536,991 34,609 3.03 7,937 12,609 20,546
Federal funds purchased 65,637 955 5.77 13,450 149 4.40 669 137 806
Repurchase agreements 22,021 264 4.76 19,345 167 3.42 27 70 97
Master notes 216,337 2,610 4.79 175,094 1,462 3.31 419 729 1,148
U. S. Treasury tax and loan accounts 18,831 262 5.52 17,307 181 4.15 19 62 81
Other short-term borrowings 16,413 197 4.76 7,570 89 4.66 105 3 108
Long-term obligations 24,595 415 6.69 48,908 608 4.93 (356) 163 (193)
Total interest-bearing liabilities $5,569,496 $ 59,858 4.26% $4,818,665 $37,265 3.07% $ 8,820 $13,773 $22,593
Interest rate spread 3.39% 3.88%
Net interest income and net yield
on interest-earning assets $62,943 3.92% $58,466 4.23% $ 8,020 ($3,543) $ 4,477
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Nine Months
<TABLE>
<CAPTION> Table 6
1995 1994 Increase (decrease) due to
Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Yield/ Total
(thousands) Balance Expense Rate Balance Expense Rate Volume Rate Change
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans:
Secured by real estate $2,727,870 $172,573 8.44% $2,220,719 $128,947 7.70% $30,271 $13,355 $43,626
Commercial and industrial 430,158 30,128 9.33 449,849 25,706 7.59 (1,275) 5,697 4,422
Consumer 1,159,949 77,099 8.87 984,886 61,159 8.28 11,227 4,713 15,940
Lease financing 58,424 3,322 7.58 49,376 2,820 7.62 517 (15) 502
Other 17,182 1,087 8.46 24,609 1,250 6.79 (424) 261 (163)
Total loans 4,393,583 284,209 8.62 3,729,439 219,882 7.87 40,316 24,011 64,327
Investment securities:
U. S. Government 1,513,309 55,567 4.91 1,632,140 55,066 4.51 (4,195) 4,696 501
State, county and municipal 7,951 465 7.82 1,280 79 8.25 401 (15) 386
Other 2,763 140 6.77 324 23 9.49 148 (31) 117
Total investment securities 1,524,023 56,172 4.93 1,633,744 55,168 4.51 (3,646) 4,650 1,004
Federal funds sold 136,336 6,039 5.92 71,379 2,115 3.96 2,401 1,523 3,924
Total interest-earning assets $6,053,942 $346,420 7.63% $5,434,562 $277,165 6.81% $39,071 $30,184 $69,255
Liabilities
Deposits:
Checking With Interest $804,391 $10,213 1.70% $780,274 $9,969 1.71% $305 (61) 244
Savings 690,376 11,698 2.27 681,902 11,402 2.24 142 154 296
Money market accounts 734,353 18,081 3.29 789,876 13,944 2.36 (1,169) 5,306 4,137
Time deposits 2,752,719 109,471 5.32 2,274,685 64,735 3.80 16,231 28,505 44,736
Total interest-bearing deposits 4,981,839 149,463 4.01 4,526,737 100,050 2.96 15,509 33,904 49,413
Federal funds purchased 39,369 1,721 5.84 20,151 543 3.60 679 499 1,178
Repurchase agreements 22,928 846 4.93 20,982 443 2.82 56 347 403
Master notes 191,723 7,134 4.97 162,951 3,524 2.89 848 2,762 3,610
U. S. Treasury tax and loan accounts 17,468 752 5.76 25,355 672 3.54 (275) 355 80
Other short-term borrowings 14,265 504 4.72 8,014 309 5.16 231 (36) 195
Long-term obligations 27,298 1,276 6.25 55,413 1,957 4.72 (1,154) 473 (681)
Total interest-bearing liabilities $5,294,890 $161,696 4.08% $4,819,603 $107,498 2.98% $15,894 $38,304 $54,198
Interest rate spread 3.55% 3.83%
Net interest income and net yield
on interest-earning assets $184,724 4.08% $169,667 4.17% $23,177 ($8,120) $15,057
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
Summary of Loan Loss Experience and Risk Elements
<TABLE>
<CAPTION>
Table 7
1995 1994
Third Second First Fourth Third
