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 March 31, 2000
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) 716-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No _____
Class A Common Stock--$1 Par Value-- 8,835,748 shares Class B Common Stock--$1
Par Value-- 1,720,360 shares (Number of shares outstanding, by class, as of
May 10, 2000)
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at March 31, 2000, December 31, 1999,
and March 31, 1999
Consolidated Statements of Income for the three-month periods
ended March 31, 2000, and March 31, 1999
Consolidated Statements of Changes in Shareholders' Equity for the
three-month periods ended March 31, 2000, and March 31, 1999
Consolidated Statements of Cash Flows for the three-month periods
ended March 31, 2000, and March 31, 1999
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Market Risk Disclosure
PART II. OTHER INFORMATION
Item 4. Submission of Matters tyo a vote of Security Holders
On April 24, 2000 at the Annual Meeting of Shareholders of Registrant
two matters were considered by the shareholders:
(a) Election of Diorectors - The shareholder vote regarding the elec-
tion of the nominees for Board of Directors was:
Nominee For Withheld
------------------------------------------------------------
J.M. Alexander, Jr. 33,357,603 170,932
T.L. Bissett 33,357,906 170,632
B.I. Boyle 32,957,352 571,183
G.H. Broadrick 32,965,137 563,398
H.M. Craig, III 33,358,103 170,432
B.M. Farnsworth 32,964,341 564,194
L.M. Fetterman 32,965,037 563,498
C.P. Holding 33,357,557 170,978
F.B. Holding 33,357,737 170,798
F.B. Holding, Jr. 33,357,966 170,569
L.R. Holding 33,355,811 172,724
C.B.C. Holt 32,828,797 699,738
J.B. Hyler, Jr. 33,355,666 172,899
G.D. Johnson 32,961,037 567,498
F.R. Jones 32,965,787 562,748
L.S. Jones 33,357,603 170,932
J.T. Maloney, Jr. 33,356,662 171,873
J.C. Mayo, Jr. 33,357,887 170,648
W. McKay 32,964,812 563,723
B.D. Nash 33,358,062 170,473
L.T. Nunnellee, II 32,961,476 567,059
T.O. Shaw 32,959,137 569,398
R.C. Soles, Jr. 33,357,962 170,573
D.L. Ward, Jr. 33,268,086 210,449
(b) Appointment of Independent Public Accountant - The shareholder
vote regarding tha appiondment of KPMG LLP as BancShares' independent
public accountant for 2000 was:
For: 33,481,753
Against: 4,166
Withheld: 42,616
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. During the quarter ended March 31, 2000,
Registrant filed no Current Reports
on Form 8-K.
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: May 10, 2000 By:/s/Kenneth A. Black
Kenneth A. Black
Vice President, Treasurer,
and Chief Financial Officer
First Citizens BancShares, Inc and Subsidiaries
First Quarter 2000
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
First Citizens BancShares, Inc. and Subsidiaries
March 31* December 31# March 31*
(thousands,except share data) 2000 1999 1999
<S> <C> <C> <C>
Assets
Cash and due from banks $446,995 $591,605 $483,590
Overnight investments 521,441 473,393 350,000
Investment securities held to maturity 1,530,632 1,353,321 2,075,213
Investment securities available for sale 16,582 18,573 24,669
Loans 6,828,095 6,751,039 6,244,828
Less reserve for loan losses 99,590 98,690 96,340
- ------------------------------------------------------------------------------------------------------------------------------------
Net loans 6,728,505 6,652,349 6,148,488
Premises and equipment 406,731 397,397 374,110
Income earned not collected 51,548 52,621 59,824
Other assets 178,298 177,840 186,269
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $9,880,732 $9,717,099 $9,702,163
====================================================================================================================================
Liabilities
Deposits:
Noninterest-bearing $1,382,750 $1,343,353 $1,301,195
Interest-bearing 6,913,100 6,830,245 6,877,903
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits 8,295,850 8,173,598 8,179,098
Short-term borrowings 587,087 568,301 584,830
Long-term obligations 154,915 155,683 157,529
Other liabilities 101,744 90,760 104,453
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,139,596 8,988,342 9,025,910
Shareholders' equity
Common stock:
Class A-$1 par value (8,846,489; 8,890,039 and
8,905,199 shares issued, respectively) 8,847 8,890 8,906
Class B-$1 par value (1,720,360 shares issued
for all periods) 1,720 1,720 1,720
Surplus 143,766 143,766 143,760
Retained earnings 581,953 567,801 513,709
Accumulated other comprehensive income 4,850 6,580 8,158
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 741,136 728,757 676,253
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $9,880,732 $9,717,099 $9,702,163
====================================================================================================================================
* Unaudited
# Derived from the Consolidated Balance Sheet included in the 1999 Annual Report
on Form 10-K.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
First Citizens BancShares, Inc and Subsidiaries
First Quarter 2000
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income
First Citizens BancShares, Inc. and Subsidiaries
Three Months Ended
March 31
(thousands, except per share data, unaudited) 2000 1999
<S> <C> <C>
Interest income
Loans $137,911 $122,655
Investment securities:
U. S. Government 20,915 29,283
State, county and municipal 48 38
Other 122 120
- ------------------------------------------------------------------------------------------------------------------------
Total investment securities interest income 21,085 29,441
Overnight investments 4,990 3,360
- ------------------------------------------------------------------------------------------------------------------------
Total interest income 163,986 155,456
Interest expense
Deposits 64,800 60,869
Short-term borrowings 6,431 5,659
Long-term obligations 3,150 3,185
- ------------------------------------------------------------------------------------------------------------------------
Total interest expense 74,381 69,713
- ------------------------------------------------------------------------------------------------------------------------
