Back to GetFilings.com
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 1994 Commission File Number 0-11709
FIRST CITIZENS BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE
(State or other jurisdiction of 62-1180360
incorporation or organization) (I.R.S. Employer Identification No.)
P. O. Box 370
First Citizens Place, Dyersburg, Tennessee 38025-0370
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (901) 285-4410
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
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 12 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 90 days.
Yes X No
The aggregate market value of voting stock held by nonaffiliates of
the registrant at December 31, 1994 was $27,163,198.
Of the registrant's only class of common stock ($1.00 par value) there
were 714,821 shares outstanding as of December 31, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the
Proxy Statement dated March 18, 1995 (Part III)
Filed by Electronic Submission
2
PART I
ITEM 1. BUSINESS
GENERAL
First Citizens Bancshares, Inc. ("Bancshares") was organized December,
1982 as a Tennessee Corporation and commenced operations in September,
1983, with the acquisition of all Capital Stock of First Citizens National
Bank of Dyersburg ("First Citizens").
First Citizens was chartered as a national bank in 1900 and presently
operates a general retail banking business in Dyersburg and Dyer County,
Tennessee providing customary banking services. First Citizens operates
under the supervision of the Comptroller of the Currency, is insured up to
applicable limits by the Federal Deposit Insurance Corporation and is a
member of the Federal Reserve System. First Citizens operates under the
day-to-day management of its own officers and directors; and formulates its
own policies with respect to lending practices, interest rates, service
charges and other banking matters.
Bancshares' primary source of income is dividends received from First
Citizens. Dividend payments are determined in relation to First Citizens'
earnings, deposit growth and capital position in compliance with regulatory
guidelines. Management anticipates that future increases in the capital of
First Citizens will be accomplished through earnings retention
or capital injection.
The following table sets forth a comparative analysis of Assets,
Deposits, Net Loans, and Equity Capital of Bancshares as of December 31,
for the years indicated:
December 31
(in thousands)
1994 1993 1992
Total Assets $256,685 $234,892 $239,897
Total Deposits 209,481 193,823 193,459
Total Net Loans 166,727 147,646 133,957
Total Equity Capital 23,879 21,700 19,309
Individual bank performance is compared to industry standards through
utilization of the Uniform Bank Performance Report (UBPR), published
quarterly by the Federal Financial Institution's Examination Council. This
report provides comparisons of significant operating ratios of First
Citizens with peer group banks. Presented in the following chart are
comparisons of First Citizens with peer group banks for the periods
indicated:
12/31/94 12/31/93 12/31/92
FCNB PEER GRP FCNB PEER GRP FCNB PEER GRP
Average Assets/
Net Interest Income 4.34% 4.41% 4.46% 4.46% 4.51% 4.45%
Average Assets/
Net Operating Income 1.15% 1.28% 1.16% 1.30% .91% 1.29%
Net loan losses/
Average total loans -.01% .09% .30% .18% .47% .25%
Primary Capital/
Average Assets 8.37% 9.05% 8.32% 8.72% 7.29% 8.48%
Cash Dividends/
Net Income 24.29% 33.32% 20.20% 38.83% 32.73% 30.49%
*Performance as of 12/31/94 is compared to peer group totals as of 09/30/94
(Most recent UBPR available)
3
EXPANSION
Bancshares may, subject to regulatory approval, acquire existing banks
or organize new banks. The Federal Reserve Board permits bank holding
companies to engage in non-banking activities closely related to banking or
managing or controlling banks, subject to Board approval. In making such
determination, the Federal Reserve Board considers whether the performance
of such activities by a bank holding company would offer advantages to the
public which outweigh possible adverse effects. Approval by the Federal
Reserve Bank of a Bank Holding Company's application to participate in a
proposed activity is not a determination that the activity is a permitted
non-bank activity for all bank holding companies. Approval applies only to
the applicant, although it suggests the likelihood of approval in a similar
case.
First Citizens National Bank through its strategic planning process
has stated its intention to acquire other financial institutions within the
West Tennessee Area. The Bank's objective in acquiring other banking
institutions would be for asset growth and diversification into other
market areas. Acquisitions would afford the bank increased economies of
scale within the data processing function and better utilization of human
resources. Any acquisition approved by the Board of Bancshares, Inc. would
provide a profitable investment for shareholders. On September 1, 1994 a
bid from First Citizens National Bank was accepted to purchase the Ripley
Branch of Merchants State Bank, Humboldt, Tennessee, a subsidiary of Union
Planters National Bank. The purchase of the branch located in Ripley,
Tennessee resulted in a deposit increase of approximately $8 Million. On
January 16, 1995 the Ripley Branch was successfully converted to the books
of First Citizens National Bank.
On September 29, 1994, President Clinton signed into law the Riegel-
Neal Interstate Banking and Branching Efficiency Act of 1994. The Act
provides for nationwide interstate Banking and branching within certain
limitations. A more detailed description of the act is discussed within
the section entitled "Usury, Recent Legislation and Economic Environment."
SUPERVISION AND REGULATION
Bancshares is a one-bank holding company under the Bank Holding
Company Act of 1956, as amended, and is subject to supervision and
examination by the Board of Governors of the Federal Reserve System.
As a bank holding company, Bancshares is required to file with the
Federal Reserve Board annual reports and other information regarding the
business obligations of itself and its subsidiaries. Board approval must
be obtained before Bancshares may:
(1) Acquire ownership or control of any voting securities of a bank
or Bank Holding Company where the acquisition results in the BHC
owning or controlling more than 5 percent of a class of voting
securities of that bank or BHC;
(2) Acquire substantially all assets of a bank or BHC or merge with
another BHC.
4
Federal Reserve Board approval is not required for a bank subsidiary
of a BHC to merge with or acquire substantially all assets of another bank
if prior approval of a federal supervisory agency, such as the Comptroller
of the Currency is required under the Bank Merger Act. Relocation of a
subsidiary bank of a BHC from one state to another requires prior approval
of the Federal Reserve Board and is subject to the prohibitions of the
Douglas Amendment.
The Bank Holding Company Act provides that the Federal Reserve Board
shall not approve any acquisition, merger or consolidation which would
result in a monopoly or which would be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of banking
in any part of the United States. Further, the Federal Reserve Board may
not approve any other proposed acquisition, merger, or consolidation, the
effect of which might be to substantially lessen competition or tend to
create a monopoly in any section of the country, or which in any manner
would be in restraint of trade, unless the anti-competitive effect of the
proposed transaction is clearly outweighed in favor of public interest by
the probable effect of the transaction in meeting the convenience and needs
of the community to be served. An amendment effective February 4, 1993
further provides that an application may be denied if the applicant has
failed to provide the Federal Reserve Board with adequate assurances that
it will make available such information on its operations and activities,
and the operations and activities of any affiliate, deemed appropriate to
determine and enforce compliance with the Bank Holding Company Act and any
other applicable federal banking statutes and regulations. In addition,
consideration is given to the competence, experience and integrity of the
officers, directors and principal shareholders of the applicant and any
subsidiaries as well as the banks and bank holding companies concerned.
The Board also considers the record of the applicant and its affiliates in
fulfilling commitments to conditions imposed by the Board in connection
with prior applications.
A bank holding company is prohibited with limited exceptions from
engaging directly or indirectly through its subsidiaries in activities
unrelated to banking or managing or controlling banks. One exception to
this limitation permits ownership of a company engaged solely in furnishing
services to banks; another permits ownership of shares of the company, all
of the activities of which the Federal Reserve Board has determined after
due notice and opportunity for hearing, to be so closely related to banking
or managing or controlling banks, as to be a proper incident thereto.
Moreover, under the 1970 amendments to the Act and to the Board's
regulations, a bank holding company and its subsidiaries are prohibited
from engaging in certain "tie-in" arrangements in connection with any
extension of credit or provision of any property or service. Subsidiary
banks of a bank holding company are subject to certain restrictions imposed
by the Federal Reserve Act on any extension of credit to the bank holding
company or to any of its other subsidiaries, or investments in the stock
or other securities thereof, and on the taking of such stock or securities
as collateral for loans to any borrower.
Bank holding companies are required to file an annual
report of their operations with the Federal Reserve Board, and
they and their subsidiaries are subject to examination by the Board.
5
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information relates to the principal
executive officers
of Bancshares and its principal subsidiary, First Citizens
National Bank as of December 31, 1994.
Name Age Position and Office
Stallings Lipford 64 Chairman of the Board and CEO of
First Citizens and Bancshares.
Mr. Lipford joined First Citizens
in 1950. He became a member of the
Board of Directors in 1960 and
President in 1970. He was made
Vice Chairman of the Board in 1982.
He served as Vice Chairman of the
Board of Bancshares from September,
1983 to February, 1984. The Board
elected Mr. Lipford Chairman of
both First Citizens and Bancshares
on February 14, 1984. He served as
President of First Citizens and
Bancshares from 1983 to 1992.
Katie Winchester 54 President of First Citizens and
Bancshares; employed by First
Citizens National Bank in 1961;
served as Executive Vice President
and Secretary of the Board from 1986
to 1992. She was made President of
Bancshares and First Citizens in 1992.
Ms. Winchester was elected to the
Board of both First Citizens and
Bancshares in 1990.
H. Hughes Clardy 52 Vice President of First Citizens
Bancshares, Inc.; Senior Vice
President and Senior Trust Officer
of First Citizens National Bank.
Employed by First Citizens National
Bank in 1993. Mr. Clardy was
employed as Vice President and
Senior Trust Officer at Crestar
Bank from January, 1987 to January,
1991 and as a Vice President of
Dominion Trust Company of Tennessee
from 1991 to 1993.
Ralph Henson 53 Vice President of First Citizens
Bancshares, Inc.; Executive Vice
President of Loan Administration
of First Citizens National Bank.
Employed by First Citizens National
Bank in 1964. Mr. Henson served
the Bank as Senior Vice President
and Senior Lending Officer until
his appointment as Executive Vice
President of Loan Administration in
February, 1993.
Jeffrey Agee 34 Vice President and Chief Financial
Officer of Bancshares, Inc. and
First Citizens as of April, 1994.
Employed by First Citizens National
Bank in 1982. Served the bank
previous to April, 1994 as Vice
President and Accounting Officer.
