-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R5XGN9A/GRQWKNNHVzFSgz7rooUNyr5hhkiJDiWaZ+FTyqnleiCGiu5Wpbj94dU3 Pmc/A1MTeHAWn5YbTVLmiQ== /in/edgar/work/20000814/0000798941-00-000004/0000798941-00-000004.txt : 20000921 0000798941-00-000004.hdr.sgml : 20000921 ACCESSION NUMBER: 0000798941-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST CITIZENS BANCSHARES INC /DE/ CENTRAL INDEX KEY: 0000798941 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 561528994 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16471 FILM NUMBER: 697115 BUSINESS ADDRESS: STREET 1: 239 FAYETTEVILLE STREET MALL CITY: RALEIGH STATE: NC ZIP: 27601 BUSINESS PHONE: 9197557000 MAIL ADDRESS: STREET 1: PO BOX 27131 STREET 2: CTWO7 CITY: RALEIGH STATE: NC ZIP: 27611-7131 10-Q 1 0001.txt FIRST CITIZENS BANCSHARES, INC. 10-Q 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 June 30, 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-- 8,813,454 shares Class B Common Stock--$1 Par Value-- 1,720,360 shares (Number of shares outstanding, by class, as of August 10, 2000) INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at June 30, 2000, December 31, 1999, and June 30, 1999 Consolidated Statements of Income for the six-month periods ended June 30, 2000, and June 30, 1999 Consolidated Statements of Changes in Shareholders' Equity for the six-month periods ended June 30, 2000, and June 30, 1999 Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2000, and June 30, 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 6. Exhibits and Reports on Form 8-K. (a) Exhibits. None. (b) Reports on Form 8-K. During the quarter ended June 30, 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: August 10, 2000 By:/s/Kenneth A. Black Kenneth A. Black Vice President, Treasurer, and Chief Financial Officer First Citizens BancShares, Inc and Subsidiaries Second Quarter 2000
Consolidated Balance Sheets First Citizens BancShares, Inc. and Subsidiaries June 30* December 31# June 30* (thousands,except share data) 2000 1999 1999 Assets Cash and due from banks $528,498 $591,605 $453,646 Investment securities held to maturity 1,524,943 473,393 1,952,502 Investment securities available for sale 18,090 1,353,321 22,974 Overnight investments 321,665 18,573 295,197 Loans 7,006,824 6,751,039 6,376,372 Less reserve for loan losses 100,515 98,690 96,765 - ----------------------------------------------------------------------------------------------------------------- Net loans 6,906,309 6,652,349 6,279,607 Premises and equipment 414,726 397,397 382,548 Income earned not collected 55,332 52,621 59,101 Other assets 174,314 177,840 182,902 - ----------------------------------------------------------------------------------------------------------------- Total assets $9,943,877 $9,717,099 $9,628,477 - --------------------------------------------------------------------------====================------------------- Liabilities Deposits: Noninterest-bearing $1,456,240 $1,343,353 $1,323,017 Interest-bearing 6,910,124 6,830,245 6,847,416 - ----------------------------------------------------------------------------------------------------------------- Total deposits 8,366,364 8,173,598 8,170,433 Short-term borrowings 562,920 568,301 518,350 Long-term obligations 153,761 155,683 156,870 Other liabilities 101,847 90,760 90,254 - ----------------------------------------------------------------------------------------------------------------- Total liabilities 9,184,892 8,988,342 8,935,907 Shareholders' Equity Common stock: Class A - $1 par value (8,814,254; 8,890,039; and 8,905,199 shares issued, respectively) 8,814 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 598,871 567,801 531,356 Accumulated other comprehensive income 5,814 6,580 6,828 - ----------------------------------------------------------------------------------------------------------------- Total shareholders' equity 758,985 728,757 692,570 - ----------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $9,943,877 $9,717,099 $9,628,477 - ----------------------------------------------------------------------------------------------------------------- # Unaudited * Derived from the 1999 Annual Report on Form 10-K. See accompanying Notes to Consolidated Financial Statements.