Net interest income 89,605 85,743
Provision for loan losses 3,459 2,662
- ------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 86,146 83,081
Noninterest income
Service charges on deposit accounts 14,060 11,600
Credit card income 7,841 6,322
Trust income 3,742 3,507
Fees from processing services 3,277 3,293
Commission income 2,782 2,265
ATM income 2,487 2,344
Mortgage income 1,405 2,497
Other service charges and fees 3,151 2,444
Securities gains - 777
Other 2,606 3,146
- ------------------------------------------------------------------------------------------------------------------------
Total noninterest income 41,351 38,195
Noninterest expense
Salaries and wages 41,025 39,097
Employee benefits 8,868 7,558
Occupancy expense 8,247 7,131
Equipment expense 9,169 9,231
Other 28,978 28,201
- ------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 96,287 91,218
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes 31,210 30,058
Income taxes 11,696 11,010
- ------------------------------------------------------------------------------------------------------------------------
Net income $19,514 $19,048
- ------------------------------------------------------------------------------------------------------------------------
Average shares outstanding 10,592,378 10,625,559
- ------------------------------------------------------------------------------------------------------------------------
Per Share
Net income $1.84 $1.79
Cash dividends 0.25 0.25
- ------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
First Quarter 2000
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity
First Citizens BancShares, Inc. and Subsidiaries
Accumulated
Class A Class B Other
Common Common Retained Comprehensive Total
(thousands,except share data, unaudited) Stock Stock Surplus Earnings Income Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $8,906 $1,720 $143,760 $497,316 $9,047 $660,749
Net income 19,048 19,048
Unrealized securities losses, net of $585
deferred tax benefit (889) (889)
Cash dividends (2,655) (2,655)
=====================================================================================================================
Balance at March 31, 1999 $8,906 $1,720 $143,760 $513,709 $8,158 $676,253
=====================================================================================================================
Balance at December 31, 1999 $8,890 $1,720 $143,766 $567,801 $6,580 $728,757
Net income 19,514 19,514
Unrealized securities losses, net of $1,128
deferred tax benefit (1,730) (1,730)
Cash dividends (2,653) (2,653)
Redemption of 43,550 shares of Class A
common stock (43) (2,709) (2,752)
=====================================================================================================================
Balance at March 31, 2000 $8,847 $1,720 $143,766 $581,953 $4,850 $741,136
=====================================================================================================================
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
First Quarter 2000
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
First Citizens BancShares, Inc. and Subsidiaries
Three months ended March 31,
(thousands, unaudited) 2000 1999
<S> <C> <C>
Operating Activities
Net income $19,514 $19,048
Adjustments to reconcile net income to cash
provided by operating activities:
Amortization of intangibles 2,951 2,916
Provision for loan losses 3,459 2,662
Deferred tax benefit (1,505) (2,227)
Change in current taxes payable 11,944 9,877
Depreciation 7,377 7,460
Change in accrued interest payable (4,368) (7,813)
Change in income earned not collected 1,073 1,828
Securities gains - (777)
Origination of loans held for sale (41,216) (163,785)
Proceeds from sale of loans held for sale 47,072 194,703
Loss (gain) on loans held for sale 10 (1,593)
Net amortization of premiums and discounts 1,113 3,275
Net change in other assets (776) (4,799)
Net change in other liabilities 3,408 (3,300)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 50,056 57,475
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities
Net increase in loans outstanding (85,481) (80,999)
Purchases of investment securities held to maturity (493,060) (356,874)
Purchases of investment securities available for sale (867) (2,119)
Proceeds from maturities of investment securities held to maturity 314,636 413,758
Proceeds from sales of investment securities available for sale - 1,710
Net change in overnight investments (48,048) (117,275)
Dispositions of premises and equipment 990 6,311
Additions to premises and equipment (17,701) (20,805)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (329,531) (156,293)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities
Net change in time deposits 64,806 6,280
Net change in demand and other interest-bearing deposits 57,446 60,410
Net change in short-term borrowings 18,018 15,418
Repurchases of common stock (2,752) -
Cash dividends paid (2,653) (2,655)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 134,865 79,453
- ----------------------------------------------------------------------------------------------------------------------------
Change in cash and due from banks (144,610) (19,365)
Cash and due from banks at beginning of period 591,605 502,955
============================================================================================================================
Cash and due from banks at end of period $446,995 $483,590
============================================================================================================================
Cash payments for:
Interest $78,749 $77,526
Income taxes 7,587 3,423
- ----------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of noncash investing and financing activities:
Common stock issued for acquisitions - -
Supplemental disclosure of noncash investing and financing activities:
Unrealized securities losses (2,858) (1,474)
- ----------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
First Quarter 2000
<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.