6
Barry Ladd 54 Senior Vice President and Senior
Lending Officer of First Citizens
National Bank as of 4/20/94.
Employed by the Bank in 1972. Mr.
Ladd served First Citizens as Vice
President and Lending Officer
previous to his appointment as
Senior Vice President.
Bennett Ragan, Jr. 46 Senior Vice President and Senior
Lending Officer of First Citizens
National Bank as of 4/20/94.
Employed by the Bank in 1970. Mr.
Ragan has served the Bank as Vice
President and Lending Officer since
1986.
BANKING BUSINESS
First Citizens operates a general retail banking business
in Dyer County, Tennessee. An agreement signed September 29, 1994 to
purchase a branch bank in Lauderdale County will expand the
bank's retail service area effective in January, 1995. All
persons who live in either community or who work in or have a
business or economic interest in either community are
considered as forming a part of the area serviced by the Bank.
First Citizens provides customary banking services, such as
checking and savings accounts, funds transfers, various types
of time deposits, and safe deposit facilities. It also
finances commercial transactions and makes and services both
secured and unsecured loans to individuals, firms and
corporations. Commercial lending operations include various
types of credit services for its customers. Agricultural
services are provided that include operating loans as well as
financing for the purchase of equipment and farm land. The
installment lending department makes direct loans to
individuals for personal, automobile, real estate, home
improvement, business and collateral needs. Mortgage lending
makes available long term fixed and variable rate loans to
finance the purchase of residential real estate. These loans
are sold in the secondary market without retaining servicing
rights. Credit cards and open-ended credit lines are
available to both commercial customers and consumers.
First Citizens Financial Plus, Inc., a Bank Service
Corporation wholly owned by First Citizens National Bank is a
licensed Brokerage Service. This allows the bank to compete
on a limited basis with numerous non-bank entities who pose a
continuing threat to our customer base, and are free to
operate outside regulatory control.
First Citizens was granted trust powers in 1925 and has
maintained an active Trust Department since that time. Assets
as of December 31, 1994 were in excess of $107,464,000. Services
offered by the Investment Management and Trust Services Division
include but are not limited to estate settlement, trustee of living
trusts, testamentary trustee, court appointed conservator and
guardian, agent for investment accounts, and trustee of pension and
profit sharing trusts.
The business of providing financial services is highly
competitive. The competition involves not only other banks but non-
financial enterprises as well. In addition to competing with
other commercial banks in the service area, First Citizens
competes with savings and loan associations, insurance
companies, savings banks, small loan companies, finance
companies, mortgage companies, real estate investment trusts,
certain governmental agencies, credit card organizations, and
other enterprises.
The following tabular analysis sets forth the competitive
position of First Citizens when compared with other financial
institutions in the
service area for the period ending June 30, 1994.
7
Dyer County Market
(All Financial Institutions)
(in thousands)
Total Deposits % of Market Share
Bank Name 06/30/94 06/30/94
First Citizens
National Bank $201,111* 48.88%
First Tennessee
Bank 91,084 22.14%
Security Bank 56,299 13.68%
Union Planters, FSB 30,336 7.37%
First Exchange Bank 21,756 5.29%
Union Planters 8,172 1.99%
Dyersburg City Employees
Credit Union 2,667 .65%
Total 411,425
*Does not include deposits of $16,950,086 categorized as Overnight and
fixed term Repurchase Agreements.
At December 31, 1994 Bancshares and its subsidiary, First Citizens
National Bank, employed a total of 150 full time equivalent employees.
Having been a part of the local community in excess of 100 years, First
Citizens has been privileged to enjoy a major share of the financial
services market. Dyersburg and Dyer County are growing and with this
growth come demands for more sophisticated financial products and services.
Strategic planning has afforded the Company both the physical resources and
data processing technology necessary to meet the financial needs generated
by this growth.
USURY, RECENT LEGISLATION AND ECONOMIC ENVIRONMENT
Tennessee usury laws limit the rate of interest that may be charged by
banks. Certain Federal laws provide for preemption of state usury laws.
Legislation enacted in 1983 amends Tennessee usury laws to permit interest
at an annual rate of interest four (4) percentage points above the average
prime loan rate for the most recent week for which such an average rate has
been published by the Board of Governors of the Federal Reserve System, or
twenty-four percent (24%), whichever is less (TCA 47-14-102(3)). The "Most
Favored Lender Doctrine" permits national banks to charge the highest rate
permitted by any state lender.
Specific usury laws may apply to certain categories of loans, such as
the limitation placed on interest rates on single pay loans of $1,000.00 or
less for one year or less. Rates charged on installment loans, including
credit cards, are governed by the Industrial Loan and Thrift Companies Act.
On September 29, 1994, President Clinton signed into law the Reigle-
Neal Interstate Banking and Branching Efficiency Act of 1994 ("Act"). The
Act provides for nationwide interstate banking and branching with certain
limitations. The Act permits bank holding companies to acquire banks
without regard to state boundaries after September 29, 1995. The Federal
Reserve may approve an interstate acquisition only if, as a result of the
acquisition, the bank holding company would control less than 10% of the
total amount of insured deposits in the United States or 30% of the
deposits in the home state of the bank being acquired. The home state can
waive the 30% limit as long as there is no discrimination against out-of-
state institutions.
Pursuant to the Act, interstate branching will take effect on June 1,
1997, except under certain circumstances. Once a bank has established
branches in a host state (a state other than its headquarters state)
through an interstate merger transaction, the bank may establish and
acquire additional branches at any location in the host state where any
bank involved in the interstate merger transaction could have established
8
or acquired branches under applicable federal or state law. The Act further
provides that individual states may opt out of interstate branching. If a
state does not opt out of interstate branching prior to May 31, 1997, then a
bank in that state may merge with a bank in another state provided that
neither of the states have opted out. States may either enact laws opting
out of interstate branching before June 1, 1997 or permit interstate merges
transactions earlier than June 1, 1997, by statute at their option. A state
also may impose conditions on any interstate merger transaction that occurs
before June 1, 1997 if the conditions do not discriminate against out-of-state
banks, are not preempted by federal law, and do not apply or require performance
after May 31, 1997.
Monetary policies of regulatory authorities, including the Federal
Reserve Board, have a significant effect on the operating results of bank
holding companies and their subsidiary banks. The Federal Reserve Board
regulates the national supply of bank credit by open market operations in
United States Government securities, changes in the discount rate on bank
borrowings, and changes in reserve requirements against bank deposits. A
tool once extensively used by the Federal Reserve Board to control growth
and distribution of bank loans, investments and deposits has been
eliminated through deregulation. Competition, not regulation, dictates
rates which must be paid and/or charged in order to attract and retain
customers.
Federal Reserve Board monetary policies have materially affected the
operating results of commercial banks in the past and are expected to do so
in the future. The nature of future monetary policies and the effect of
such policies on the business and earnings of the company and its
subsidiaries cannot be accurately predicted.
ITEM 2. PROPERTIES
First Citizens owns and occupies a six-story building in Dyersburg,
Tennessee containing approximately 50,453 square feet of office space,
bearing the municipal address of First Citizens Place (formerly 200 West
Court). An expansion program completed during 1988 doubled the available
floor space of the existing facility. The space was utilized to combine
all lending and loan related functions. First Citizens owns the Banking
Annex containing total square footage of 12,989, of which approximately
3,508 square feet is rented to various tenants. The municipal address of
the bank occupied portion of the Annex is 215-219 Masonic Street.
The land and building occupied by the Downtown Drive-In Branch located
at 113 South Church Street, Dyersburg, Tennessee is owned by First
Citizens. The building, containing approximately 1,250 square feet, is
located on a lot which measures 120 feet square. Also located at this
address is a separate ATM facility wholly owned by the Bank.
The Midtown Branch of First Citizens is located at 620 U.S. 51 By-Pass
adjacent to the Green Village Shopping Center. The building contains 1,920
square feet and has been owned by First Citizens since construction. The
land on which this Branch is located, having previously been leased, was
purchased during 1987. In June of 1992 an additional 1.747 acres adjoining
the Midtown Branch property was purchased to accommodate future growth and
expansion. During 1993, the Board of Directors made a decision to locate a
branch office at 2211 St. John Avenue near the Industrial Park, eliminating
the need to expand the Midtown Branch. The 1.747 acres is now offered for
sale.
In addition, the Midtown Branch Motor Bank is located on .9 acres
adjoining the Midtown Branch. This property consists of a servicing
facility and six remote teller stations and is owned in its entirety by the
Bank. A drive-through ATM was located at this facility during 1994.
The Newbern Branch, also owned by First Citizens, is located on North
Monroe Street, Newbern, Tennessee. The building contains approximately
4,284 square feet and occupies land which measures approximately 1.5 acres.
A separate facility located in Newbern on the corner of Highway 51 and
RoEllen Road houses an ATM. Both land and building are owned by the Bank.
The Super Money Market Branch in the Kroger Supermarket on Highway 78
is operated under a franchise obtained through National Bank of Commerce,
Memphis, Tennessee. While the fixtures are owned by First Citizens, space
is made available from the Kroger Company through the franchise agreement.
An ATM is also located near the branch in the Kroger facility.
9
The Industrial Park Branch located at 2211 St. John Avenue is a full
service banking facility that offers drive-thru Teller and ATM services.
The building owned by First Citizens National Bank contains approximately
2,773 square feet and is located on 1.12 acres of land. The Industrial
Park Branch, became operational In November, 1994.
In November, 1993 First Citizens National Bank leased space in the
Wal-Mart Store #677 located at 2650 Lake Road in Dyersburg, Tennessee to
locate an Automatic Teller Machine (ATM). The ATM was installed in
December, 1993. In January, 1995 the ATM was relocated in the newly
constructed Super Wal-Mart Store located at the same address.
The Ripley Branch of First Citizens National Bank, purchased January
16, 1995, is located at 292 South Washington Street in Ripley, Tennessee
(Lauderdale County). The Branch contains approximately 1,450 square feet
and was built in 1984 on a quarter acre of land. The Ripley Branch is a
full service banking facility that also offers drive-up teller and twenty
four hour ATM services.
There are no liens or encumbrances against any of the properties owned
by First Citizens.