First Citizens BancShares, Inc and Subsidiaries Second Quarter 2000
Consolidated Statements of Income First Citizens BancShares, Inc. and Subsidiaries Three Months Ended June 30 Six Months Ended June 30 (thousands, except per share data; unaudited) 2000 1999 2000 1999 - --------------------------------------------------------------------------------------------------------------------- Interest income Loans $143,382 $124,046 $281,293 $246,701 Investment securities: U. S. Government 23,324 28,883 44,239 58,166 State, county and municipal 55 37 103 75 Other 133 119 255 239 - --------------------------------------------------------------------------------------------------------------------- Total investment securities interest income 23,512 29,039 44,597 58,480 Overnight investments 4,996 3,875 9,986 7,235 - --------------------------------------------------------------------------------------------------------------------- Total interest income 171,890 156,960 335,876 312,416 Interest expense Deposits 69,670 60,484 134,470 121,353 Short-term borrowings 7,356 5,180 13,787 10,839 Long-term obligations 3,158 3,157 6,308 6,342 - --------------------------------------------------------------------------------------------------------------------- Total interest expense 80,184 68,821 154,565 138,534 - --------------------------------------------------------------------------------------------------------------------- Net interest income 91,706 88,139 181,311 173,882 Provision for loan losses 2,975 2,178 6,434 4,840 - --------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 88,731 85,961 174,877 169,042 Noninterest income Service charges on deposit accounts 14,716 14,209 28,776 25,809 Credit card income 9,084 7,569 16,925 13,891 Trust income 3,660 3,500 7,402 7,007 Fees from processing services 3,675 3,080 6,952 6,373 Commission income 3,325 3,020 6,107 5,285 ATM income 2,832 2,817 5,319 5,161 Mortgage income 1,595 1,513 3,000 4,010 Other service charges and fees 3,180 2,237 6,331 4,681 Securities gains 22 - 22 777 Other 2,008 1,326 4,614 4,472 - --------------------------------------------------------------------------------------------------------------------- Total noninterest income 44,097 39,271 85,448 77,466 Noninterest expense Salaries and wages 41,596 39,798 82,621 78,895 Employee benefits 8,209 7,765 17,077 15,323 Occupancy expense 8,135 7,355 16,382 14,486 Equipment expense 9,290 9,301 18,459 18,532 Other 30,723 29,168 59,701 57,369 - --------------------------------------------------------------------------------------------------------------------- Total noninterest expense 97,953 93,387 194,240 184,605 - --------------------------------------------------------------------------------------------------------------------- Income before income taxes 34,875 31,845 66,085 61,903 Income taxes 13,421 11,542 25,117 22,552 - --------------------------------------------------------------------------------------------------------------------- Net income $21,454 $20,303 $40,968 $39,351 - --------------------------------------------------------------------------------------------------------------------- Per Share Net income $2.03 $1.91 $3.88 $3.70 Cash dividends 0.25 0.25 0.50 0.50 - --------------------------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 2000
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 Balance at December 31, 1998 $8,906 $1,720 $143,760 $497,316 $9,047 $660,749 Net income 39,351 39,351 Unrealized securities losses, net of $1,461 tax benefit (2,219) (2,219) Cash dividends (5,311) (5,311) ================================================================================================================================= Balance at June 30, 1999 $8,906 $1,720 $143,760 $531,356 $6,828 $692,570 ================================================================================================================================= Balance at December 31, 1999 $8,890 $1,720 $143,766 $567,801 $6,580 $728,757 Redemption of 75,785 shares of Class A common stock (76) (4,604) (4,680) Net income 40,968 40,968 Unrealized securities losses, net of $412 tax benefit (766) (766) Cash dividends (5,294) (5,294) ================================================================================================================================= Balance at June 30, 2000 $8,814 $1,720 $143,766 $598,871 $5,814 $758,985 ================================================================================================================================= See accompanying Notes to Consolidated Financial Statements.
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 2000
Consolidated Statements of Cash Flows First Citizens BancShares, Inc. and Subsidiaries Six months ended June 30 (thousands, unaudited) 2000 1999 Operating Activities Net income $40,968 $39,351 Adjustments to reconcile net income to cash provided by operating activities: Amortization of intangibles 5,912 5,871 Provision for loan losses 6,434 4,840 Deferred tax benefit (1,681) (2,667) Change in current taxes payable 141 (5,956) Depreciation 14,876 15,107 Change in accrued interest payable 5,784 (3,753) Change in income earned not collected (2,711) 2,551 Securities gains (22) (777) Origination of loans held for sale (101,566) (311,502) Proceeds from sale of loans held for sale 103,631 368,081 Loss (gain) on loans held for sale 225 (2,045) Net amortization of premiums and discounts 894 6,635 Net change in other assets (293) (3,072) Net change in other liabilities 5,162 (5,725) - -------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 77,754 106,939 - -------------------------------------------------------------------------------------------------------------------------- Investing Activities Net increase in loans outstanding (262,684) (239,505) Purchases of investment securities held to maturity (724,402) (486,398) Purchases of investment securities available for sale (867) (2,630) Proceeds from maturities of investment securities held to maturity 551,886 662,633 Proceeds from sales of investment securities available for sale 194 1,710 Net change in overnight investments 151,728 (62,472) Dispositions of premises and equipment 2,114 