In the opinion of management, the consolidated statements contain all
material adjustments necessary to present fairly the financial position of First
Citizens BancShares, Inc. as of and for each of the periods presented, and all
such adjustments are of a normal recurring nature. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
These financial statements should be read in conjunction with the financial
statements and notes included in the 1999 First Citizens BancShares, Inc. Annual
Report, which is incorporated by reference on Form 10-K. Certain amounts for
prior periods have been reclassified to conform with statement presentations for
2000. However, the reclassifications have no effect on shareholders' equity or
net income as previously reported.
Note B
Comprehensive Income
The following table displays comprehensive income for the periods indicated:
<TABLE>
<CAPTION>
Three months ended March 31
(thousands) 2000 1999
<S> <C> <C>
Net income $19,514 $19,048
Other comprehensive income (loss) (1,730) (889)
================================================================================
Comprehensive income $17,784 $18,159
================================================================================
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
First Quarter 2000
<PAGE>
<TABLE>
<CAPTION>
Financial Summary
Table 1
2000 1999
First Fourth Third Second First
(thousands, except per share data and ratios) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Summary of Operations
Interest income $163,986 $161,251 $160,224 $156,960 $155,456
Interest expense 74,381 72,511 70,497 68,821 69,713
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 89,605 88,740 89,727 88,139 85,743
Provision for loan losses 3,459 3,503 3,329 2,178 2,662
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 86,146 85,237 86,398 85,961 83,081
Noninterest income 41,351 41,975 45,898 39,271 38,195
Noninterest expense 96,287 95,911 95,104 93,387 91,218
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 31,210 31,301 37,192 31,845 30,058
Income taxes 11,696 11,984 14,060 11,542 11,010
====================================================================================================================================
Net income $19,514 $19,317 $23,132 $20,303 $19,048
====================================================================================================================================
Net interest income-taxable equivalent $90,374 $89,267 $90,258 $88,703 $86,338
- ------------------------------------------------------------------------------------------------------------------------------------
Selected Quarterly Averages
Total assets $9,658,251 $9,721,360 $9,644,135 $9,605,512 $9,517,513
Investment securities 1,497,278 1,583,216 1,897,593 2,066,519 2,091,575
Loans 6,789,203 6,646,312 6,474,200 6,289,714 6,180,106
Interest-earning assets 8,667,039 8,627,990 8,689,146 8,659,199 8,558,123
Deposits 8,128,968 8,140,962 8,121,209 8,139,147 8,018,971
Interest-bearing liabilities 7,512,781 7,533,726 7,518,874 7,490,958 7,495,944
Long-term obligations 155,171 158,975 156,856 157,453 158,307
Shareholders' equity $734,777 $720,617 $702,065 $683,771 $668,087
Shares outstanding 10,592,378 10,625,208 10,625,559 10,625,559 10,625,559
- ------------------------------------------------------------------------------------------------------------------------------------
Selected Quarter-End Balances
Total assets $9,880,732 $9,717,099 $9,577,715 $9,628,477 $9,702,163
Investment securities 1,547,214 1,371,894 1,699,520 1,975,476 2,099,882
Loans 6,828,095 6,751,039 6,574,807 6,376,372 6,244,828
Interest-earning assets 8,896,750 8,596,326 8,590,485 8,647,045 8,694,710
Deposits 8,295,850 8,173,598 8,062,091 8,170,433 8,179,098
Interest-bearing liabilities 7,655,102 7,554,229 7,454,172 7,522,636 7,620,262
Long-term obligations 154,915 155,683 156,840 156,870 157,529
Shareholders' equity $741,136 $728,757 $713,069 $692,570 $676,253
Shares outstanding 10,566,849 10,610,399 10,625,559 10,625,559 10,625,559
- ------------------------------------------------------------------------------------------------------------------------------------
Profitability Ratios (averages)
Rate of return (annualized) on:
Total assets 0.81% 0.79% 0.95% 0.85% 0.81%
Shareholders' equity 10.68 10.64 13.07 11.91 11.56
Dividend payout ratio 13.59 13.74 11.47 13.09 13.97
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidity and Capital Ratios (averages)
Loans to deposits 83.52% 81.64% 79.72% 77.28% 77.07%
Shareholders' equity to total assets 7.61 7.41 7.28 7.12 7.02
Time certificates of $100,000 or more to total
deposits 9.01 8.96 8.93 8.91 9.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $1.84 $1.82 $2.18 $1.91 $1.79
Cash dividends 0.25 0.25 0.25 0.25 0.25
Book value at period end 70.14 68.68 67.11 65.18 63.64