(thousands, except ratios) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Reserve balance at beginning of period $76,887 $73,897 $72,017 $71,537 $70,862
Reserve of acquired institution (6) 1,986 1,272 436 360
Provision for loan losses 1,716 1,460 534 1,486 1,159
Net charge-offs:
Charge-offs (1,783) (1,670) (1,234) (3,022) (2,276)
Recoveries 1,172 1,214 1,308 1,580 1,432
Net (charge-offs) recoveries (611) (456) 74 (1,442) (844)
Reserve balance at end of period $77,986 $76,887 $73,897 $72,017 $71,537
Historical Statistics
Balances
Average total loans $4,500,192 $4,424,724 $4,253,117 $3,999,377 $3,854,738
Total loans at period-end 4,540,056 4,480,235 4,362,969 4,148,133 3,939,264
Risk Elements
Nonaccrual loans $14,296 $16,406 $19,953 $21,069 $22,720
Other real estate acquired through forclosure 2,739 3,590 4,296 5,926 7,614
Total nonperforming assets $17,035 $19,996 $24,249 $26,995 $30,334
Accruing loans 90 days or more past due $4,874 $3,524 $5,020 $5,326 $5,177
Ratios
Net charge-offs (annualized) to average total loans 0.05% 0.04% -0.01% 0.14% 0.09%
Reserve for loan losses to total loans 1.72 1.72 1.69 1.87 1.82
Nonperforming assets to total loans plus foreclosed
real estate at period-end 0.37 0.45 0.56 0.65 0.77
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
Summary of Loan Loss Experience and Risk Elements
<TABLE>
<CAPTION>
Table 7
Nine Months Ended
(thousands, except ratios) September 30
1995 1994
<S> <C> <C>
Reserve balance at beginning of period $72,017 $70,049
Reserve of acquired institution 3,252 573
Provision for loan losses 3,710 1,300
Net charge-offs:
Charge-offs (4,687) (5,458)
Recoveries 3,694 5,073
Net (charge-offs) recoveries (993) (385)
Reserve balance at end of period $77,986 $71,537
Historical Statistics
Balances
Average total loans $4,393,583 $3,729,439
Total loans at period-end 4,540,056 3,939,264
Risk Elements
Nonaccrual loans $14,296 $22,720
Other real estate acquired through forclosure 2,739 7,614
Total nonperforming assets $17,035 $30,334
Accruing loans 90 days or more past due $4,874 $5,177
Ratios
Net charge-offs (annualized) to average total loans 0.03% 0.01%
Reserve for loan losses to total loans 1.72 1.82
Nonperforming assets to total loans plus foreclosed
real estate at period-end 0.37 0.77
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
Third Quarter 1995
<PAGE>
INTRODUCTION
Management's discussion and analysis of earnings and related financial
data are presented to assist in understanding the financial condition
and results of operations of First Citizens BancShares, Inc. and
Subsidiaries ("BancShares"). It should be read in conjunction with the
unaudited Consolidated Financial Statements and related notes contained
elsewhere in this report. The focus of this discussion concerns
BancShares' four banking subsidiaries (collectively, the "Banks"),
because BancShares itself made an insignificant contribution to the
consolidated totals. Banks operate under the name First-Citizens Bank &
Trust Company in North Carolina and Virginia, while Bank of Marlinton
and Bank of White Sulphur Springs operate in West Virginia. Certain
changes discussed herein result from various acquisitions that were
consummated during 1995 and 1994. Table 2 describes the various
business combinations, all of which were accounted for as purchases.