6,311 Additions to premises and equipment (34,319) (36,890) - -------------------------------------------------------------------------------------------------------------------------- Net cash used by investing activities (316,350) (157,241) - -------------------------------------------------------------------------------------------------------------------------- Financing Activities Net change in time deposits 153,142 (28,446) Net change in demand and other interest-bearing deposits 39,624 86,471 Net change in short-term borrowings (7,303) (51,721) Repurchases of common stock (4,680) - Cash dividends paid (5,294) (5,311) - -------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 175,489 993 - -------------------------------------------------------------------------------------------------------------------------- Change in cash and due from banks (63,107) (49,309) Cash and due from banks at beginning of period 591,605 502,955 ========================================================================================================================== Cash and due from banks at end of period $528,498 $453,646 ========================================================================================================================== Cash payments for: Interest $148,781 $142,288 Income taxes 25,716 30,199 Supplemental disclosure of noncash investing and financing activities: Unrealized securities losses (1,178) (3,680) - -------------------------------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 2000 Notes to Consolidated Financial Statements First Citizens BancShares, Inc. and Subsidiaries 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. 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:
Three Months Ended June 30 Six Months Ended June 30 (thousands) 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------------- Net income $21,454 $20,303 $40,968 $39,351 Other comprehensive income (loss) 964 (1,330) (766) (2,219) ======================================================================================================================= Comprehensive income $22,418 $18,973 $40,202 $37,132 =======================================================================================================================
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 2000
Financial Summary Table 1 2000 1999 Six Months Ended Second First Fourth Third Second June 30 (thousands, except per share data and ratios)Quarter Quarter Quarter Quarter Quarter 2000 1999 - --------------------------------------------------------------------------------------------------------------------------------- Summary of Operations Interest income $171,890 $163,986 $161,251 $160,224 $156,960 $335,876 $312,416 Interest expense 80,184 74,381 72,511 70,497 68,821 154,565 138,534 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income 91,706 89,605 88,740 89,727 88,139 181,311 173,882 Provision for loan losses 2,975 3,459 3,503 3,329 2,178 6,434 4,840 - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 88,731 86,146 85,237 86,398 85,961 174,877 169,042 Noninterest income 44,097 41,351 41,975 45,898 39,271 85,448 77,466 Noninterest expense 97,953 96,287 95,911 95,104 93,387 194,240 184,605 - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 34,875 31,210 31,301 37,192 31,845 66,085 61,903 Income taxes 13,421 11,696 11,984 14,060 11,542 25,117 22,552 =================================================================================================================================== Net income $21,454 $19,514 $19,317 $23,132 $20,303 $40,968 $39,351 =================================================================================================================================== Net interest income-taxable equivalent $92,414 $90,374 $89,267 $90,258 $88,703 $182,788 $175,041 - ----------------------------------------------------------------------------------------------------------------------------------- Selected Averages Total assets $9,772,765 $9,658,251 $9,721,360 $9,644,135 $9,605,512 $9,715,508 $9,561,845 Investment securities 1,594,291 1,497,278 1,583,216 1,897,593 2,066,519 1,545,784 2,078,978 Loans 6,917,041 6,789,203 6,646,312 6,474,200 6,289,714 6,853,121 6,235,303 Interest-earning assets 8,788,776 8,667,039 8,627,990 8,689,146 8,659,199 8,727,906 8,618,671 Deposits 8,211,252 8,128,968 8,140,962 8,121,209 8,139,147 8,170,165 8,079,391 Interest-bearing liabilities 7,560,267 7,512,781 7,533,726 7,518,874 7,490,958 7,536,525 7,508,518 Long-term obligations 153,773 155,171 158,975 156,856 157,453 154,472 157,877 Shareholders' equity $748,648 $734,777 $720,617 $702,065 $683,771 $741,795 $675,883 Shares outstanding 10,551,766 10,592,378 10,625,208 10,625,559 10,625,559 10,572,072 10,625,559 - ----------------------------------------------------------------------------------------------------------------------------------- Selected Period-End Balances Total assets $9,943,877 $9,880,732 $9,717,099 $9,577,715 $9,628,477 $9,943,877 $9,880,732 Investment securities 1,543,033 1,547,214 1,371,894 1,699,520 1,975,476 1,543,033 1,547,214 Loans 7,006,824 6,828,095 6,751,039 6,574,807 6,376,372 7,006,824 6,828,095 Interest-earning assets 8,871,522 8,896,750 8,596,326 8,590,485 8,647,045 8,871,522 8,896,750 Deposits 8,366,364 8,295,850 8,173,598 8,062,091 8,170,433 8,366,364 8,295,850 Interest-bearing liabilities 7,626,805 7,655,102 7,554,229 7,454,172 7,522,636 7,626,805 7,655,102 Long-term obligations 153,761 154,915 155,683 156,840 156,870 153,761 154,915 Shareholders' equity $758,985 $741,136 $728,757 $713,069 $692,570 $758,985 $741,136 Shares outstanding 10,534,614 10,566,849 10,610,399 10,625,559 10,625,559 10,534,614 10,566,849 - ------------------------------------------------------------------------------------------------------------------------------------ Profitability Ratios (averages) Rate of return (annualized) on: Total assets 0.88 % 0.81 % 0.79 % 0.95 % 0.85 % 0.85 % 0.83 % Shareholders' equity 11.53 10.68 10.64 13.07 11.91 11.11 11.74 Dividend payout ratio 12.32 13.59 13.74 11.47 13.09 12.89 13.51 - ------------------------------------------------------------------------------------------------------------------------------------ Liquidity and Capital Ratios (averages) Loans to deposits 84.24 % 83.52 % 81.64 % 79.72 % 77.28 % 83.88 % 77.18 % Shareholders' equity to total assets 7.66 7.61 7.41 7.28 7.12 7.64 7.07 Time certificates of $100,000 or more to total deposits 9.27 9.01 8.96 8.93 8.91 9.15 8.95 - ------------------------------------------------------------------------------------------------------------------------------------ Per Share of Stock Net income $2.03 $1.84 $1.82 $2.18 $1.91 $3.88 $3.70 Cash dividends 0.25 0.25 0.25 0.25 0.25 0.50 0.50 Book value at period end 72.05 70.14 68.68 67.11 65.18 72.05 70.14 Tangible book value at period end 61.92 59.79 58.13 56.31 54.05 61.92 59.79 - ------------------------------------------------------------------------------------------------------------------------------------