ITEM 3. LEGAL PROCEEDINGS
As of December 31, 1994 there are no material legal proceedings
pending other than ordinary routine litigation incidental to the business
of First Citizens National Bank. During the fourth quarter of 1994 there
were no legal proceedings pending or terminated of a reportable nature.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the year ending December 31, 1994, there
were no meetings, annual or special, of the shareholders of Bancshares. No
matters were submitted to a vote of the shareholders nor were proxies
solicited by management or any other person.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
As of December 31, 1994 there were 620 active holders of Bancshares'
stock. Bancshares common stock is not actively traded on any market. Per
share prices reflected in the following table are based on records of
actual sales during stated time periods. These records may not include all
sales during these time periods if sales were not reported to First
Citizens for transfer.
Quarter Ended High Low
March 31, 1994 $35.00 $30.00
June 30, 1994 $35.00 $33.10
September 30, 1994 $37.50 $35.00
December 31, 1994 $38.00 $37.40
March 31, 1993 $57.65 $52.50
June 30, 1993 $68.00 $61.00
September 30, 1993 $69.10 $68.00
December 31, 1993 $30.00 $27.64*
*Declared 2.5 for 1 stock split.
Dividends paid each quarter of 1994 were 26 cents per share. In addition,
a special dividend of 15 cents per share was paid during fourth quarter,
bringing total dividends paid per share during 1994 to $1.19. Dividends
paid per share during 1993 were 60 cents (first and second quarters) 65
cents (third quarter) and 25 cents (fourth quarter). The fourth quarter
dividend was adjusted to account for a 2.5 for 1 stock split effective
October 15, 1994.
10
Future dividends will depend on Bancshare's earnings and financial
condition and other factors which the Board of Directors of Bancshares
considers relevant.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents information for Bancshares effective
December 31 for the years indicated.
(in thousands)
(except per share data)
1994 1993 1992 1991 1990
Net Interest &
Fee Income $ 11,094 $ 10,895 $ 10,389 $ 9,882 $ 9,991
Gross Interest Income $ 19,087 $ 18,156 $ 18,893 $ 21,074 $ 22,261
Income From
Continuing Operations $ 2,946 $ 2,638 $ 2,175 $ 1,961 $ 1,314
Long Term Obligations(4) $ 4,125 $ 0 $ 0 $ 0 $ 0
Income Per Share from
Continuing Operation(1) $ 4.15 $ 3.76 $ 3.39 $ 3.06 $ 2.05
Net Income per
Common Share(2)(3) $ 4.15 $ 3.94 $ 3.39 $ 3.06 $ 2.05
Cash Dividends Declared
per Common Share(2)(3) $ 1.19 $ .99 $ .94 $ .89 $ .88
Total Assets at Year End $256,685 $234,892 $239,897 $227,017 $218,378
(1)Restated to reflect 10% stock dividend on December 15, 1992.
(2)Restated to reflect 2.5 for 1 Stock Split on October 15, 1993.
(3)The $1.19 dividend for 1994 reflects $.26 x 4 plus a special dividend of
$.15.
(4)Long Term Obligations is FHLB Borrowings matched with Loans & Investments.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
To understand the following analysis, reference should be made to the
consolidated financial statements and other selected financial data
presented elsewhere in this report. For purposes of the following
discussion, net interest income and net interest margins are presented on a
fully taxable equivalent basis. Per share data is adjusted to reflect all
stock dividends declared through December 31, 1994.
Multiple changes in the financial services industry continue to offer
both opportunity and challenge. Interstate banking/branching became a
reality by legislation passed September, 1994. The Act permits full
nationwide interstate banking one year from enactment and authorized
interstate branching after June 1, 1997. Methods by which Regulators
measure bank's compliance with the Community Reinvestment Act will be
changing in the coming year. First Citizens takes pride in having received
an "Outstanding" rating on the most recent CRA examination and has every
intention of maintaining this designation. The Board, Management and Staff
are committed to providing products and services which meet the financial
needs of all segments of the communities we serve.
On August 29, 1994 the bank submitted a bid to purchase the Ripley
Branch of Union Planters Bank of West Tennessee, formerly Merchants State
Bank. In January, 1995 the acquisition was finalized resulting in an
increase to deposit totals of $8 Million. The acquisition provided
additional funding for future loan growth while providing a physical
presence in the Lauderdale County Market.
The Industrial Park Branch, constructed in 1994, held its grand
opening November, 1994. The full service branch located near the
Dyersburg/Dyer County Industrial Park provides a more convenient outlet of
service for employees of local industry and residents of the area.
11
In 1993 Sharon Younger and Associates were contracted to perform a
Market Perception Study within the Bank's market place. The purpose of the
study was to determine how customers across the market perceive bank
products and services and to assess how well their credit needs are being
met. 52.9% of customers included in the survey considered First Citizens
National Bank as their primary Banking Institution and over 85.3% indicated
they were satisfied with current products and services offered by their
bank. In 1994 the contract with Sharon Younger was amended to included
focus group meetings with various demographic groups to determine customer
satisfaction with products and services offered by First Citizens National
Bank. As a result of these meetings several new products were introduced
to our customers to improve their banking relationship with First Citizens.
An Overdraft Line of Credit, Free Checking Account, and a low rate credit
card with no annual fee was designed to attract customers in the 30-45 age
group that expressed a need for these product types.
In June, 1994 the bank entered into an agreement with the accounting
firm of Reynolds, Bone & Griesbeck to conduct a cost/benefit analysis for
the installation of a check/statement imaging product. In November, 1994
the Board of Directors approved the signing of a contract with Systematics,
Inc., Orlando, Florida to install an Item Capture and Deposit Statement
Imaging Application. Image Statements are expected to be available to our
customer's by June, 1995. In October, 1994 additional services were
contracted with Reynolds, Bone & Griesbeck that included the selection of a
Debit Card product and processor as well as acting as an advisor on the
bank's Information System Strategic Planning Team. It is expected the bank
will announce the selection of a Debit Card product during the second
quarter, of 1995. First Citizens also signed a contract with Southern Data
Systems, Roswell, Georgia to install a Teller Platform "TellerPro Plus"
Application in July, 1995. TellerPro Plus will fully automate Teller
transaction processing, expand supervisor capabilities, provide management
information and insure bank wide audit controls.
First Citizens Bancshares, Inc. and First Citizens National Bank are
pleased to report excellent operating results for the year ending 12/31/94.
Enhanced earnings and strong loan growth continued the trend exhibited in
1993. Net Income for 1994, 1993 and 1992 was $2,946,249, $2,763,737, and
$2,174,710 respectively. Earnings per common share were $4.15 in 1994,
$3.76 in 1993, and $3.39 in 1992 reflecting a continuous increase. Earnings
per share were adjusted in 1993 to reflect a 2.5 stock split approved by
the Board of Directors in September, 1993. Dividends declared per common
share were $1.19, $.99 and $.94 for the three years ranging from 1994 to
1992. Weighted average number of shares outstanding changed from 700,958
(1993) to 709,434 (1994). Shares were issued from previously authorized
unissued stock to satisfy demands of the Dividend Reinvestment and
Quarterly Optional Stock Purchase Plans. Improvement reflected in earnings
ratios can be attributed to strategic planning efforts to shift the focus
from asset growth to profitability; sound asset/liability management; and
tight controls and monitoring procedures placed on non-interest expense
categories. Total Assets increased approximately $21,794,000 when
comparing 1994 to 1993. The Loan Portfolio excluding Allowance for Loan
Losses increased $19,081,000 or 87.55% of total asset growth.
Stockholders' Equity increased $2,178,000, a 10.04% of increase from
12/31/93.
Net Interest Income as a percent of average assets was 4.72% for
twelve months ended December 31, 1994, a decrease from 4.91% at 12/31/93.
The decrease reflects the current rising rate environment. As Interest
rates move upward it is expected that funds will continue to flow into Bank
Certificate of Deposits from stocks and mutual funds. First Citizens
through its Asset/Liability program has adequately matched deposit and loan
maturities to protect the bank from risk created by volatile changes in
interest rates.
12
Changes in Financial Accounting Standards
FASB NO. 114 (Accounting by creditors for impairments of loans).
Effective date is fiscal years beginning after December 15, 1994. FASB 114
requires a bank to recognize impairment of a loan if the present value of
expected future cash flows discounted at the loan's effective interest rate
(or alternatively, the observable market price of the loan or the fair
value of the collateral) is less than the recorded investment. If the fair
value used is at least equal or greater than the recorded amount, there is
no impairment. Impaired loans are usually considered loans in non-accrual
status, 90 days or more past due that will not pay full interest and
principal due, or have been classified as a problem loan. First Citizens
National Bank has implemented procedures that capture average balances of
impaired loans, interest income associated with impaired loans, and
allocations made to the reserve for loan losses associated with impaired
loan. No material affect is projected for Bancshares or the Bank as a
result of the implementation of FASB 114.
FASB NO. 115 (Accounting for certain investments in Debts and Equity
Securities). Effective January 1, 1994, the Company adopted FASB 115 and
classified securities contained in its investment portfolio according to
stated specifications: Held-to-maturity (includes securities which the
company has the intent and the ability to hold to maturity); Trading
securities (includes investment securities which are held for short-term
resale); and Available-for-sale (includes all other investment securities).
The cumulative effect of FASB 115 on the investment portfolio for 1994 was
$259,543.
FASB 118 (Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures) amends FASB Statement 114 to allow a creditor
to use exiting methods for recognizing interest income on impaired loans.
Implementation of procedures discussed in FASB 114 includes accounting
requirements for income recognition on impaired loans.
FASB 119 (Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments) amends FASB 105 (Disclosure of Information
about Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk), and FASB 107 (Disclosures
about Fair Value of Financial Instruments). Effective for years after
December 15, 1994. Statement No. 119 requires disclosures about the
amounts, nature, and terms of derivatives that are not subject to statement
105 because they do not result in off-balance-sheet risk of accounting
loss. It requires banks to make a distinction between financial
instruments held or issued for trading purposes and for purposes other than
trading. Derivative products held in the banks investment portfolio are
reported on a quarterly basis to the banks investment committee and Board
of Directors. The reports presented include disclosure requirements stated
in FASB 119.