SUMMARY
BancShares realized an earnings increase of 15.6 percent during the third
quarter of 1995 compared to the third quarter of 1994. Consolidated net
income during the third quarter of 1995 was $15.8 million, compared to
$13.7 million earned during the corresponding period of 1994. The
decrease was the result of higher noninterest expense. Net income per
share during the third quarter of 1995 totaled $1.49, compared to $1.37
during the third quarter of 1994. Return on average assets was 0.89
percent for the third quarters of 1995 and 1994. For the nine-month
period ended September 30, consolidated net income increased from $38
million in 1994 to $40.6 million in 1995. This increase was the result
of increases in net interest income and noninterest income, with such
increases offsetting the increase in noninterest expense. Net income
per share during 1995 totaled $3.85, compared to $3.86 during the same
period of 1994. The reduction in net income per share despite an
increase in consolidated net income reflects the higher number of
average shares outstanding during 1995, the result of shares of Class A
common stock being issued for certain business combinations. Return on
average assets was 0.81 percent for 1995 compared to 0.84 percent during
the same period of 1994. Other profitability, liquidity and capital
ratios are presented in Table 1. To understand the changes and trends in
interest-earning assets and interest-bearing liabilities, refer to the
average balances, interest income and expense, and yields and rates
presented in Tables 5 and 6.
INTEREST-EARNING ASSETS
Interest-earning assets averaged $6.38 billion for the third quarter of 1995, an
increase of $895.4 million or 16.3 percent from the third quarter of 1994, the
result of growth in the loan portfolio. For the nine-month period ended
September 30, 1995, earning assets averaged $6.05 billion, compared to $5.43
billion during the same period of 1994, an increase of 11.4 percent. Loans. At
September 30, 1995, and 1994, gross loans totaled $4.54 billion and $3.94
billion, respectively. As of December 31, 1994, gross loans were $4.15 billion.
The $391.9 million increase from December 31, 1994 to September 30, 1995, is the
combined result of the $170.4 million in acquired loans and growth among
consumer and commercial and industrial loans. The $600.8 million growth in
loans from September 30, 1994 to September 30, 1995 results from acquisitions,
which have added $219 million in loans, and strong growth within various loan
products. Table 3 details outstanding loans by type for the past five quarters.
During the third quarter of 1995, average loans were $4.5 billion, an increase
of $645.5 million or 16.7 percent from the comparable period of 1994. Consumer
loans averaged $1.17 billion during the third quarter of 1995, compared to $1.05
billion during the same period of 1994, an increase of $115 million or 10.9
percent. This results from sustained demand for automobile financing. Loans
secured by real estate averaged $2.8 billion during the third quarter of 1995,
an increase of $544.8 million or 24.2 percent between the two periods. Growth in
the consumer portfolio is expected to continue throughout 1995. However, higher
market rates during 1995 are likely to diminish demand, and management does not
expect loans to display the growth rate seen during 1994. Growth among loans
secured by real estate is expected to continue at moderate levels. Management
anticipates stronger growth among commercial and industrial loans throughout the
remainder of 1995. Investment securities. At September 30, 1995, and 1994, the
investment portfolio totaled $1.74 billion and $1.5 billion, respectively. At
December 31, 1994, the investment portfolio was $1.46 billion. The growth in
the portfolio during 1995 has resulted from increased liquidity. All securities
are classified as held-to-maturity, as BancShares has the ability and the
positive intent to hold its investment portfolio until maturity. Table 4
presents detailed information relating to the investment portfolio. Income on
Interest-Earning Assets. Taxable equivalent interest income amounted to $122.8
million during the third quarter of 1995, a 28.3 percent increase over the third
quarter of 1994. The average yield on interest-earning assets for the third
quarter of 1995 was 7.65 percent, compared to 6.95 percent for the corresponding
period of 1994, a 70 basis point improvement resulting from higher market rates.