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 2000
Outstanding Loans by Type Table 2 2000 1999 - ---------------------------------------------------------------------------------------------------------------------- Second First Fourth Third Second (thousands) Quarter Quarter Quarter Quarter Quarter - ---------------------------------------------------------------------------------------------------------------------- Real estate: Construction and land development $200,483 $208,518 $186,119 $170,467 $169,755 Mortgage: 1-4 family residential 1,460,512 1,368,732 1,326,642 1,311,314 1,254,010 Commercial 1,934,302 1,866,544 1,810,904 1,732,853 1,641,846 Equity Line 813,908 776,164 755,342 706,271 685,924 Other 204,962 184,397 161,652 162,098 164,719 Commercial and industrial 946,067 950,445 985,738 971,199 952,206 Consumer 1,297,982 1,340,671 1,393,227 1,400,144 1,391,491 Lease financing 131,579 127,822 123,908 111,338 106,684 Other 17,029 4,802 7,507 9,123 9,737 - ---------------------------------------------------------------------------------------------------------------------- Total loans 7,006,824 6,828,095 6,751,039 6,574,807 6,376,372 Less reserve for loan losses 100,515 99,590 98,690 97,965 96,765 - --------------------------------------------------------------------------------------------------------------------- Net loans $6,906,309 $6,728,505 $6,652,349 $6,476,842 $6,279,607 - ----------------------------------------------------------------------------------------------------------------------
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 2000
Investment Securities Table 3 June 30, 2000 June 30, 1999 Average Taxable Average Taxable Book Fair Maturity Equivalent Book Fair Maturity Equivalent (thousands) Value Value (Yrs./Mos.) Yield Value Value (Yrs./Mos.) Yield Securities held to maturity: U. S. Government: Within one year $1,150,347 $1,135,868 0/6 5.88 % $1,372,194 $1,372,493 0/6 5.75 % One to five years 360,910 356,896 1/10 6.84 572,467 563,890 1/5 5.41 Five to ten years 280 281 8/4 8.12 200 203 8/2 8.21 Over ten years 8,634 8,472 26/5 7.32 4,519 4,522 23/1 7.07 - ----------------------------------------------------------------------------------------------------------------------------------- Total 1,520,171 1,501,517 0/10 6.11 1,949,380 1,941,108 0/10 5.65 State, county and municipal: Within one year 1,150 1,155 0/7 7.20 237 241 0/10 7.90 One to five years 1,260 1,270 2/1 7.21 2,410 2,462 2/5 7.21 Five to ten years 500 500 5/0 7.94 Over ten years 1,557 1,588 17/9 8.59 160 163 18/2 9.14 - ----------------------------------------------------------------------------------------------------------------------------------- Total 4,467 4,514 7/6 7.77 2,807 2,866 3/2 7.38 Other: Within one year 10 10 0/1 5.28 10 10 0/1 0.06 One to five years 45 45 1/11 6.64 55 55 2/8 5.47 Five to ten years 250 28/1 4.50 250 9/1 2.25 - ----------------------------------------------------------------------------------------------------------------------------------- Total 305 305 5/3 4.95 315 315 7/8 2.74 - ----------------------------------------------------------------------------------------------------------------------------------- Total securities held to matu1,524,943 1,506,336 1/0 6.12 % 1,952,502 1,944,289 0/10 5.65 % Marketable equity securities 8,481 18,090 - - 11,333 22,974 - - - ----------------------------------------------------------------------------------------------------------------------------------- Total investment securities $1,533,424 $1,524,426 - - $1,963,835 $1,967,263 - - - -----------------------------------------------------------------------------------------------------------------------------------
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 2000
Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Second 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 Assets Total loans $6,917,041 $144,058 8.38 % $6,289,714 $124,592 7.95 % $12,562 $6,904 $19,466 Investment securities: U. S. Government 1,573,315 23,324 5.96 2,038,593 28,883 5.68 (6,776) 1,217 (5,559) State, county and municipal 4,091 87 8.55 2,892 55 7.63 24 8 32 Other 16,885 133 3.17 25,034 119 1.91 (52) 66 14 - ----------------------------------------------------------------------------------------------------------------------------------- Total investment securities 1,594,291 23,544 5.94 2,066,519 29,057 5.64 (6,804) 1,291 (5,513) Overnight investments 277,444 4,996 7.24 302,966 3,875 5.13 (399) 1,520 1,121 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-earning assets $8,788,776 $172,598 7.90 % $8,659,199 $157,524 7.30 % $5,359 $9,715 $15,074 - ----------------------------------------------------------------------------------------------------------------------------------- Liabilities Deposits: Checking With Interest $1,074,503 $1,562 0.58 % $1,086,135 $1,782 0.66 % ($11) ($209) ($220) Savings 645,346 2,500 1.56 669,254 2,717 1.63 (99) (118) (217) Money market accounts 1,441,085 15,116 4.22 1,328,802 11,157 3.37 1,042 2,917 3,959 Time deposits 3,692,946 50,492 5.50 3,726,677 44,828 4.82 (529) 6,193 5,664 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 6,853,880 69,670 4.09 6,810,868 60,484 3.56 403 8,783 9,186 Federal funds purchased 36,278 558 6.19 40,377 472 4.69 (56) 142 86 Repurchase agreements 167,901 2,068 4.95 110,931 978 3.54 601 