13
NON-INTEREST INCOME
The following table reflects non-interest income for the
years ending December 31, 1994, 1993 and 1992:
December 31
Change from prior year
(in thousands)
Total Increase (Decrease) Total Increase (Decrease) Total
1994 Amount Percentage 1993 Amount Percentage 1992
Service Charges on
Deposit Accounts $ 426 $ (14) (3.18%) $ 440 $ 6 1.38% $ 434
Other Service Charges,
Commissions & Fees $ 704 $ (67) (8.69%) $ 771 $ 212 37.92% $ 559
Other Income $1,051 $ 182 20.94% $ 869 $ (136) (13.53%) $1,005
TOTAL NON-INTEREST
INCOME $2,181 $ 101 4.86% $2,080 $ 82 4.10% $1,998
Non Interest Income is up by 4.86% and 4.10% respectively
when comparing 1994, 1993 and 1992. Other Service Charges,
Commissions and Fees reflect a decrease of 8.6% attributed to
a slowdown in mortgage lending and refinancing of existing
mortgages; reduced income received from the Bank's brokerage
services and the sale of annuities. Other categories listed
within the table reflect a significant increase with the
largest percentage reflected in Trust Income. The Investment
Management and Trust Services Division posted improved income
and profits each quarter of 1994. Another factor contributing
to above peer group levels in Non-Interest Income is the sale
of a parcel of other real estate during the first quarter of
1994, resulting in a before tax profit of $297,000.
NON-INTEREST EXPENSE
December 31
Change from prior year
(in thousands)
Total Increase(Decrease) Total Increase(Decrease) Total
1994 Amount Percentage 1993 Amount Percentage 1992
Salaries & Employee
Benefits $4,970 $220 4.63% $4,750 $ 239 5.30% $4,511
Net Occupancy Expense $ 318 $(31) (8.88%) $ 349 $ 39 12.58% $ 310
Other Operating Expense $3,522 $(112) (3.08%) $3,634 $(292) (7.44%) $3,926
TOTAL NON-INTEREST EXPENSE $8,810 $ 77 1.06% $8,733 $ (14) (.16%) $8,747
A review of Non-Interest Expense reflects that all categories have
been well managed. Total Non-Interest Expense only increased 1.06% when
comparing 1994 to 1993 after posting a slight decline (.16%) in 1992.
Included in this category is FDIC Insurance premiums of $440,000 in 1994,
$430,000 in 1993,and $430,000 in 1992. Under current funding levels, the
fund will be restored to mandated levels during the third quarter of 1994,
at which time premium levels are scheduled to be reduced. FDIC Chairman
Helper has indicated that premiums which average 25.5 cents per $100.00 of
deposits could be reduced as low as 4.5 cents on average. This would serve
to drastically improve bank earnings nationwide.
Salaries and Employee Benefits increased approximately $220,000 or
4.63% when comparing to the previous year. A comparison of assets per
employee for the years of 1990 to 1994 is reflected in the table below:
(in thousands)
December 31 Assets Per Employee
1994 $1,695
1993 $1,563
1992 $1,643
1991 $1,393
1990 $1,380
14
One measure of efficient staffing in the banking industry
is the dollar amount of assets per employee. Peer group banks
average $2,000,000 in 1995 compared to the banks total of
$1,695,000. Full time equivalent employees was 150, 149, 146
respectively as of 12/31/94, 93, and 92. It is conceivable
that our ratios will remain higher than peer group banks
because of increased staff necessary to support extended
banking hours and non-banking services to our customers.
First Citizens provides banking hours that are convenient to
our customers by opening drive-in windows at 7AM and certain
of our branches on Saturdays. The Super Money Market Branch
located in the Kroger Supermarket allows banking until 8 PM on
weekdays and 6 PM on Saturday. Non-banking services include
Trust and Brokerage services staffed by a total of 13.5
employees. In 1994 First Citizens opened one full service
branch with a total of 4 full time and 3 part time employees.
The bank also employed 2 other full time employees to place in
a training program for future placement at the Ripley Branch.
It should be noted that the full time equivalent ratio only
increased by 4 employees including these additions.
COMPOSITION OF DEPOSITS
The average daily amounts of deposits and rates paid on
such deposits are summarized for the periods indicated:
December 31
(in thousands)
1994 1993 1992
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
Non-Interest
Bearing Demand
Deposits $ 24,989 - $ 21,922 - $18,695 -
Savings Deposits $ 64,912 2.69% $ 65,612 2.58% $60,006 2.98%
Time Deposits $111,268 4.79% $104,166 4.70% $111,771 5.42%
TOTAL DEPOSITS $201,169 3.52% $191,700 3.44% $190,472 4.12%
Total deposits grew approximately $10 Million or 3.52%
when comparing 1994 to 1993 and 1992. The increase is due to
rising interest rates and an aggressive program implemented to
seek deposit funds. An active officer call program was
established that required participants to aggressively seek
deposit funds as well as loans. Increased Time Deposit totals
of $9,469,000 is reflective of our customer preference to
invest in bank certificate of deposits rather than stocks and
mutual fund investments when interest rates are comparable for
each type. Deposit rates increased in 1994 and are projected
to remain higher than levels paid in 1992 and 93.
Non Interest Bearing Demand Deposits have also increased
over $3 Million for each year under review. Deposit funds
that are excluded from Total Deposits are "Sweep Account"
funds and Fixed Repurchase Agreements totaling $10,956,000
and $5,994,000 respectively. The "Sweep" account is a product
that allows funds from a checking account to automatically
sweep daily into an overnight repurchase agreement. This
affords commercial or large balance customers (amounts of
$25,000 or more per depositor) the opportunity to earn
interest on excess collected funds while providing
availability of adequate funds to clear large denomination
checks when presented for payment.
Pricing of deposit products is based on local market
conditions and Treasury Bill rates. The average rate paid on
deposits in 1994 was 4.02% compared to 3.80% in 1993.
15
MATURITY DISTRIBUTION OF TIME DEPOSITS IN AMOUNTS OF $100,000
AND OVER
December 31
(in thousands)
1994 1993
Amount Percent Amount Percent
Maturing in:
3 months or less $ 3,874 22.78% $ 6,770 39.48%
Over 3 through 6 months $ 3,302 19.42% $ 5,200 30.32%
Over 6 through 12 months $ 5,550 32.64% $ 2,388 13.92%
Over 12 months $ 4,278 25.16% $ 2,792 16.28%
TOTAL $17,004 100.00% $17,150 100.00%
16
SOURCES AND USES OF FUNDS
(in thousands)
1994 1993 1992
FUNDING USES Average Increase Average Increase Average
Balance (Decrease) % Balance (Decrease) % Balance
Amount Amount Amount
INTEREST-EARNING
ASSETS:
Loans (Net of
Unearned Discounts
& Reserve) $160,254 $18,590 13.12% $141,664 $ 7,150 5.32% $134,514
Taxable Investment
Securities $ 48,767 ($10,357) (17.52%) $ 59,124 $ 614 1.05% $ 58,510
Non-Taxable
Investment
Securities $ 13,284 $ 3,484 35.55% $ 9,800 $ 3,385 52.77% $ 6,415
Federal Funds
Sold $ 2,687 $ 300 12.57% $ 2,387 $(4,632)(65.99%)$ 7,019
Interest Earning
Deposits In Banks $ 156 $ (42)(21.21%) $ 198 $ 198 100% $ 0
TOTAL INTEREST-
EARNING ASSETS $225,148 $11,975 5.62% $213,173 $ 6,715 3.25% $206,458
Other Uses $ 20,751 $ 646 3.21% $ 20,105 $ (17) (.08%) $20,122
TOTAL FUNDING USES $245,899 $12,621 5.41% $233,278 $ 6,698 2.96% $226,580
SUMMARY - AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS
1994 1993 1992
FUNDING SOURCES Average Increase Average Increase Average
Balance (Decrease) % Balance (Decrease) % Balance
Amount Amount Amount
INTEREST-BEARING
LIABILITIES:
Savings Deposits $ 64,912 $ (700)(1.07%)$ 65,612 $ 5,606 9.34% $ 60,006
Time Deposits $111,268 $ 7,102 6.82% $104,166 $(7,605) (6.80%)$111,771
Federal Funds
Purchased and Other
Interest Bearing
Liabilities $ 22,646 $ 1,442 6.80% $ 21,204 $ 3,418 19.22% $17,786
TOTAL INTEREST-
BEARING LIABILITIES $198,826 $ 7,844 4.11% $190,982 $ 1,419 .75% $189,563
Demand Deposits $ 24,989 $ 3,067 13.99% $ 21,922 $ 3,227 17.26% $ 18,695
Other Sources $ 22,084 $ 1,710 8.39% $ 20,374 $ 2,052 11.20% $ 18,322
TOTAL FUNDING
SOURCES: $245,899 $ 12,621 5.41% $233,278 $ 6,698 2.96% $226,580
17
(FIRST CITIZENS NATIONAL BANK)
Monthly Average Balances and Interest Rates
(in thousands)
1994 1993 1992
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
ASSETS
INTEREST EARNING
ASSETS:
Loans (1)(2)
(3) $160,217 $ 14,619 9.12% $141,591 $ 13,389 9.46% $134,413 $13,511 10.05%
Investment
Securities:
Taxable $ 48,767 $ 2,978 6.11% $ 59,124 $ 3,571 6.04% $ 58,510 $ 4,014 6.86%
Tax Exempt (4) $ 13,284 $ 908 6.84% $ 9,800 $ 677 6.91% $ 6,415 $ 488 7.61%
Interest Earning
Deposits $ 156 $ 5 3.21% $ 198 $ 6 3.03% $ 0 $ 0 0%
Federal Funds
Sold $ 2,687 $ 113 4.21% $ 2,387 $ 75 3.14% $ 7,019 $ 257 3.66%
Lease Financing $ 37 $ 4 10.81% $ 73 $ 6 8.22% $ 101 $ 11 10.89%
Total Interest
Earning Assets $225,148 $ 18,627 8.27% $213,173 $ 17,724 8.31% $206,458 $18,281 8.85%
18
SUMMARY - AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS (continued)
(FIRST CITIZENS NATIONAL BANK)
Monthly Average Balances and Interest Rates
(in thousands)
1994 1993 1992
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
NON-INTEREST
EARNING ASSETS:
Cash and Due From
Banks $ 8,876 $ - - $ 8,373 $ - - $ 7,492 $ - -
Bank Premises and
Equipment $ 8,008 $ - - $ 7,859 $ - - $ 7,664 $ - -
Other Assets $ 3,867 $ - - $ 3,873 $ - - $ 4,966 $ - -
Total Assets $245,899 $ - - $233,278 $ - - $226,580 $ - -
LIABILITIES AND
SHAREHOLDERS'
EQUITY:
INTEREST BEARING
LIABILITIES:
Savings Deposits $ 64,912 $ 1,746 2.69% $ 65,612 $ 1,695 2.58% $ 60,006 $1,789 2.98%
(5)
Time Deposits $111,268 $ 5,335 4.79% $104,166 $ 4,895 4.70% $111,771 $6,058 5.42%
Federal Funds
Purchased and
Other Interest
Bearing
Liabilities $ 22,646 $ 912 4.03% $ 21,204 $ 671 3.16% $ 17,786 $ 657 3.69%
Total Interest
Bearing
Liabilities $198,826 $ 7,993 4.02% $190,982 $ 7,261 3.80% $189,563 $8,504 4.49%
NON-INTEREST
BEARING
LIABILITIES:
Demand Deposits $ 24,989 $ - - $ 21,922 $ - - $ 18,695 $ - -
Other
Liabilities $200,379 $ 1,908 $ - - $ 1,827 $ - -
Total
Liabilities $225,368 $ - - $214,812 $ - - $210,085 $ - -
SHAREHOLDERS'
EQUITY $ 20,530 $ - - $ 18,466 $ - - $ 16,495 $ - -
19
SUMMARY - AVERAGE BALANCE SHEET AND NET INTEREST INCOME ANALYSIS (continued)
(FIRST CITIZENS NATIONAL BANK)
Monthly Average Balances and Interest Rates
(in thousands)
1994 1993 1992
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $245,899 $ - - $233,278 $ - - $226,580 $ - -
NET INTEREST
INCOME $ - $10,634 - $ - $10,463 - $ - $ 9,777 -
NET YIELD ON
AVERAGE EARNING
ASSETS $ - $ - 4.72% $ - $ - 4.91% $ - $ - 4.74%
(1) Loan totals are shown net of interest collected, not earned and
loan loss reserves.