Taxable equivalent loan income for the third quarter of 1995 was $97.9 million,
an increase of $20.1 million or 25.8 percent from the third quarter of 1994 due
to growth in the loan portfolio and higher loan yields. The taxable equivalent
yield on the loan portfolio was 8.64 percent during the third quarter of 1995,
compared to 8.04 percent during the same period of 1994. Taxable equivalent
loan income for the nine-month period ended September 30 was $284.2 million, a
29.3 percent increase over the same period of 1994, the combined result of the
volume increases and a 75 basis point yield increase. Taxable equivalent income
earned on the investment portfolio amounted to $22.3 million during the third
quarter of 1995 and $17 million during the same period of 1994. The portfolio's
taxable equivalent yield increased from 4.36 percent for the quarter ended
September 30, 1994, to 5.21 percent for the quarter ended September 30, 1995.
Additionally, the average portfolio during the third quarter of 1995 was $1.69
billion, an increase of $151.2 million or 9.8 percent over the same period of
1994. For the nine-month period ended September 30, 1995, and 1994, investment
securities taxable-equivalent interest income increased 1.8 percent, the result
of a 42 basis point yield improvement.
INTEREST-BEARING LIABILITIES.
At September 30, 1995, and 1994, interest-bearing liabilities totaled $5.65
billion and $4.86 billion, respectively, compared to $4.98 billion as of
December 31, 1994. Average interest-bearing liabilities for the third quarter of
1995 totaled $5.57 billion, an increase of 15.6 percent from the third quarter
of 1994. Deposits. At September 30, 1995, total deposits were $6.23 billion, an
increase of $817.2 million or 15.1 percent over September 30, 1994. Compared to
the December 31, 1994 balance of $5.52 billion, total deposits have increased
$710.4 million. Acquisitions during 1995 have generated $338.1 million in
deposit liabilities. The remaining increase in deposits since December 31, 1994
has resulted from growth generated within the existing branch network, largely
the result of a promotion of the one year certificate of deposit during the
first quarter. Average interest-bearing deposits were $5.2 billion during the
third quarter of 1995 compared to $4.54 billion during the third quarter of
1994, an increase of 14.7 percent. Much of the increase is attributed to
average time deposits, which increased $673.1 million from the third quarter of
1994 to the third quarter of 1995. Borrowed Funds. At September 30, 1995,
short-term borrowings totaled $343.1 million compared to $290.9 million at
December 31, 1994 and $231.5 million at September 30, 1994. For the quarters
ended September 30, 1995, and 1994, short-term borrowings averaged $339.2
million and $232.8 million, respectively, a 45.7 percent increase resulting from
higher levels of overnight borrowings. Long-term obligations averaged $24.6
million during the third quarter of 1995, compared to $48.9 million during the
third quarter of 1994. The 49.7 percent reduction results from the
reclassification of Federal Home Loan Bank borrowings to short-term status.
Expense on Interest-Bearing Liabilities. Interest expense amounted to $59.9
million during the third quarter of 1995, a $22.6 million or 60.6 percent
increase from the third quarter of 1994. The higher interest expense resulted
from a 119 basis point increase in the aggregate rate on interest bearing
liabilities, which was 4.26 percent during the third quarter of 1995, compared
to 3.07 percent during the third quarter of 1994. The $750.8 million growth in
average interest-bearing liabilities also contributed to the higher level of
interest expense during 1995. For both the three-month and the nine-month
periods ended September 30, increases in interest expense also resulted from the
shifting mix of deposits. Since time deposits typically carry higher rates than
transaction accounts, the higher ratios of time deposits to total
interest-bearing deposits in 1995 over 1994 contributed to the increase in
interest expense. Interest expense for the nine-month period ended September 30,
1995, was $161.7 million, a 50.4 percent increase over the comparable period of
1994. The increase resulted from a 110 basis point increase in the rate on
interest-bearing liabilities and a $475.3 million increase in average
interest-bearing liabilities.