489 1,090 Master notes 294,464 3,893 5.32 315,718 3,072 3.90 (251) 1,072 821 Other short-term borrowings 53,971 837 6.24 55,611 658 4.75 (23) 202 179 Long-term obligations 153,773 3,158 8.26 157,453 3,157 8.04 (79) 80 1 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilitie$7,560,267 $80,184 4.27 $7,490,958 $68,821 3.68 % $595 $10,768 $11,363 - ----------------------------------------------------------------------------------------------------------------------------------- Interest rate spread 3.63 % 3.62 % - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income and net yield on interest-earning assets $92,414 4.23 % $88,703 4.11 % $4,764 ($1,053) $3,711 - ----------------------------------------------------------------------------------------------------------------------------------- Assets Total loans $6,917,041 $144,058 8.38 % $6,289,714 $124,592 7.95 % $12,562 $6,904 $19,466 Investment securities: U. S. Government 1,573,315 23,324 5.96 2,038,593 28,883 5.68 (6,776) 1,217 (5,559) State, county and municipal 4,091 87 8.55 2,892 55 7.63 24 8 32 Other 16,885 133 3.17 25,034 119 1.91 (52) 66 14 - ----------------------------------------------------------------------------------------------------------------------------------- Total investment securities 1,594,291 23,544 5.94 2,066,519 29,057 5.64 (6,804) 1,291 (5,513) Overnight investments 277,444 4,996 7.24 302,966 3,875 5.13 (399) 1,520 1,121 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-earning assets $8,788,776 $172,598 7.90 % $8,659,199 $157,524 7.30 % $5,359 $9,715 $15,074 - ----------------------------------------------------------------------------------------------------------------------------------- Liabilities Deposits: Checking With Interest $1,074,503 $1,562 0.58 % $1,086,135 $1,782 0.66 % ($11) ($209) ($220) Savings 645,346 2,500 1.56 669,254 2,717 1.63 (99) (118) (217) Money market accounts 1,441,085 15,116 4.22 1,328,802 11,157 3.37 1,042 2,917 3,959 Time deposits 3,692,946 50,492 5.50 3,726,677 44,828 4.82 (529) 6,193 5,664 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 6,853,880 69,670 4.09 6,810,868 60,484 3.56 403 8,783 9,186 Federal funds purchased 36,278 558 6.19 40,377 472 4.69 (56) 142 86 Repurchase agreements 167,901 2,068 4.95 110,931 978 3.54 601 489 1,090 Master notes 294,464 3,893 5.32 315,718 3,072 3.90 (251) 1,072 821 Other short-term borrowings 53,971 837 6.24 55,611 658 4.75 (23) 202 179 Long-term obligations 153,773 3,158 8.26 157,453 3,157 8.04 (79) 80 1 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilitie$7,560,267 $80,184 4.27 $7,490,958 $68,821 3.68 % $595 $10,768 $11,363 - ----------------------------------------------------------------------------------------------------------------------------------- Interest rate spread 3.63 % 3.62 % - ----------------------------------------------------------------------------------------------------------------------------------- Net interest income and net yield on interest-earning assets $92,414 4.23 % $88,703 4.11 % $4,764 ($1,053) $3,711 - ----------------------------------------------------------------------------------------------------------------------------------- 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 state income tax rates of 7.00% for 2000 and 1999.
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 2000
Consolidated Taxable Equivalent Rate/Volume Variance Analysis - Six Months Table 5 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 - -------------------------------------------------------------------------------------------------------------------------------- Assets Total loans $6,853,122 $282,711 8.28 % $6,235,303 $247,824 7.99 % $25,221 $9,666 $34,887 Investment securities: U. S. Government 1,524,029 44,239 5.84 2,050,931 58,166 5.72 (15,069) 1,142 (13,927) State, county and municipal 3,853 162 8.46 2,972 111 7.53 35 16 51 Other 17,902 255 2.86 25,075 239 1.92 (85) 101 16 - -------------------------------------------------------------------------------------------------------------------------------- Total investment securities 1,545,784 44,656 5.81 2,078,978 58,516 5.68 (15,119) 1,259 (13,860) Overnight investments 329,001 9,986 6.10 304,390 7,235 4.79 677 2,074 2,751 - -------------------------------------------------------------------------------------------------------------------------------- Total interest-earning assets $8,727,907 $337,353 7.76 % $8,618,671 $313,575 7.32 % $10,779 $12,999 $23,778 - -------------------------------------------------------------------------------------------------------------------------------- Liabilities Deposits: Checking With Interest $1,069,858 $3,114 0.59 % $1,078,954 $3,706 0.69 % ($43) ($549) ($592) Savings 649,819 5,029 1.56 695,067 5,396 1.57 (343) (24) (367) Money market accounts 1,468,401 29,552 4.05 1,302,195 21,501 3.33 3,070 4,981 8,051 Time deposits 3,647,539 96,775 5.34 3,733,927 90,750 4.90 (2,125) 8,150 6,025 - -------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 6,835,617 134,470 3.96 6,810,143 121,353 3.59 559 12,558 13,117 Federal funds purchased 34,975 1,029 5.92 59,797 1,382 4.66 (651) 298 (353) Repurchase agreements 153,722 3,563 4.66 108,944 1,901 3.52 914 748 1,662 Master notes 300,641 7,411 4.96 313,960 6,040 3.88 (286) 1,657 1,371 Other short-term borrowings 57,098 1,784 6.28 57,797 1,516 5.29 (17) 285 268 Long-term obligations 154,472 6,308 8.21 157,877 6,342 8.10 (129) 95 (34) - -------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities$7,536,525 $154,565 4.12 % $7,508,518 $138,534 3.72 % $390 $15,641 $16,031 Interest rate spread 3.64 % 3.60 % - -------------------------------------------------------------------------------------------------------------------------------- Net interest income and net yield on interest-earning assets $182,788 4.21 % $175,041 4.10 % $10,389 ($2,642) $7,747 - -------------------------------------------------------------------------------------------------------------------------------- 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 state income tax rates of 7.00% for 2000 and 1999. The taxable equivalent adjustment was $1,477 and $1,159 for 2000 and 1999, respectively.