(2) Fee Income is included in interest income and the computations
of the yield on loans. Overdraft Fee Income is excluded from the
totals.
(3) Includes loans on nonaccrual status.
(4) Interest and rates on securities which are non-taxable
for Federal Income Tax purposes are presented on a
taxable equivalent basis.
(5) Includes Insured Money Fund, NOW, club accounts, and
other savings.
20
VOLUME/RATE ANALYSIS
(First Citizens 1994 Compared to 1993 1993 Compared to 1992
National Bank) Due to Changes in: Due to Changes in:
Total Total
Average Average Increase Average Average Increase
Volume Rate (Decrease) Volume Rate (Decrease)
(in thousands)
Interest Earned On:
Loans $ 1,762 $ (532) $ 1,230 $ 721 $ (843) $ (122)
Taxable Investments $ (626)$ 33 $ (593) $ 42 $ (485) $ (443)
Tax Exempt Investment
Securities $ 241 $ (10) $ 231 $ 258 $ (69) $ 189
Interest Bearing
Deposits with Other
Banks (1) 0 (1) 6 0 6
Federal Funds Sold and
Securities purchased
under agreements to
resell 9 29 38 (170) (12) (182)
Lease Financing (3) 1 (2) (3) (2) (5)
TOTAL INTEREST EARNING
ASSETS $ 1,382 $ (479) $ 903 $ 854 (1,411) (557)
Interest Paid On:
Savings Deposits (18) 69 51 167 (261) (94)
Time Deposits 334 106 440 (412) (751) (1,163)
Federal Funds Purchased
and Securities Sold
Under Agreement to
Repurchase 46 195 241 126 (112) 14
TOTAL INTEREST BEARING
LIABILITIES $ 362 $ 370 $ 732 $ (119) (1,124) (1,243)
INTEREST EARNINGS $ 1,020 $ (849) $ 171 $ 973 (287) 686
A summary of average interest earning assets and interest bearing
liabilities is set forth in the preceding table together with average
yields on the earning assets and average costs on the interest bearing
liabilities. Interest Earning Assets at 12/31/94 total $225,148,000 at
an average rate of 8.27% compared to $213,173,000 average rate of 8.31%
at 12/31/93 and $206,458.000 average rate of 8.85% at 12/31/92.
Interest Bearing Liabilities totaled $198,826,000 with an average rate
of 4.02% at 12/31/94 compared to $190,982,000 average rate of 3.80% and
$189,563,000 average rate of 4.49%. Net Yield on Average Earning Assets
(annualized) 4.72%, 4.91%, and 4.74% for the same time periods. During
1993 and the first six months of 1994 loan rates reflected a decrease as
a result of low interest rates set by the economic environment and a
highly competitive local market. Rates paid on deposits decreased more
significantly during the same time period. During the last half of 1994
interest rates started to climb causing net interest margins to shrink.
Maintaining net interest margins achieved in prior years could prove
difficult if interest rates continue to rise in 1995.
21
LOAN PORTFOLIO ANALYSIS
COMPOSITION OF LOANS
December 31
(in thousands)
1994 1993 1992 1991 1990
Real Estate Loans:
Construction $ 10,511 $ 7,675 $ 5,272 $ 4,879 $ 5,526
Mortgage $ 97,310 $ 87,314 $ 79,376 $76,500 $74,039
Commercial, Financial
and Agricultural Loans $ 38,843 $ 35,626 $ 33,931 $33,089 $29,786
Installment Loans to
Individuals $ 19,117 $ 15,901 $ 15,077 $15,901 $17,130
Other Loans $ 3,000 $ 2,806 $ 2,005 $ 2,697 $ 3,835
TOTAL LOANS $168,781 $149,322 $135,661 $133,066 $130,316
CHANGES IN LOAN CATEGORIES
December 31, 1994 as compared to December 31, 1993
(in thousands)
% of Increase Amount of Increase
Loan Category (Decrease) (Decrease)
Real Estate 13.51% $12,832
Commercial, Financial
and Agricultural 9.03% $ 3,217
Installment Loans to
Individuals 20.23% $ 3,216
Other Loans 6.91% $ 194
TOTAL LOANS 13.03% $19,459
LOAN PORTFOLIO ANALYSIS
The Loan Portfolio remained diversified in 1994 with real estate
loans comprising 63.88%, commercial and agriculture 23.01% and
installment loans and all others 13.01%. Total Loans grew in excess of
$19 Million and $13 Million in 1994 and 1993 with the largest portion of
growth centered in real estate loans. Low interest rates prompted
consumer refinancing of existing mortgages, as well as new home
purchases in 1993 and the first six months of 1994. In addition,
commercial customers secured outstanding debt with real estate to take
advantage of the lower rates and to provide longer repayment terms.
Loans for Agricultural purposes continue to increase each year as well
as Installment Loans to individuals. In 1994 a strategic decision was
made to aggressively seek installment loans and credit cards after
suppressing growth in this area for the years of 1991 to 1993. The
decision was made as a strategy to improve earnings by increasing
consumer loans. Growth in the loan portfolio is an objective, however
ensuring credit quality is our first priority. Management considers the
portfolio composition to be diversified with no concentrations of
credit.
The book value of repossessed real property held by Bancshares was
$1,119,000 at 12/31/94 and $2,108,000 at 12/31/93. The balance was
significantly reduced as a result of the sale of property in December,
1993 valued at $1,055,000. The only property held on the books of
Bancshares is a strip shopping center valued at $689,000. The remaining
balance held in repossessed real property represents real estate held by
First Citizens National Bank with exception to property purchased for
expansion of the branch located on Highway 51 Bypass valued at $151,000.
Accounting for adjustments to the value of Other Real Estate when
recorded subsequent to foreclosure is accomplished
on the basis of an independent appraisal. The asset is recorded at the
lesser of its appraised value or the loan balance. Any reduction to
value is charged to the allowance for possible loan losses. All other
real estate parcels are appraised annually and the carrying value is
22
adjusted to reflect the decline, if any, in its realizable value. Such
adjustments are charged directly to expense.
The average yield on loans of First Citizens National Bank for the
years indicated are as follows:
1994 - 9.12%
1993 - 9.46%
1992 - 10.05%
1991 - 11.34%
1990 - 12.82%
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
Due after
Due in one one year but Due after
year or less within five years five years
(in thousands)
Real Estate $18,658 $70,125 $19,038
Commercial, Financial
and Agricultural $20,072 $13,927 $4,844
All Other Loans $ 4,170 $17,927 $ 20
TOTALS $42,900 $101,979 $23,902
Loans with Maturities After One Year for which:
(in thousands)
Interest Rates are Fixed or Predetermined $98,705
Interest Rates are Floating or Adjustable $27,176
The degree of interest rate risk that a bank is subject to can be
controlled through a well managed asset/liability management program.
First Citizens controls interest rate risk by matching assets and
liabilities, that is by employing interest-sensitive funds in assets
that are also interest sensitive. One tool used to ensure market rate
return is variable rate loans. Loans totaling $70,076,000 or 42% of the
total portfolio are subject to repricing within one year or carry a
variable rate of interest. Loan maturities in the one to five year
category increased from $99,133,000 at 12/31/93 to $101,979,000 at
12/31/94 due to customers demand to lock in fixed rates for a longer
period of time. This strategy is projected to change in 1995 in light
of higher rates being charged on loans.