Tangible book value at period end 59.79 58.13 56.31 54.05 52.27
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
First Quarter 2000
<PAGE>
<TABLE>
<CAPTION>
Outstanding Loans by Type
Table 2
2000 1999
First Fourth Third Second First
(thousands) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Real estate:
Construction and land development $208,518 $186,119 $170,467 $169,755 $166,123
Mortgage:
1-4 family residential 1,368,732 1,326,642 1,311,314 1,254,010 1,276,945
Commercial 1,866,544 1,810,904 1,732,853 1,641,846 1,594,076
Equity Line 776,164 755,342 706,271 685,924 613,510
Other 184,397 161,652 162,098 164,719 160,690
Commercial and industrial 950,445 985,738 971,199 952,206 889,962
Consumer 1,340,671 1,393,227 1,400,144 1,391,491 1,437,897
Lease financing 127,822 123,908 111,338 106,684 95,557
Other 4,802 7,507 9,123 9,737 10,068
- -------------------------------------------------------------------------------------------------------------------------
Total loans 6,828,095 6,751,039 6,574,807 6,376,372 6,244,828
Less reserve for loan losses 99,590 98,690 97,965 96,765 96,340
- -------------------------------------------------------------------------------------------------------------------------
Net loans $6,728,505 $6,652,349 $6,476,842 $6,279,607 $6,148,488
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
First Quarter 2000
<PAGE>
<TABLE>
<CAPTION>
Investment Securities
Table 3
March 31, 2000 March 31, 1999
Average Taxable Average Taxable
Book Fair Maturity Equivalent Book Fair 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 $1,200,835 $1,184,701 0/7 5.63 % $1,345,055 $1,351,757 0/7 5.90 %
One to five years 315,939 310,768 1/11 6.60 721,630 719,754 1/6 5.23
Five to ten years 309 310 8/7 8.11 116 121 7/0 8.38
Over 10 years 9,026 8,831 26/7 7.33 4,948 5,059 22/10 7.11
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,526,109 1,504,610 0/10 5.84 2,071,749 2,076,691 0/11 5.66
State, county and municipal:
Within one year 900 904 0/6 7.28 125 125 0/2 7.70
One to five years 1,761 1,777 1/2 7.27 2,664 2,754 2/6 7.27
Over ten years 1,557 1,586 18/0 8.59 160 165 18/5 9.14
- -----------------------------------------------------------------------------------------------------------------------------------
Total 4,218 4,267 7/7 7.76 2,949 3,044 3/3 7.39
Other:
Within one year 10 10 0/4 5.24 210 210 0/2 5.24
One to five years 45 45 2/2 5.47 55 55 2/11 5.47
Five to ten years 250 250 8/4 2.25 250 250 9/4 2.25
- ------------------------------------------------------------------------------------------------------------------------------------
Total 305 305 5/6 4.95 515 515 0/8 3.81
- -----------------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity 1,530,632 1,509,182 1/0 5.85 2,075,213 2,080,250 0/11 5.67
Marketable equity securities 8,619 16,582 11,136 24,669
===================================================================================================================================
Total investment securities $1,539,251 $1,525,764 $2,086,349 $2,104,919
===================================================================================================================================
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
First Quarter 2000
<PAGE>
<TABLE>
<CAPTION>
Consolidated Taxable Equivalent Rate/Volume Variance Analysis - First Quarter
Table 4
2000 1999 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>
Total loans $6,789,203 $138,653 8.20 % $6,180,106 $123,232 8.04 % $13,161 $2,260 $15,421
Investment securities:
U. S. Government 1,474,744 20,915 5.70 2,063,406 29,283 5.76 (8,245) (123) (8,368)
State, county and municipal 3,615 75 8.34 3,053 56 7.44 11 8 19
Other 18,919 122 2.59 25,116 120 1.94 (34) 36 2
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment securities 1,497,278 21,112 5.67 2,091,575 29,459 5.71 (8,268) (79) (8,347)
Overnight investments 380,558 4,990 5.27 286,442 3,360 4.76 1,190 440 1,630
===================================================================================================================================
Total interest-earning assets $8,667,039 $164,755 7.63 % $8,558,123 $156,051 7.36 % $6,083 $2,621 $8,704
===================================================================================================================================
Liabilities:
Deposits:
Checking with Interest $1,065,212 $1,552 0.59 % $1,071,693 $1,924 0.73 % ($5) ($367) ($372)
Savings 654,292 2,529 1.55 690,834 2,679 1.57 (129) (21) (150)
Money market accounts 1,495,715 14,436 3.88 1,275,292 10,344 3.29 2,012 2,080 4,092
Time deposits 3,602,133 46,283 5.17 3,741,259 45,922 4.98 (1,565) 1,926 361
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 6,817,352 64,800 3.82 6,779,078 60,869 3.64 313 3,618 3,931
Federal funds purchased 33,672 471 5.63 79,434 910 4.65 (581) 142 (439)