NET INTEREST INCOME
Taxable equivalent net interest income totaled $62.9 million during the third
quarter of 1995, an increase of 7.7 percent from the third quarter of 1994. The
average net yield on interest-earning assets was 3.92 percent for the third
quarter of 1995, 31 basis points below the net yield recorded during the third
quarter of 1994. The taxable equivalent interest rate spread was 3.39 percent
for the third quarter of 1995, compared to 3.88 percent for the third quarter of
1994. Management anticipates continued compression of the net yield in the
coming quarters due to current market conditions. Management views the ratio of
interest-earning assets to interest-bearing liabilities within one year to be at
an acceptable level. Management is aware of the potential negative impact
changes in interest rates may have on net interest income. A principal objective
of BancShares' asset liability function is to manage interest rate risk or the
exposure to changes in interest rates. Management maintains portfolios of
interest-earning assets and interest-bearing liabilities with maturities or
repricing opportunities that will protect against wide interest rate
fluctuations, thereby limiting, to the extent possible, the ultimate interest
rate exposure.
ASSET QUALITY
Reserve for loan losses. Management continuously analyzes the growth and risk
characteristics of the total loan portfolio under current and projected economic
conditions in order to evaluate the adequacy of the reserve for loan losses. At
September 30, 1995, the reserve for loan losses amounted to $78 million or 1.72
percent of loans outstanding. This compares to $71.5 million or 1.82 percent at
September 30, 1994. Lower levels of nonperforming assets during 1995 have
allowed a slight reduction in the reserve ratio. Management considers the
established reserve adequate to absorb future losses that relate to loans
outstanding at September 30, 1995. While management uses available information
to establish provisions for loan losses, future additions to the reserve may be
necessary based on changes in economic conditions. In addition, various
regulatory agencies may require the recognition of additions to the reserve
based on their examinations. The provision for loan losses charged to operations
during the nine months ended September 30, 1995 was $3.3 million, compared to
$573,000 during the same period of 1994. Net charge-offs for the nine months
ended September 30, 1995 totalled $993,000, compared to net charge-offs of
$385,000 during the same period of 1994. Table 7 provides details concerning
the reserve and provision for loan losses over the past five quarters.
Nonperforming assets. At September 30, 1995, BancShares' nonperforming assets
amounted to $17 million or 0.37 percent of gross loans plus foreclosed
properties, compared to $27 million at December 31, 1994, and $30.3 million at
September 30, 1994. The $13.3 million reduction in nonperforming assets since
September 30, 1994 reflected reductions in nonaccrual loans and foreclosed
assets. Management continues to closely monitor nonperforming assets, taking
necessary actions to minimize potential exposure.
NONINTEREST INCOME
Noninterest income was $23.6 million for the third quarter of 1995, compared to
$21.4 million for the third quarter of 1994. The $2.2 million increase was
primarily due to higher fee income, the result of growth among fees collected
from other banks for processing services. Total fee income during the third
quarter of 1995 was $5.3 million, compared to $4.3 million from the same period
of 1994. During the third quarter of 1995, service charge income was $10.2
million, a 6.7 percent increase over the $9.6 million earned during the same
period of 1994. Bolstered by growth in merchant activity, credit card income
increased 11.2 percent from the third quarter of 1994 to the same period of
1995. For the nine-month period ended September 30, 1995, noninterest income
totaled $68.3 million, an increase of $6 million from the same period of 1994.
The 9.7 percent increase was the combined result of higher service charge income
and improved fee income. Loan sales generated gains of $432,000 during 1995,
compared to losses of $806,000 recorded during the same period of 1994.
NONINTEREST EXPENSE
Noninterest expense for the third quarter of 1995 amounted to $59.7 million.
This was a 4.1 percent increase over the third quarter of 1994. Salaries and
wages increased 6.5 percent between the periods, primarily the result of merit
raises. Employee benefits expense increased 15 percent during the third quarter
of 1995, much of which resulted from higher health care costs. Occupancy expense
increased 8.4 percent during the third quarter of 1995, compared to the
corresponding period of 1994. For the nine month period ended September 30,
occupancy expense during 1995 was 10.9 percent above the 1994 level. Increases
for both the quarters and the nine month periods ended September 30, 1995 and
1994 resulted from increased operating costs. Other expenses decreased 4.5
percent for the third quarter of 1995 versus the same period of 1994. The
reduction resulted from a refund received from the FDIC for deposit insurance.