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 2000
Summary of Loan Loss Experience and Risk Elements Table 6 2000 1999 Six Months Ended Second First Fourth Third Second June 30 (thousands, except ratios) Quarter Quarter Quarter Quarter Quarter 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Reserve balance at beginning of period $99,590 $98,690 $97,965 $96,765 $96,340 $98,690 $96,115 Provision for loan losses 2,975 3,459 3,503 3,329 2,178 6,434 4,840 Net charge-offs: Charge-offs (3,395) (3,290) (3,841) (3,150) (3,231) (6,685) (6,696) Recoveries 1,345 731 1,063 1,021 1,478 2,076 2,506 - ------------------------------------------------------------------------------------------------------------------------------------ Net charge-offs (2,050) (2,559) (2,778) (2,129) (1,753) (4,609) (4,190) - ------------------------------------------------------------------------------------------------------------------------------------ ==================================================================================================================================== Reserve balance at end of period $100,515 $99,590 $98,690 $97,965 $96,765 $100,515 $96,765 ==================================================================================================================================== Historical Statistics Balances Average total loans $6,917,041 $6,789,203 $6,646,312 $6,474,200 $6,289,714 $6,853,121 $6,235,303 Total loans at period-end 7,006,824 6,828,095 6,751,039 6,574,807 6,376,372 7,006,824 6,376,372 - ------------------------------------------------------------------------------------------------------------------------------------ Risk Elements Nonaccrual loans $9,910 $10,546 $10,720 $10,580 $11,465 $9,910 $11,465 Other real estate acquired through foreclosure 1,249 2,071 1,600 1,614 2,030 1,249 2,030 - ------------------------------------------------------------------------------------------------------------------------------------ Total nonperforming assets $11,159 $12,617 $12,320 $12,194 $13,495 $11,159 $13,495 - ------------------------------------------------------------------------------------------------------------------------------------ Accruing loans 90 days or more past due $6,051 $5,294 $3,576 $7,350 $5,181 $6,051 $5,181 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios Net charge-offs (annualized) to average total loans 0.12 % 0.15 % 0.17 % 0.13 % 0.11 % 0.14 % 0.14% Reserve for loan losses to total loans at period-end 1.43 1.46 1.46 1.49 1.52 1.43 1.52% Nonperforming assets to total loans plus foreclosed real estate at period-end 0.16 0.18 0.18 0.19 0.21 0.16 0.21% - ------------------------------------------------------------------------------------------------------------------------------------
First Citizens BancShares, Inc. and Subsidiaries Second Quarter 2000 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, West Virginia, and Virginia. Atlantic States Bank ("ASB") operates offices in Georgia and Florida. SUMMARY BancShares realized an increase in earnings during the second quarter of 2000 compared to the second quarter of 1999. Consolidated net income during the second quarter of 2000 was $21.5 million, compared to $20.3 million earned during the corresponding period of 1999. Net income per share during the second quarter of 2000 totaled $2.03, compared to $1.91 during the second quarter of 1999. Return on average assets was 0.88 percent for the second quarter of 2000 compared to 0.85 percent during the same period of 1999. For the first six months of 2000, BancShares recorded net income of $41.0 million, compared to $39.4 million earned during the first six months of 1999. Net income per share for the first six months of 2000 was $3.88, compared to $3.70 during the same period of 1999. BancShares returned 0.85 percent on average assets during the first six months of 2000 compared to 0.83 percent during the corresponding period of 1999. The 5.7 percent increase in second quarter net income and the 4.1 percent increase in year-to-date net income were the net result of higher net interest income and higher noninterest income, partially offset by higher noninterest expense. 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 second quarter and Table 5 for the first six months of 2000 and 1999. INTEREST-EARNING ASSETS Interest-earning assets for the second quarter of 2000 averaged $8.79 billion, an increase of $129.6 million or 1.5 percent from the second quarter of 1999. For the six months ended June 30, 2000, earning assets averaged $8.73 billion, an increase of $109.2 million or 1.3 percent over the same period of 1999. These increases result from growth in the loan portfolio. Loans. At June 30, 2000 and 1999, gross loans totaled $7.01 billion and $6.38 billion, respectively. As of December 31, 1999, gross loans were $6.75 billion. The $630.5 million growth in loans from June 30, 1999 to June 30, 2000 results from growth within BancShares' commercial and retail real estate-based lending. Table 2 details outstanding loans by type for the past five quarters. During the second quarter of 2000, loans averaged $6.92 billion, an increase of $627.3 million or 10.0 percent from the comparable period of 1999. Loan growth resulted from strong demand for commercial and business loans as well as continued growth among retail loans secured by real estate. Loans secured by real estate averaged $4.21 billion during the second quarter of 2000, an increase of $662.1 million, or 18.6 percent during the same period of 1999. The increase in real estate loans is due to higher commercial, business, and EquityLine loan volume. Loans originated for commercial purposes averaged $866.3 million during the second quarter of 2000, compared to $818.8 million during the second quarter of 1999, an increase of $47.4 million or 5.8 percent. For the year-to-date, gross loans have averaged $6.85 billion for 2000 compared to $6.24 billion for the same period of 1999. This $617.8 million or 9.9 percent increase is likewise due to growth among commercial, business and retail real estate lending. As of June 30, 2000, $21.0 million in fixed-rate residential mortgage loans are classified as held for sale. All loans held for sale are carried at the lower of cost or fair value. Mortgage loan sale activity during the first six months of 2000 has resulted from two primary goals. First, as in the past, management seeks to lessen the exposure to changes in interest rates by selling portions of its long-term fixed-rate loan production. Second, loan sales provide liquidity to meet ongoing loan demand. The sales of residential mortgage loans has supported both objectives. Despite the recent upward pressure on interest rates, management anticipates continued growth among commercial and business lending. Management projects continued reductions in retail installment loans, primarily resulting from a diminished emphasis on sales finance activity. All growth projections, however, remain dependent on interest rates, as continued upward pressure on interest rates will likely slow loan growth. Investment securities. At June 30, 2000 and 1999, the investment portfolio totaled $1.54 