Repurchase agreements 139,543 1,495 4.31 106,935 923 3.50 320 252 572
Master notes 306,817 3,518 4.61 312,184 2,968 3.86 (42) 592 550
Other short-term borrowings 60,226 947 6.32 60,006 858 5.80 7 82 89
Long-term obligations 155,171 3,150 8.16 158,307 3,185 8.16 (49) 14 (35)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $7,512,781 $74,381 3.98 % $7,495,944 $69,713 3.77 % ($32) $4,700 $4,668
- -----------------------------------------------------------------------------------------------------------------------------------
Interest rate spread 3.65 % 3.59 %
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income and net yield on
interest-earning assets $90,374 4.19 % $86,338 4.09 % $6,115 ($2,079) $4,036
- ------------------------------------------------------------------------------------------------------------------------------------
Average loan balances include nonaccrual loans. Yields related to loans and
securities exempt from both federal and state income taxes, federal income taxes
only, or state income taxes only, are stated on a taxable-equivalent basis
assuming a statutory federal income tax rate of 35% for each period, and a state
income tax rate of 7% for each period.
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
First Quarter 2000
<PAGE>
<TABLE>
<CAPTION>
Summary of Loan Loss Expenience and Risk Elements Table 5
2000 1999
First Fourth Third Second First
(thousands, except ratios) Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C>
Reserve balance at beginning of period $98,690 $97,965 $96,765 $96,340 $96,115
Provision for loan losses 3,459 3,503 3,329 2,178 2,662
Net charge-offs:
Charge-offs (3,290) (3,841) (3,150) (3,231) (3,465)
Recoveries 731 1,063 1,021 1,478 1,028
- --------------------------------------------------------------------------------------------------------------------------
Net charge-offs (2,559) (2,778) (2,129) (1,753) (2,437)
==========================================================================================================================
Reserve balance at end of period $99,590 $98,690 $97,965 $96,765 $96,340
==========================================================================================================================
Historical Statistics
Balances
Average total loans $6,789,203 $6,646,312 $6,474,200 $6,289,714 $6,180,106
Total loans at period-end 6,828,095 6,751,039 6,574,807 6,376,372 6,244,828
- --------------------------------------------------------------------------------------------------------------------------
Risk Elements
Nonaccrual loans $10,546 $10,720 $10,580 $11,465 $12,322
Other real estate acquired through foreclosure 2,071 1,600 1,614 2,030 3,062
- --------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $12,617 $12,320 $12,194 $13,495 $15,384
- --------------------------------------------------------------------------------------------------------------------------
Accruing loans 90 days or more past due $5,294 $3,576 $7,350 $5,181 $5,541
- --------------------------------------------------------------------------------------------------------------------------
Ratios
Net charge-offs (annualized) to average total loans 0.15 % 0.17 % 0.13 % 0.11 % 0.16 %
Reserve for loan losses to total loans at period-end 1.46 1.46 1.49 1.52 1.54
Nonperforming assets to total loans plus foreclosed
real estate at period-end 0.18 0.18 0.19 0.21 0.25
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
First Citizens BancShares, Inc. and Subsidiaries
First Quarter 2000
<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"). This discussion and analysis should be read in conjunction
with the unaudited Consolidated Financial Statements and related notes
presented within this report. The focus of this discussion concerns
BancShares' two banking subsidiaries. First-Citizens Bank & Trust Company
("FCB") operates branches in North Carolina, Virginia, and West Virginia.
Atlantic States Bank operates offices in Georgia and Florida.
SUMMARY
BancShares realized improved earnings during the first quarter of 2000
compared to the first quarter of 1999. Consolidated net income during the
first quarter of 2000 was $19.5 million, compared to $19.0 million earned
during the corresponding period of 1999. Net income per share during the
first quarter of 2000 totaled $1.84, compared to $1.79 during the first
quarter of 1999. Annualized return on average assets was 0.81 percent for
the first quarter of 2000 and 1999. The higher net income and net income
per share resulted from improved net interest income and noninterest
income. These improvements were partially offset, however, by higher
noninterest expense during the first quarter of 2000.
Various 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 balance sheets presented
in Table 4 for the first three months of 2000 and 1999.