23
NON-PERFORMING LOANS
Nonaccrual, Restructured and Past Due Loans and Foreclosed Properties
(First Citizens National Bank)
December 31
(in thousands)
1994 1993 1992 1991 1990
Nonaccrual Loans $ 945 $1,079 $1,743 $2,058 $1,958
Restructured Loans 0 0 0 0 0
Foreclosed Property
Other Real Estate, 148 98 550 884 1,247
Other Repossessed Assets 0 0 0 0 13
Total Nonperforming Assets $1,093 $1,177 $2,293 $2,942 $3,218
Loans and leases 90 days
Past due and still
accruing interest $1,044 $ 322 $ 176 $1,029 $ 877
Nonperforming assets as a
percent of loans and
leases plus foreclosed
property at end of year* .71% .79% 1.71% 2.20% 2.45%
Allowance as a percent of:
Nonperforming assets 187.92% 142.40% 74.27% 65.81% 59.48%
Nonperforming assets and
loans 90 days past due 96.12% 111.81% 68.98% 48.76% 46.74%
Gross Loans 1.22% 1.12% 1.27% 1.46% 1.47%
Addition to Reserve as a
percent of Net
Charge-Offs 1,675.00% 93.69% 63.82% 103.86% 142.49%
Loans and leases 90 days
past due as a percent of
loans and leases at year
end* .62% .22% .13% .78% .67%
Recoveries as a percent of
Gross Charge-Offs 87.10% 28.79% 36.17% 26.64% 10.75%
*Net of unearned income
Interest income on loans is recorded on an accrual basis. The
accrual of interest is discontinued on all loans, except consumer loans,
which become 90 days past due, unless the loan is well secured and in
the process of collection. Consumer loans which become past due 90 to
120 days are charged to the allowance for loan losses. The gross
interest income that would have been recorded for the twelve months
ending 12/31/94 if all loans reported as non-accrual had been current in
accordance with their original terms and had been outstanding throughout
the period is $86,000. Interest income on loans reported as ninety days
past due and on interest accrual status was $95,000 for 1994. Loans on
which terms have been modified to provide for a reduction of either
principal or interest as a result of deterioration in the financial
position of the borrower are considered to be "Restructured Loans".
First Citizens has no Restructured Loans for the period being reported.
Total Non-Performing Assets have consistently decreased since 1990. As
of December, 1994, non-performing loans are at the lowest level since
1985. Total assets in this category as a percent of loans and leases
plus foreclosed property was .71% in 1994, .79% in 1993, and 1.71% in
1992.
Certain loans contained on the bank's Internal Problem Loan List are
not included in the listing of non-accrual, past due or restructured
loans. Management is confident that, although certain of these loans
may pose credit problems, any potential for loss has been provided for
by specific allocations to the Loan Loss Reserve Account. Loan officers
are required to develop a "Plan of Action" for each problem loan within
their portfolio. Adherence to each established plan is monitored by
Loan Administration and re-evaluated at regular intervals for
effectiveness.
24
LOAN LOSS EXPERIENCE & RESERVE FOR LOAN LOSSES (in thousands)
1994 1993 1992 1991 1990
Average Net Loans
Outstanding $160,254 $141,664 $134,514 $134,230 $126,083
Balance of Reserve
for Loan Losses
at Beginning of
Period $ 1,676 $ 1,703 $ 1,936 $ 1,914 $ 1,371
Loan Charge-Offs $ (186) $ (601) $ (1,009) $ (777) $(1,432)
Recovery of Loans
Previously Charged Off $ 162 $ 173 $ 365 $ 207 $ 154
Net Loans Charged Off $ (24) $ (428) $ (644) $ (570) $(1,278)
Additions to Reserve
Charged to Operating
Expense $ 402 $ 401 $ 411 $ 592 $ 1,821
Balance at End of
Period $ 2,054 $ 1,676 $ 1,703 $ 1,936 $ 1,914
Ratio of Net Charge-
Offs to Average Net
Loans Outstanding .01% .30% .48% .43% 1.01%
The allowance for possible loan losses is determined by management
and approved by the Board based on previous loan loss experience,
existing and anticipated economic conditions, composition and volume of
the loan portfolio and the level of non-performing assets. A quarterly
analysis is presented to the Board in order that a determination may be
made concerning the sufficiency of the reserves.
Activity posted to the Reserve Account during 1994 consisted of (1)
Loan Charge Offs $186,000, (2) Recovery of Loans Previously Charged Off
$162,000, and (3) Additions to the Reserve Account $402,000. Net loans
charged off have consistently decreased when comparing the years listed
in the table. Additions to the Reserve Account have decreased
significantly since 1990 and are below peer group levels. Problem
Loans, as a percentage of total portfolio were 2.30% at 12/31/94, 2.92%
at 12/31/93 and 4.10% at 12/31/92. Internal Loan Review performs an
analysis on an annual basis of approximately 75% of the loan portfolio.
Based on this review, each loan is classified as Pass, Substandard,
Doubtful, or Loss. Loans classified as loss are charged monthly against
the Loan Loss Reserve account. Quarterly reports are provided directly
to the Board of Directors by the Loan Review Officer which summarize
results of the reviews. FASB 114 (Accounting by creditors for
impairment of loans) will cause minor changes to the formula used for
the calculation of the allowance for loan losses. However, no material
affect is expected to Bancshares, Inc. or its subsidiary, First Citizens
National Bank.
Management estimates the approximate amount of charge-offs for the
12 month period ending 12/31/95 to be as follows:
Domestic Amount
Commercial, Financial & Agricultural $150,000
Real Estate-Construction 0
Real Estate-Mortgage 50,000
Installment Loans to individuals & credit cards 50,000
Lease financing 0
01/01/95 through 12/31/95 Total $250,000
25
The following table will identify charge-offs by category for the
periods ending December 31 as indicated:
Year Ending December 31
(in thousands)
1994 1993 1992
Charge-offs:
Domestic:
Commercial, Financial & Agricultural $ 32 $ 415 $ 649
Real Estate-Construction 0 0 0
Real Estate-Mortgage 22 27 115
Installment Loans to individuals
& credit cards 132 159 245
Lease financing 0 0 0
Total $ 186 $ 601 $1,009
Recoveries:
Domestic:
Commercial, Financial & Agricultural $ 30 $ 53 $ 66
Real Estate-Construction 0 0 0
Real Estate-Mortgage 12 11 148
Installment Loans to individuals
& credit cards 120 109 151
Lease financing 0 0 0
Total $ 162 $ 173 $ 365
Net Charge-offs $ 24 $ 428 $ 644
COMPOSITION OF INVESTMENT SECURITIES
December 31
(in thousands)
1994 1993 1992 1991 1990
U. S. Treasury &
Government Agencies $47,042 $42,502 $59,019 $50,919 $43,337
State & Political
Subdivisions $10,883 $12,774 $ 9,300 $ 3,239 $7,484
All Others $ 4,801 $ 5,471 $ 6,129 $ 4,944 $5,251
TOTALS $62,726 $60,747 $74,448 $59,102 $56,072
MATURITY AND YIELD ON SECURITIES - DECEMBER 31, 1994
(in thousands)
Maturing Maturing Maturing
Maturing After One Year After Five Years After
Within One Year Within Five Years Within Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
U. S. Treasury
and Government
Agencies $ 2,000 6.40% $31,986 6.43% $ 5,916 7.05% $7,140 6.45%
State and
Political
Subdivisions* $ 1,320 6.82% $ 6,075 7.26% $ 3,488 5.36% --- --
All Others $ 800 6.50% $ 1,250 6.56% $ 2,151 5.50% $ 600 9.14%
TOTALS $ 4,120 6.55% $39,311 6.56% $11,555 6.25% $7,740 6.65%
*Yields on tax free investments are stated herein on a taxable
equivalent basis.
26
HELD TO MATURITY & AVAILABLE FOR SALE SECURITIES - DECEMBER 31, 1994
Held to Maturity Available for Sale
(in thousands)
Amortized Fair Amortized Fair
Cost Value Cost Value
U.S. Treasury Securities 6,435 6,208 5,515 5,315
U.S. Government Agency & Corporation
obligations (exclude mortgage-backed
securities):
Issued by U.S. Govt. Agencies (2) 301 293 0 0
Issued by U.S. Govt.-Sponsored
Agencies (3) 22,554 21,554 3,602 3,583
Securities issued by states & political
subdivisions in the U.S.:
General Obligations 6,335 6,066 50 50
Revenue Obligations 3,091 2,926 770 767
Industrial development &
similar obligations 0 0 625 640
Mortgage-backed Securities (MBS):
Pass-through securities:
Guaranteed by GNMA 618 604 1,192 1,129
Issued by FNMA & FHLMC 1,319 1,276 0 0
Privately-issued 0 0 0 0
CMOs & REMICs:
Issued by FNMA & FHLMC 5,050 4,652 812 736
Privately-issued &
collateralized by MBS
issued or guaranteed by
FNMA, FHLMC or GNMA 600 617 0 0
All other privately-issued 0 0 0 0
Other Debt Securities 0 0 0 0
Other domestic debt securities 989 952 1,051 1,053
Foreign debt securities 0 0 0 0
Equity Securities:
Investments in Mutual Funds 0 0 0 0
Other equity securities with readily
determinable fair values 0 0 2,161 2,161
All other equity securities (1) 0 0 0 0
Total 47,292 45,148 15,778 15,434
(1) Includes equity securities without readily determinable fair
values at historical cost.
(2) Includes Small Business Administration "Guaranteed Loan Pool
Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than pass-through securities,
CMOs, and REMICs) issued by the Farm Credit System, the
Federal Home Loan Bank System, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the
Student Loan Marketing Association, and the Tennessee Valley
Authority.
A major goal of the bank's investment portfolio management is
to maximize returns from investments while controlling the basic
elements of risk. The second goal is to provide liquidity and
meet financial needs of the community. Investment Securities also
serve as collateral for government and public fund deposits.
Securities contained within the portfolio consist primarily of U.
S. Treasury, and other U. S. Government Agency securities and tax
exempt obligations of States and Political Subdivisions. All
other securities comprise approximately 7.65% of the portfolio.
Tax Free Investments make up approximately 17% of the portfolio.
27
Investments for the first half of 1994 were curtailed by
strong loan demand and the implementation of Financial Accounting
Standard No. 115 which addresses Accounting for Certain
Investments in Debt and Equity Securities. FASB 115 requires that
banks maintain separate investment portfolios for Held-To-
Maturity, Available-For-Sale, and Trading Account investments. As
of 12/31/94 approximately 24.61% of total investments were booked
in the Available For Sale portfolio. The remaining 75.39% was
placed in the Held to Maturity account. FASB 115 also requires
banks to mark to market the Available for Sale and Trading account
investments at the end of each calendar quarter. Held-To-Maturity
account investments are stated at amortized cost on the balance
sheet. Mark to Market resulted in a negative after tax impact on
the capital account of the consolidated balance sheet at 12/31/94
of $259,543. All purchases and sale transactions in 1994 were
made according to specifications set forth in FASB 115. During
the fourth quarter, 1994, there were no transfers between the
trading, held for sale, or held to maturity accounts.