billion and $1.98 billion, respectively. At December 31, 1999, the investment portfolio was $1.37 billion. The large reduction in the securities portfolio since June 30, 1999 results from the use of maturing investment securities to fund the strong loan growth. The smaller balance at December 31, 1999 resulted from BancShares' focus on liquidity for Y2K planning purposes. Average investment securities decreased by $472.2 million or 22.9 percent from the second quarter ended of 1999 to the second of 2000, the result of loan growth. All securities that are classified as held-to-maturity reflect BancShares' ability and positive intent to hold those investments until maturity. Marketable equity securities are classified as available-for-sale and are reported at their aggregate fair value. Table 3 presents detailed information relating to the investment securities portfolio. Income on Interest-Earning Assets. Interest income amounted to $171.9 million during the second quarter of 2000, a 9.5 percent increase over the second quarter of 1999. Improved yields and loan growth contributed to higher interest income in the second quarter of 2000 when compared to the same period of 1999. The taxable-equivalent yield on interest-earning assets for the second quarter of 2000 was 7.90 percent, compared to 7.30 percent for the corresponding period of 1999. The higher yield on earning assets during 2000 results primarily from an increase in the blended taxable-equivalent loan yield, the result of increased market rates and a more favorable loan mix. Loan interest income for the second quarter of 2000 was $143.4 million, an increase of $19.3 million or 15.6 percent from the second quarter of 1999, due to volume growth and increased yields. The taxable-equivalent yield on the loan portfolio was 8.38 percent during the second quarter of 2000, compared to 7.95 percent during the same period of 1999, the increase resulting from higher market rates. In addition to higher market rates during 2000, the composition of the loan portfolio has shifted toward commercial and business loans, which carry higher yields than the installment or residential mortgage loans they replace. For the six months ended June 30, 2000, loan interest income was $281.3 million, an increase of $34.6 million or 14.0 percent over the same period of 1999. The increase in interest income during the six-month period reflects the growth in the loan portfolio and higher loan yields. Income earned on the investment securities portfolio amounted to $23.5 million during the second quarter of 2000 and $29.0 million during the same period of 1999, a decrease of $5.5 million or 19.0 percent. This decrease is the result of a $472.2 million or 22.9 percent decrease in the average securities portfolio. The investment securities portfolio taxable-equivalent yield rose to 5.94 percent for the quarter ended June 30, 2000, compared to 5.64 percent for the quarter ended June 30, 1999. For the six months ended June 30, 2000, interest income from investment securities was $44.6 million, compared to $58.5 million during the same period of 1999, a decrease of 23.7 percent. This decrease is the result of a 25.6 percent reduction in the average securities portfolio. The yield on average investment securities rose from 5.68 percent for the six-month period ended June 30, 1999 to 5.81 for the same period of 2000. INTEREST-BEARING LIABILITIES At June 30, 2000 and 1999, interest-bearing liabilities totaled $7.63 billion and $7.52 billion, respectively, compared to $7.55 billion as of December 31, 1999. During the second quarter of 2000, interest-bearing liabilities averaged $7.56 billion, an increase of $69.3 million or 0.9 percent from the second quarter of 1999. Total interest-bearing liabilities increased 0.6 percent during the first six months of 2000 when compared to the same period of 1999. Deposits. At June 30, 2000, total deposits were $8.37 billion, an increase of $195.9 million or 2.4 percent over June 30, 1999. Compared to the December 31, 1999 balance of $8.17 billion, total deposits have increased $192.8 million or 2.4 percent. Average interest-bearing deposits were $6.85 billion during the second quarter of 2000 compared to $6.81 billion during the second quarter of 1999, an increase of 0.6 percent. While total interest-bearing liabilities were essentially unchanged, average money market accounts increased $112.3 million from the second quarter of 1999 to the second quarter of 2000, while . average time deposits decreased $33.7 million from the second quarter of 1999 to the second quarter of 2000, and average savings accounts decreased $23.9 million between the two periods. Borrowed Funds. At June 30, 2000, short-term borrowings totaled $562.9 million compared to $568.3 million at December 31, 1999 and $518.4 million at June 30, 1999. For the quarters ended June 30, 2000 and 1999, short-term borrowings averaged $552.6 million and $522.6 million, respectively. This increase resulted from growth among overnight repurchase agreements, partially offset by lower average Master Note borrowings. Expense on Interest-Bearing Liabilities. BancShares' interest expense amounted to $80.2 million during the second quarter of 2000, an $11.4 million or 16.5 percent increase from the second quarter of 1999. The higher interest expense was primarily the result of higher market rates. The average rate on these liabilities was 4.27 percent during the second quarter of 2000 compared to 3.68 percent during the same period of 1999. For the second quarter, the rate on average time deposits grew from 4.82 percent in 1999 to 5.50 percent in 2000, while the rate on average money market accounts increased from 3.37 percent to 4.22 percent. The rate on average master notes for the second quarter of 2000 was 5.32 percent, while the rate was 3.90 percent during the same period in 1999. For the year-to-date, interest expense was $154.6 million, compared to $138.5 million for the same period of 1999. The 11.6 percent increase results from higher interest rates for interest-bearing deposits and borrowings. NET INTEREST INCOME Net interest income totaled $91.7 million during the second quarter of 2000, an increase of $3.6 million or 4.0 percent from the second quarter of 1999. The taxable-equivalent net yield on interest-earning assets was 4.23 percent for the second quarter of 2000, an increase of 12 basis points from the 4.11 percent reported for the second quarter of 1999. The taxable equivalent interest rate spread for the second quarter of 2000 was 3.63 percent compared to 3.62 percent for the same period of 1999. The improved net yield on interest-earning assets result from faster growth in interest-earning assets than growth of interest-bearing liabilities. 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 June 30, 2000, BancShares' market risk profile has not changed significantly from December 31, 1999. BancShares continues to experience a liability-sensitive position which results in lower net interest income during period of rising interest rates. However, as a result of asset growth rates at levels that exceed deposit growth rates, the liability sensitive position as a percentage of interest-earning assets has narrowed since December 31, 1999. 