INTEREST-EARNING ASSETS
At March 31, 2000, interest-earning assets totaled $8.90 billion, an
increase of $202.0 million or 2.3 percent from March 31, 1999. This
increase results from growth in the loan portfolio. For the first quarter
of 2000, interest-earning assets averaged $8.67 billion, a 1.3 percent
increase over the first quarter of 1999.
Loans. At March 31, 2000 and 1999, gross loans totaled $6.83 billion and
$6.24 billion, respectively. As of December 31, 1999, gross loans were
$6.75 billion. The $583.3 million growth in loans from March 31, 1999 to
March 31, 2000 results from growth within BancShareS' commercial-purpose
loans and EquityLine loans. This growth has resulted from customer demand
and BancShares' strong focus on these products during this period.
During the first quarter of 2000, loans averaged $6.79 billion, an increase
of $609.1 million or 9.9 percent from the comparable period of 1999. Strong
demand among commercial, business, and EquityLine customers and BancShares'
ability to deliver desirable products through accessible delivery networks
allowed the strong growth in loans. Commercial loans, which averaged $2.50
billion during the first quarter of 2000, increased $213.6 million or 9.3
percent over the first quarter of 1999. Business loans, which averaged
$676.7 million during the first quarter of 2000, increased $230.5 million
over the first quarter of 1999. EquityLine loans averaged $765.1 million
during the first three months of 2000, compared to $609.9 million during
the same period in 1999. This represents an increase of $155.1 million, or
25.4 percent, over the first three months of 1999. All loans held for sale
are carried at the lower of cost or fair value.
Management anticipates continued growth among commercial-purpose loans
during 2000, although the rate of growth will likely be less than that in
1999. Management projects consumer loans will experience some run-off
during 2000. Growth projections are dependent on anticipated interest rate
movements, as interest rate changes will affect retail and commercial loan
growth.
Investment securities. At March 31, 2000 and 1999, the investment portfolio
totaled $1.55 billion and $2.10 billion, respectively. At December 31,
1999, the investment portfolio was $1.37 billion. The 26.3 percent
reduction in the investment portfolio since March 31, 1999 occurred as
proceeds from maturing securities were used to fund loan demand. All
securities that are classified as held-to-maturity reflect BancShares'
ability and positive intent to hold those investments until maturity.
Available-for-sale securities are reported at their aggregate fair value.
Table 3 presents detailed information relating to the investment securities
portfolio.
Overnight investments. Overnight investments averaged $380.6 million during
the first quarter of 2000, an increase of $94.1 million or 32.9 percent.
This growth resulted from the need to maintain sufficient liquidity to meet
current loan demand. Income earned from overnight investments amounted to
$5.0 million during the first quarter of 2000, a $1.6 million or 48.5
percent increase from the same period of 1999. This growth resulted from
higher invested balances during 2000 and a 51 basis point yield increase.
Income on Interest-Earning Assets. Interest income amounted to $164.0
million during the first quarter of 2000, a 5.5 percent increase over the
first quarter of 1999. Growth in the loan portfolio and improved loan
yields contributed to higher interest income in the first quarter of 2000
when compared to the same period of 1999.
The taxable-equivalent yield on interest-earning assets for the first
quarter of 2000 was 7.63 percent, compared to 7.36 percent for the
corresponding period of 1999.
Loan interest income for the first quarter of 2000 was $137.9 million, an
increase of $15.3 million or 12.4 percent from the first quarter of 1999,
the result of volume growth and improved yields. The taxable-equivalent
yield on the loan portfolio was 8.20 percent during the first quarter of
2000, compared to 8.04 percent during the same period of 1999. The higher
loan yields resulted from market-driven rate movements and a lower
percentage of the loan portfolio in lower-yielding residential mortgage
loans and indirect automobile loans.
Income earned on the investment securities portfolio amounted to $21.09
million during the first quarter of 2000 and $29.4 million during the same
period of 1999, a decrease of $8.4 million or 28.4 percent. This decrease
is the result of a $594.3 million reduction in the average securities
portfolio and a 4 basis point yield reduction. The reduction in the average
securities portfolio resulted from loan demand consuming much of the
liquidity generated from maturing securities. The investment securities
portfolio taxable-equivalent yield decreased from 5.71 percent for the
quarter ended March 31, 1999, to 5.67 percent for the quarter ended March
31, 2000. This reduction resulted from the maturity of securities with
higher yields than those that remain in the investment securities portfolio
at March 31, 2000.
INTEREST-BEARING LIABILITIES.
At March 31, 2000 and 1999, interest-bearing liabilities totaled $7.66
billion and $7.62 billion, respectively, compared to $7.55 billion as of
December 31, 1999. During the first quarter of 2000, interest-bearing
liabilities averaged $7.51 billion, an increase of $16.8 million or 0.22
percent from the first quarter of 1999. This increase primarily resulted
from an increase in interest-bearing deposits and overnight repurchase
agreements. These increases were partially offset by lower volume in
Federal funds purchased.