As of 12/31/94, the securities portfolio held $13,940,968 in
"Derivative" products which consisted of $6,462,128 CMO's
(Collateralized Mortgage Obligations), $483,745 Strip Coupon, and
$6,995,095 in Structured Notes. "Derivative" are non-traditional
securities that derive value from the price action of other
assets. Total investment in Derivative products constitutes 22%
of the investment portfolio and are Government Backed securities
bearing short maturities. These investments do no represent a
high level of concentration or an abnormal amount of market risk
to the overall portfolio.
Maturities in the portfolio are made up of 6.55% within one
year, and 62.67% after one year and within five years. Policy
provides for 20% maturities on an annual basis. Management made a
conscious effort to shorten maturities in 1994 based on volatility
in interest rates and mark to market rules. Maturities on
investments purchased In 1995 will be structured to meet loan
demand as well as projected changes in interest rates.
Gains/Losses reflected in year-end income statements
attributable to trading account securities:
Year Ended
12/31 Gains Losses Net
1994 $ 0.00 $ 0.00 $ 0.00
1993 $ 0.00 $ 0.00 $ 0.00
1992 $ 0.00 $ 0.00 $ 0.00
The following table allocates by category unrealized Gains/Losses
within the portfolio as of December 31, 1994 (in thousands):
UNREALIZED NET
GAINS LOSSES GAINS/LOSSES
U.S. TREASURY
SECURITIES $ 0 $ 227 $ (227)
OBLIGATIONS OF U.S.
GOVERNMENT AGENCIES
AND CORPORATIONS $ 4 $1,467 $(1,463)
OBLIGATIONS OF STATES
AND POLITICAL
SUBDIVISIONS $ 5 $ 438 $ (433)
FEDERAL RESERVE AND
CORPORATE STOCK $ 0 $ 21 $ (21)
TOTALS $ 9 $2,153 $(2,144)
28
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity is the ability to meet the needs of our customer
base for loans and deposit withdrawals by maintaining assets which
are convertible to cash equivalents with minimal exposure to
interest rate risks. The liquidity which is determined by a
comparison of net liquid assets to net liabilities remains between
10% and 15%. The stability of our deposit base, sound
asset/liability management, a strong capital base and quality
assets assure adequate liquidity. Low interest rates during 1993
and the first 9 months of 1994 placed pressure on the banks'
ability to retain funds in maturing certificates of deposit. Many
of our customers were seeking alternate investment options in
annuities, mutual funds, and stocks. Deposits over $100,000 were
more volatile and interest sensitive than smaller consumer
deposits which make up the major portion of our deposit base.
Another factor that affected the liquidity ratio was the demand to
lock in low interest rates for longer periods of time. In excess
of 71,000,000 in loans shifted from the adjustable rates to fixed
or predetermined rates. However, this trend was shifting in the
fourth quarter, along with upward moves in interest rates.
To address liquidity concerns the bank became a member of the
Federal Home Loan Bank, thereby opening up an additional liquidity
source totaling $11.5 Million should the need arise. In 1994
Federal Home Loan Bank Borrowings totaled $4,124,170. These
borrowings are maturity matched with specific loans and
investments on the books of the bank. The average Federal Home
Loan Borrowings for 1994 was $2,889,000. Other sources that are
available to meet liquidity needs are (1) Loans in excess of
$42,900,000 and Investment Securities totaling $4,120,000 maturing
within one year and (2) Lines of Credit with correspondent banks
totaling 7.5 million.
Interest rate sensitivity varies with different types of
interest-earning assets and interest-bearing liabilities. Overnight
federal funds, on which rates change daily, and loans which are
tied to the prime rate are much more sensitive than long-term
investment securities and fixed rate loans. The shorter term
interest sensitive assets and liabilities are the key to measure-
ment of the interest sensitivity gap. Minimizing this gap is a
continual challenge and is a primary objective of the
asset/liability management program.
The following condensed gap report provides an analysis of
interest rate sensitivity of earning assets and costing
liabilities. First Citizens Asset/Liability Management Policy
provides that the cumulative gap as a percent of assets shall not
exceed 10% for categories up to 12 months and one to two year
categories and 20% for categories in excess of two years. As
evidenced by the following table, our current position is
significantly below this level, with annual income exposure
determined to be less than the $150,000 exposure limitation set by
policy.
29
CONDENSED GAP REPORT
12/31/94 CURRENT BALANCES
(in thousands)
DAILY 0-1 1-2 2-3 3-6 6-12
TOTAL FLOATING MONTHS MONTHS MONTHS MONTHS MONTHS
CASH AND DUE FROM:
CURRENCY AND COIN 2,450 - - - - - -
DUE FROM BANKS 1,275 - - - - - -
CASH ITEMS 5,763 - - - - - -
MONEY MARKET 160 160 - - - - -
TOTAL CASH & DUE FROM 9,648 160 - - - - -
INVESTMENTS:
US TREASURIES 11,750 - - - - - -
US AGENCIES 27,371 - - - - 1,000 1,000
VARIABLE AGENCIES 7,920 - - - 3,292 - 4,128
MUNICIPALS 10,883 - - 440 - 50 830
CORP & OTHERS 3,527 - - 500 - 300 -
FEDERAL HOME LOAN BANK 1,275 - - - - - -
TOTAL INVESTMENTS 62,726 - - 940 3,292 1,350 5,958
LOANS:
COMMERCIAL FIXED 19,845 - 1,337 553 778 1,939 5,398
COMMERCIAL VARIABLE 18,692 18,692 - - - - -
REAL ESTATE-VARIABLE 20,749 20,749 - - - - -
REAL ESTATE FIXED 79,511 - 1,938 1,474 2,383 2,828 2,784
HOME EQUITY LOANS 4,663 4,663 - - - - -
SEC MORTGAGE 136 - 136 - - - -
INSTALLMENT LOANS 18,846 - 237 283 217 639 1,519
INSTALLMENT VARIABLE 271 271 - - - - -
FLOOR PLAN 979 - 979 - - - -
CREDIT CARDS 1,765 - - - - - 1,756
OVERDRAFTS 256 256 - - - - -
NON-ACCRUAL LOANS 945 - - - - - -
FHLB LOANS 2,123 - - - - - -
TOTAL LOANS 168,781 44,631 4,627 2,310 3,378 5,406 11,466
LOAN LOSS RESERVE 2,054 - - - - - -
NET LOANS 166,727 44,631 4,627 2,310 3,378 5,406 11,466
FED FUNDS SOLD 2,900 2,900 - - - - -
TOTAL FED FUNDS SOLD 2,900 2,900 - - - - -
TOTAL EARNING ASSETS 232,353 47,531 4,627 3,250 6,670 6,756 17,424
OTHER ASSETS:
BUILDING, F&F & LAND 8,392 - - - - - -
OTHER REAL ESTATE 148 - - - - - -
OTHER ASSETS 3,641 - - - - - -
TOTAL OTHER ASSETS 12,181 - - - - - -
TOTAL ASSETS 254,182 47,691 4,627 3,250 6,670 6,756 17,424
DEMAND DEPOSITS:
BANKS 39 - - - - - -
DEMAND DEPOSITS 26,744 - - - - - -
TOTAL DEMAND 26,783 - - - - - -
SAVINGS ACCOUNTS:
REGULAR SAVINGS 18,249 - - - - - -
NOW ACCOUNT 27,261 - - - - - -
IMF-MMDA 11,768 - 11,768 - - - -
HIGH YIELD ACCOUNT 4,429 - 4,429 - - - -
DOGWOOD CLUB 4,642 - - - - - -
TOTAL SAVINGS 66,349 - 16,197 - - - -
30
CONDENSED GAP REPORT
12/31/94 CURRENT BALANCES
(in thousands)
1-2 2+
YEARS YEARS
CASH AND DUE FROM:
CURRENCY AND COIN - 2,450
DUE FROM BANKS - 1,275
CASH ITEMS - 5,763
MONEY MARKET - -
TOTAL CASH & DUE FROM - 9,488
INVESTMENTS:
US TREASURIES 3,000 8,750
US AGENCIES 2,729 22,642
VARIABLE AGENCIES 500 -
MUNICIPALS 220 9,343