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 June 30, 2000, the reserve for loan losses amounted to $100.5 million or 1.43 percent of loans outstanding. This compares to $98.7 million or 1.46 percent at December 31, 1999, and $96.8 million or 1.52 percent at June 30, 1999. Management considers the established reserve adequate to absorb losses that relate to loans outstanding at June 30, 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. The provision for loan losses charged to operations during the second quarter of 2000 was $3.0 million, compared to $2.2 million during the second quarter of 1999. For the six month periods ended June 30, total provision for loan losses was $6.4 million for 2000 and $4.8 million for 1999. The $1.6 million increase reflects the higher rate of growth in the loan portfolio during 2000. Net charge-offs for the six month period ended June 30, 2000 totaled $4.6 million, compared to $4.2 million during the same period of 1999. As a percentage of average loans outstanding, the losses represent 0.14 percent for both periods on an annualized basis. Gross charge-offs totaled $6.7 million for each of the six month periods ended June 30, 2000 and 1999. Recoveries were $2.1 million and $2.5 million for the respective periods. Management remains committed to maintaining high levels of credit quality. Table 6 provides details concerning the reserve and provision for loan losses over the past five quarters and for the year-to-date for 2000 and 1999. Nonperforming assets. At June 30, 2000, BancShares' nonperforming assets amounted to $11.2 million or 0.16 percent of gross loans plus foreclosed properties, compared to $12.3 million at December 31, 1999, and $13.5 million at June 30, 1999. Management continues to closely monitor nonperforming assets, taking necessary actions to minimize potential exposure. NONINTEREST INCOME During the first six months of 2000, noninterest income was $85.4 million, compared to $77.5 million during the same period of 1999. The $8.0 million or 10.3 percent increase was primarily due to growth in service charges on deposit accounts and improved credit card income. During the first six months of 2000, total service charges on deposits was $28.8 million, compared to $25.8 million earned during the same period of 1999. This increase primarily resulted from higher commercial service charges and increased bad check charges. Noninterest income from the credit card operation contributed an additional $3.0 million during the first six months of 2000 compared to the same period of 1999. This represents a 21.8 percent increase over 1999, the result of higher merchant income and interchange income generated by card usage. BancShares also reported a $1.7 million increase in other service charges and fees during the first six months of 2000, a 35.2 percent increase due to growth in various fee producing services. Noninterest income gains were partially offset by reductions in mortgage income and securities gains. Mortgage income was $3.0 million for the first six months of 2000, a reduction of $1.0 million or 25.2 percent from the same period of 1999. During 2000, origination fees declined due to fewer mortgage loan originations. Securities gains were $755,000 lower during the first half of 2000 due to lower investment gains in equity investments. During the third quarter of 2000, FCB entered into an agreement to sell the servicing rights for approximately $1.6 billion in residential mortgages. Subject to regulatory approval and other conditions, management expects this transaction to close during the third or fourth quarter. Based on current pricing indicators, management projects an after-tax gain of approximately $13.2 million. FCB has also entered into agreements to sell four offices in eastern North Carolina to related parties. As a result of these transactions, which are expected to be consummated during the fourth quarter of 2000, management projects noninterest income of approximately $4.2 million will be recorded. NONINTEREST EXPENSE Noninterest expense was $194.2 million for the first six months of 2000, a 5.2 percent increase over the $184.6 million recorded during the same period of 1999. Much of the $9.6 million increase in noninterest expense relates to continued franchise expansion in Georgia and Florida by ASB. Salary and wages expenses increased $3.7 million during 2000 when compared to the same period of 1999. This 4.7 percent increase reflects the growth in employee population required to staff new branch offices throughout the franchise. Employee benefits expense increased $1.8 million or 11.4 percent during the first six months of 2000, compared to the corresponding period of 1999 due to the larger employee population and increased insurance costs. Occupancy expense increased $1.9 million or 13.1 percent during the first six months of 2000, the result of higher rent and depreciation expense for new and renovated branch facilities and increased property tax expenses. The $2.3 million increase in other expenses resulted from higher credit card processing costs and net loss on assets. INCOME TAXES Income tax expense amounted to $25.1 million during the first six months of 2000, compared to $22.6 million during the same period of 1999, an 11.4 percent increase resulting from higher pre-tax income. The effective tax rates for these periods were 38.0 percent and 36.4 percent, respectively. The increase in income tax expense and the higher effective tax rates result from higher state income tax expense during 2000. 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. SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY BancShares maintains an adequate capital position and exceeds all minimum regulatory capital requirements. At June 30, 2000 and 1999, the leverage capital ratio of BancShares was 8.24 percent and 7.56 percent, respectively, surpassing the minimum level of 3 percent. As a percentage of risk-adjusted assets, BancShares' Tier 1 capital ratio was 10.13 percent at June 30, 2000, and 10.01 percent as of June 30, 1999. The minimum ratio allowed is 4 percent of risk-adjusted assets. The total risk-adjusted capital ratio was 11.42 percent at June 30, 2000 and 11.33 percent as of June 30, 1999. The minimum total capital ratio is 8 percent. BancShares and its subsidiary banks exceed the capital standards established by their respective regulatory agencies. CURRENT ACCOUNTING AND REGULATORY ISSUES 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, as amended, 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 judgment 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. EX-27 2 0002.txt EXHIBIT 27
9 1,000 6-MOS DEC-31-2000 JUN-30-2000 528,498 87,815 233,850 0 18,090 1,524,943 1,524,426 7,006,824 100,515 9,943,877 8,366,364 562,920 101,847 153,761 0 0 10,534 748,451 9,943,877 281,293 44,597 9,986 335,876 134,470 20,095 181,311 6,434 22 194,240 66,085 66,085 0 0 40,968 3.88 3.88 4.21 9,910 6,051 0 0 98,690 6,685 2,076 100,515 100,515 0 0
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