Deposits. At March 31, 2000, total deposits were $8.30 billion, an increase
of $116.8 million or 1.4 percent over March 31, 1999. Compared to the
December 31, 1999 balance of $8.17 billion, total deposits
have increased $122.3 million.
Average interest-bearing deposits were $6.82 billion during the first
quarter of 2000 compared to $6.78 billion during the first quarter of 1999,
an increase of $38.3 million. The increase is due to growth among money
market deposits. Average money market deposits increased $220.4 million
from the first quarter of 1999 to the first quarter of 2000 due to growth
in the premium money market products. Average time deposits decreased
$139.1 million or 3.7 percent for the first quarter of 1999 to the same
period of 2000. This reduction is partially due to migration of funds into
the premium money market products during the past year. However, increases
in time deposit rates during 2000 have caused this trend to reverse.
Management anticipates growth in time deposit balances through the
remainder of 2000. Time deposits of $100,000 or more averaged 9.01 percent
of total deposits during the first quarter of 2000, compared to 9.04
percent during the same period of 1999.
Borrowed Funds. At March 31, 2000, short-term borrowings totaled $587.1
million compared to $568.3 million at December 31, 1999 and $584.8 million
at March 31, 1999. For the quarters ended March 31, 2000 and 1999,
short-term borrowings averaged $540.3 million and $558.6 million,
respectively. Long-term obligations averaged $155.2 million during the
first quarter of 2000, compared to $158.3 million during the first quarter
of 1999.
Expense on Interest-Bearing Liabilities. BancShares' interest expense
amounted to $74.4 million during the first quarter of 2000, a $4.7 million
or 6.7 percent increase from the first quarter of 1999. The higher interest
expense was the result of a 21 basis point increase in the aggregate
blended rate on interest-bearing liabilities. The rate on these liabilities
was 3.98 percent during the first quarter of 2000, compared to 3.77 percent
during the first quarter of 1999.
NET INTEREST INCOME
Net interest income totaled $89.6 million during the first quarter of 2000,
an increase of 4.5 percent from the first quarter of 1999. The improvement
in net interest income results primarily from balance sheet growth. The
taxable-equivalent net yield on interest-earning assets was 4.19 percent
for the first quarter of 2000, compared to the 4.09 percent achieved for
the first quarter of 1999. The taxable equivalent interest rate spread for
the first quarter of 2000 was 3.65 percent compared to 3.59 percent for the
same period of 1999.
A principal objective of BancShares' asset/liability management 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.
Management is aware of the potential negative impact that movements in
market interest rates may have on net interest income.
Market risk is the potential economic loss resulting from changes in market
prices and interest rates. This risk can either result in diminished
current fair values or reduced net interest income in future periods. As of
March 31, 2000, BancShares' market risk profile has not changed
significantly from December 31, 1999. Changes in fair value that result
from movement in market rates can not be predicted with any degree of
certainty. Therefore, the impact that future changes in market rates will
have on the fair values of financial instruments is uncertain.
ASSET QUALITY
Reserve for loan losses. Management continuously analyzes the growth and
risk characteristics of the total loan portfolio under current economic
conditions in order to evaluate the adequacy of the reserve for loan
losses. Such factors as the financial condition of the borrower, fair
market value of collateral and other considerations are recognized in
estimating probable credit losses. At March 31, 2000, the reserve for loan
losses amounted to $99.6 million or 1.46 percent of loans outstanding. This
compares to $98.7 million or 1.46 percent at December 31, 1999, and $96.3
million or 1.54 percent at March 31, 1999. The reduction in the ratio of
the loan loss reserve to loans outstanding since March 31, 1999 has
resulted from growth in lower-risk types of credit, which, based on current
conditions, have lower reserve requirements than higher risk credits that
are either not growing or growing at a slower rate.
The provision for loan losses charged to operations during the first
quarter of 2000 was $3.5 million, compared to $2.7 million during the first
quarter of 1999. Net charge-offs for the three months ended March 31, 2000
totaled $2.6 million, compared to net charge-offs of $2.4 million during
the same period of 1999. On an annualized basis, these net charge-offs
represent 0.15 percent and 0.16 percent of average loans outstanding during
the respective periods. The increase in total provision for loan losses
during the first quarter of 2000 results from continued loan growth during
2000 and a slight increase in net charge-offs. Management remains committed
to maintaining high levels of credit quality. Table 5 provides details
concerning the reserve and provision for loan losses over the past five
quarters.
Nonperforming assets. At March 31, 2000, BancShares' nonperforming assets
amounted to $12.6 million or 0.18 percent of gross loans plus foreclosed
properties, compared to $12.3 million at December 31, 1999, and $15.4
million at March 31, 1999. While BancShares views these levels of
nonperforming assets as further evidence of strong asset quality,
management continues to closely monitor nonperforming assets, taking
necessary actions to minimize potential exposure.