This nonrecurring item contributed to a 74 percent reduction in FDIC insurance
expense during the third quarter of 1995 when compared to the third quarter of
1994. For the year-to-date the $58.5 million in other expenses represents an
increase of 5.7 percent increase, driven by increases in intangible
amortization, non-credit charge offs, and expenses related to the credit card
operation.
Various proposals are currently being considered by committees of the United
States Congress concerning a possible merger of the Savings Association
Insurance Fund ("SAIF") and Bank Insurance Fund ("BIF"), both of which are
controlled by the FDIC. One of the principal issues under discussion is the
amount of additional funds needed to recapitalize the SAIF prior to such a
merger. Substantially all of the proposals under consideration contemplate a
one-time special assessment to be levied on SAIF-insured deposits, which
assessment has ranged up to $.85 per $100 of SAIF-insured deposits maintained by
the institution assessed. In addition, the various proposals differ as to
whether the proposed assessment will be deductible for tax purposes by the
institution assessed. At March 31, 1995, the Banks had approximately $1.7
billion of SAIF-insured deposits which would be subject to such a special
assessment. Due to the uncertainty as to which, if any, of the various
proposals will be adopted and the ultimate amount and tax deductibility of the
assessment to be levied on the Banks, the impact of the proposals and the
assessment is imposible to predict with certainty at this time.
INCOME TAXES
Income tax expense amounted to $8.7 million during the third quarter of 1995,
compared to $7.1 million during the third quarter of 1994. The effective tax
rates for these periods were 35.4 percent and 34.3 percent, respectively. The
year-to-date effective tax rates are 35.1 percent and 34.5 percent,
respectively, for 1995 and 1994.
LIQUIDITY
Management relies on the investment portfolio as a source of liquidity, with
maturities designed to provide needed cash flows. Further, retail deposits
generated throughout the extensive branch network has enabled management to fund
asset growth and maintain liquidity. BancShares also maintains readily available
sources to borrow funds as needed through its correspondent network. Loans to
deposits averaged 73.5 percent during the third quarter of 1995 versus 72.2
percent for the same period of 1994. Management continues to view liquidity as
a key financial objective.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
BancShares maintains an adequate capital position and exceeds all minimum
regulatory capital requirements. At September 30, 1995, and 1994, the leverage
capital ratio of BancShares was 6.1 percent and 6.5 percent, respectively,
surpassing the minimum level of 3 percent. The reduction experienced during
1995 is due to intangible assets that result from business combinations. As a
percentage of risk-adjusted assets, BancShares' core capital ratio was 9.6
percent and 10.4 percent, respectively at September 30, 1995, and 1994. The
minimum ratio allowed is 4 percent of risk-adjusted assets. The total capital
ratio was 10.9 percent and 11.6 percent of risk-adjusted assets, above the
minimum 8 percent level. The reduction in these capital ratios reflect the
impact of the acquisition-related intangibles.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 483,627
<SECURITIES> 1,744,233
<RECEIVABLES> 1,939
<ALLOWANCES> 77,986
<INVENTORY> 0
<CURRENT-ASSETS> 2,227,860
<PP&E> 316,465
<DEPRECIATION> 110,116
<TOTAL-ASSETS> 7,168,772
<CURRENT-LIABILITIES> 6,227,964
<BONDS> 0
<COMMON> 10,690
0
0
<OTHER-SE> 495,183
<TOTAL-LIABILITY-AND-EQUITY> 7,168,772
<SALES> 344,737
<TOTAL-REVENUES> 413,009
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 184,955
<LOSS-PROVISION> 3,710
<INTEREST-EXPENSE> 161,696
<INCOME-PRETAX> 62,648
<INCOME-TAX> 22,028
<INCOME-CONTINUING> 40,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,620
<EPS-PRIMARY> 3.85
<EPS-DILUTED> 3.85
</TABLE>