Management considers the established reserve adequate to absorb estimated
probable losses that relate to loans outstanding at March 31, 2000. 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 or other factors. In addition, various regulatory
agencies, as an integral part of their examination process, periodically
review the reserve for loan losses. Such agencies may require the
recognition of adjustments to the reserve based on their judgments of
information available to them at the time of their examination.
NONINTEREST INCOME
During the first three months of 2000, noninterest income was $41.4
million, compared to $38.2 million during the same period of 1999. The $3.2
million or 8.3 percent increase was primarily due to growth in service
charges on deposit accounts and credit card income. During the first three
months of 2000, total service charges on deposits were $14.1 million,
compared to $11.6 million earned during the same period of 1999.
Credit card income during the first quarter of 2000 was $7.8 million,
compared to $6.3 million earned during the same period of 1999. The $1.5
million or 24.0 percent increase resulted from higher interchange income
and merchant fee income.
BancShares recorded mortgage income of $1.4 million for the first three
months of 2000, compared to $2.5 million during the same period of 1999.
The $1.0 million reduction in mortgage income can be attributed to
decreased mortgage originations, primiarly the result of higher interest
rates during 2000.
NONINTEREST EXPENSE
Noninterest expense was $96.3 million for the first three months of 2000, a
5.6 percent increase over the $91.2 million recorded during the same period
of 1999. Much of the $5.1 million increase in total noninterest expense
relates to continued franchise expansion and the investments required to
support that growth. Salaries and wages increased $1.9 million during 2000
when compared to the same period of 1999. This 4.9 percent increase
reflects the growth in employee population required to staff the new branch
offices and in-store locations in Florida and Georgia. Employee benefits
expense increased 17.3 percent during 2000, primarily the result of
increased pension and insurance expenses.
Equipment expense was $9.2 million during both first quarters of 1999 and
2000. Slightly higher costs were recorded in maintenance contracts,
partially offset by lower depreciation on hardware. Occupancy expense was
$8.2 million for the first three months of 2000, a 15.6 percent increase
over the $7.1 million recorded during the same period of 1999. Much of the
increase was the result of higher rent and depreciation expense for new and
renovated branch facilities.
INCOME TAXES
Income tax expense amounted to $11.7 million during the three months ended
March 31, 2000, compared to $11.0 million during the same period of 1999, a
6.2 percent increase resulting from higher pre-tax income. The effective
tax rates for these periods were 37.5 percent and 36.6 percent,
respectively, the increase resulting from higher state income tax
obligations.
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 branch network have enabled management to
fund asset growth and maintain liquidity. In the event additional liquidity
is needed, BancShares maintains readily available sources to borrow funds
through its correspondent network. Loan growth during the first quarter was
funded by growth in deposits and by liquidity granted from maturity of
investment securities. Deposits are expected to display seasonal patterns
through the remainder of 2000, providing funds for projected loan growth.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
BancShares maintains an adequate capital position and exceeds all minimum
regulatory capital requirements. At March 31, 2000 and 1999, the leverage
capital ratios of BancShares were 8.14 percent and 7.42 percent,
respectively, surpassing the minimum level of 3 percent. As a percentage of
risk-adjusted assets, BancShares' Tier 1 capital ratios were 10.08 percent
at March 31, 2000 and March 31, 1999. The minimum ratio allowed is 4
percent of risk-adjusted assets. The total risk-adjusted capital ratios
were 11.37 percent at March 31, 2000 and 11.41 percent as of March 31,
1999. The minimum total capital ratio is 8 percent. BancShares and its
subsidiary banks exceed the capital standards established by their
respective regulatory agencies.
ACCOUNTING MATTERS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133 "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. As a result of BancShares' limited
use of derivative instruments, the adoption of SFAS No. 133 should not have
a material impact on its consolidated financial statements. SFAS No. 133
becomes effective during 2001 for BancShares.
Management is not aware of any current recommendations by regulatory
authorities that, if implemented, would have or would be reasonably likely
to have a material effect on liquidity, capital ratios, or results of
operations.
FORWARD-LOOKING STATEMENTS
This discussion may contain statements that could be deemed forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act
of 1934 and the Private Securities Litigation Reform Act, which statements
are inherently subject to risks and uncertainties. Forward-looking
statements are statements that include projections, predictions,
expectations or beliefs about future events or results or otherwise are not
statements of historical fact. Such statements are often characterized by
the use of qualifying words (and their derivatives) such as "expect,"
"believe," "estimate," "plan," "project," "anticipate," or other statements
concerning opinions or judgments of BancShares and its management about
future events. Factors that could influence the accuracy of such
forward-looking statements include, but are not limited to, the financial
success or changing strategies of BancShares' customers, actions of
government regulators, the level of market interest rates, and general
economic conditions.
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