CORP & OTHERS 750 1,977
FEDERAL HOME LOAN BANK - 1,275
TOTAL INVESTMENTS 7,199 43,987
LOANS:
COMMERCIAL FIXED 1,592 8,248
COMMERCIAL VARIABLE - -
REAL ESTATE-VARIABLE - -
REAL ESTATE FIXED 5,784 62,320
HOME EQUITY LOANS - -
SEC MORTGAGE - -
INSTALLMENT LOANS 3,636 12,315
INSTALLMENT VARIABLE - -
FLOOR PLAN - -
CREDIT CARDS - -
OVERDRAFTS - -
NON-ACCRUAL LOANS - 945
FHLB LOANS - 2,123
TOTAL LOANS 11,012 85,951
LOAN LOSS RESERVE - 2,054
NET LOANS 11,012 83,897
FED FUNDS SOLD - -
TOTAL FED FUNDS SOLD - -
TOTAL EARNING ASSETS 18,211 127,884
OTHER ASSETS:
BUILDING, F&F & LAND - 8,392
OTHER REAL ESTATE - 148
OTHER ASSETS - 3,641
TOTAL OTHER ASSETS - 12,181
TOTAL ASSETS 18,211 149,553
DEMAND DEPOSITS:
BANKS - 39
DEMAND DEPOSITS - 26,744
TOTAL DEMAND - 26,783
SAVINGS ACCOUNTS:
REGULAR SAVINGS - 18,249
NOW ACCOUNT - 27,261
IMF-MMDA - -
HIGH YIELD ACCOUNT - -
DOGWOOD CLUB - 4,642
TOTAL SAVINGS - 50,152
31
CONDENSED GAP REPORT
12/31/94 CURRENT BALANCES
(in thousands)
DAILY 0-1 1-2 2-3 3-6 6-12
TOTAL FLOATING MONTHS MONTHS MONTHS MONTHS MONTHS
TIME DEPOSITS:
FLEX-CD 81,619 - 7,044 3,635 4,747 17,584 21,131
LARGE CD-FLEX 16,805 - 1,054 721 1,900 3,302 5,550
IRA-FLOATING 237 237 - - - - -
IRA-FIXED 17,720 262 262 457 347 1,126 2,874
CHRISTMAS CLUB 71 - - - - - 71
TOTAL TIME 116,452 499 8,360 4,813 6,994 22,012 29,626
TOTAL DEPOSITS 209,584 499 24,557 4,813 6,994 22,012 29,626
SHORT TERM BORROWINGS:
TT&L 612 612 - - - - -
SECURITIES SOLD-SWEEP 10,956 10,956 - - - - -
SECURITIES SOLD-FIXED 5,994 - 1,665 2,279 550 600 342
FHLB-LIBOR INVESTMENT 1,907 - - 1,907 - - -
FHLB-LONG TERM 2,218 - - - - - -
TOTAL SHORT TERM BORR. 21,687 11,568 1,665 4,186 550 600 342
OTHER LIABILITIES:
ACCRUED INT. PAYABLE 1,432 - - - - - -
OTHER LIABILITIES 51 - - - - - -
TOTAL OTHER LIABILITIES 1,483 - - - - - -
TOTAL LIABILITIES 232,754 12,067 26,222 8,999 7,544 22,612 29,968
CAPITAL:
COMMON STOCK 2,000 - - - - - -
SURPLUS 4,000 - - - - - -
UNREALIZED GAIN (LOSSES) -240 - - - - - -
UNDIVIDED PROFITS 15,668 - - - - - -
TOTAL CAPITAL 21,428 - - - - - -
TOTAL LIAB'S & CAPITAL 254,182 12,067 26,222 8,999 7,544 22,612 29,968
GAP (SPREAD) - 35,624 -21,595 -5,749 -874 -15,856 -12,544
GAP % TOTAL ASSETS - 14.02 -8.50 -2.26 -0.34 -6.24 -4.94
CUMULATIVE GAP - 35,624 14,029 8,280 7,406 -8,450 -20,994
CUM. GAP % TOTAL ASSETS - 14.02 5.52 3.26 2.91 -3.32 -8.26
SENSITIVITY RATIO - 3.95 1.37 1.18 1.14 0.89 0.80
32
CONDENSED GAP REPORT
12/31/94 CURRENT BALANCES
(in thousands)
1-2 2+
YEARS YEARS
TIME DEPOSITS:
FLEX-CD 11,041 16,437
LARGE CD-FLEX 1,878 2,400
IRA-FLOATING - -
IRA-FIXED 3,397 8,995
CHRISTMAS CLUB - -
TOTAL TIME 16,316 27,832
TOTAL DEPOSITS 16,316 104,767
SHORT TERM BORROWINGS:
TT&L - -
SECURITIES SOLD-SWEEP - -
SECURITIES SOLD-FIXED 165 393
FHLB-LIBOR INVESTMENT - -
FHLB-LONG TERM - 2,218
TOTAL SHORT TERM BORR. 165 2,611
OTHER LIABILITIES:
ACCRUED INT. PAYABLE - 1,432
OTHER LIABILITIES - 51
TOTAL OTHER LIABILITIES - 1,483
TOTAL LIABILITIES 16,481 108,861
CAPITAL:
COMMON STOCK - 2,000
SURPLUS - 4,000
UNREALIZED GAIN (LOSSES) -240
UNDIVIDED PROFITS - 15,668
TOTAL CAPITAL - 21,428
TOTAL LIAB'S & CAPITAL 16,481 130,289
GAP (SPREAD) 1,730 19,264
GAP % TOTAL ASSETS 0.68 7.58
CUMULATIVE GAP -19,264 -
CUM. GAP % TOTAL ASSETS -7.58 -
SENSITIVITY RATIO 0.84 1.00
33
CONDENSED GAP REPORT
12/31/94 CURRENT BALANCES
(in thousands)
AVERAGE DAILY 0-1 1-2 2-3 3-6 6-12
RATE FLOATING MONTHS MONTHS MONTHS MONTHS MONTHS
CASH AND DUE FROM:
CURRENCY AND COIN - - - - - - -
DUE FROM BANKS - - - - - - -
CASH ITEMS - - - - - - -
MONEY MARKET 5.50 5.50 - - - - -
TOTAL CASH & DUE FROM 0.09 5.50 - - - - -
INVESTMENTS:
US TREASURIES 6.12 - - - - - -
US AGENCIES 6.46 - - - - 6.38 6.42
VARIABLE AGENCIES 6.48 - - - 6.50 - 6.45
MUNICIPALS 7.05 - - 5.93 - 8.48 7.18
CORP & OTHERS 6.83 - - 5.00 - 9.00 -
FEDERAL HOME LOAN BANK 6.05 - - - - - -
TOTAL INVESTMENTS 6.51 - - 5.43 6.50 7.04 6.54
LOANS:
COMMERCIAL FIXED 7.79 - 7.36 7.83 8.04 8.08 7.72
COMMERCIAL VARIABLE 9.65 9.65 - - - - -
REAL ESTATE-VARIABLE 9.65 9.65 - - - - -
REAL ESTATE FIXED 8.17 - 7.68 9.60 8.54 8.99 9.34
HOME EQUITY LOANS 9.40 9.40 - - - - -
SEC MORTGAGE 9.50 - 9.50 - - - -
INSTALLMENT LOANS 9.74 - 8.91 9.70 9.60 9.88 10.48
INSTALLMENT VARIABLE 10.24 10.24 - - - - -
FLOOR PLAN 9.75 - 9.75 - - - -
CREDIT CARDS 14.50 - - - - - 14.50
OVERDRAFTS - - - - - - -
NON-ACCRUAL LOANS - - - - - - -
FHLB LOANS 7.60 - - - - - -
TOTAL LOANS 8.69 9.57 8.14 9.19 8.49 8.77 9.52
LOAN LOSS RESERVE - - - - - - -
NET LOANS 8.80 9.57 8.14 9.19 8.49 8.77 9.52
FED FUNDS SOLD 5.50 5.50 - - - - -
TOTAL FED FUNDS SOLD 5.50 5.50 - - - - -
TOTAL EARNING ASSETS 8.14 9.32 8.14 8.10 7.51 8.42 8.50
OTHER ASSETS:
BUILDING, F&F & LAND - - - - - - -
OTHER REAL ESTATE - - - - - - -
OTHER ASSETS - - - - - - -
TOTAL OTHER ASSETS - - - - - - -
TOTAL ASSETS 7.45 9.31 8.14 8.10 7.51 8.42 8.50
DEMAND DEPOSITS:
BANKS - - - - - - -
DEMAND DEPOSITS - - - - - - -
TOTAL DEMAND - - - - - - -
SAVINGS ACCOUNTS:
REGULAR SAVINGS 3.01 - - - - - -
NOW ACCOUNT 2.45 - - - - - -
IMF-MMDA 2.96 - 2.96 - - - -
HIGH YIELD ACCOUNT 5.02 - 5.02 - - - -
DOGWOOD CLUB 2.15 - - - - - -
TOTAL SAVINGS 2.84 - 3.52 - - - -
34
CONDENSED GAP REPORT
12/31/94 CURRENT BALANCES
(in thousands)
1-2 2+
YEARS YEARS
CASH AND DUE FROM:
CURRENCY AND COIN - -
DUE FROM BANKS - -
CASH ITEMS - -
MONEY MARKET - -
TOTAL CASH & DUE FROM - -
INVESTMENTS:
US TREASURIES 5.49 6.34
US AGENCIES 7.22 6.38
VARIABLE AGENCIES 6.60 -
MUNICIPALS 5.56 7.12
CORP & OTHERS 6.87 6.95
FEDERAL HOME LOAN BANK - 6.05
TOTAL INVESTMENTS 6.36 6.54
LOANS:
COMMERCIAL FIXED 8.03 7.78
COMMERCIAL VARIABLE - -
REAL ESTATE-VARIABLE - -
REAL ESTATE FIXED 8.84 7.98
HOME EQUITY LOANS - -
SEC MORTGAGE - -
INSTALLMENT LOANS 10.80 9.35
INSTALLMENT VARIABLE - -
FLOOR PLAN - -
CREDIT CARDS - -
OVERDRAFTS - -
NON-ACCRUAL LOANS - -
FHLB LOANS - 7.60
TOTAL LOANS 9.37 8.06
LOAN LOSS RESERVE - -
NET LOANS 9.37 8.26
FED FUNDS SOLD - -
TOTAL FED FUNDS SOLD - -
TOTAL EARNING ASSETS 8.18 7.67
OTHER ASSETS:
BUILDING, F&F & LAND - -
OTHER REAL ESTATE - -
OTHER ASSETS - -
TOTAL OTHER ASSETS - -
TOTAL ASSETS 8.18 6.56
DEMAND DEPOSITS:
BANKS - -
DEMAND DEPOSITS - -
TOTAL DEMAND - -
SAVINGS ACCOUNTS:
REGULAR SAVINGS - 3.01
NOW ACCOUNT - 2.45
IMF-MMDA - -
HIGH YIELD ACCOUNT - -
DOGWOOD CLUB - 2.15
TOTAL SAVINGS - 2.62
35
CONDENSED GAP REPORT
12/31/94 CURRENT BALANCES
(in thousands)
AVERAGE DAILY 0-1 1-2 2-3 3-6 6-12
RATE FLOATING MONTHS MONTHS MONTHS MONTHS MONTHS
TIME DEPOSITS:
FLEX-CD 5.27 - 4.23 4.26 4.33 5.04 5.45
LARGE CD-FLEX 5.27 - 4.47 3.18 4.66 4.98 5.38
IRA-FLOATING 3.00 3.00 - - - - -
IRA-FIXED 5.63 4.21 4.21 4.34 4.05 4.26 5.21
CHRISTMAS CLUB 2.46 - - - - - 2.46
TOTAL TIME 5.32 3.63 4.26 4.11 4.40 4.99 5.40
TOTAL DEPOSITS 3.86 3.63 3.77 4.11 4.40 4.99 5.40
SHORT TERM BORROWINGS:
TT&L 5.54 5.54 - - - - -
SECURITIES SOLD-SWEEP 4.05 4.05 - - - - -
SECURITIES SOLD-FIXED 4.92 - 4.15 5.22 4.50 5.12 5.50
FHLB-LIBOR INVESTMENT 6.05 - - 6.05 - - -
FHLB-LONG TERM 5.50 - - - - - -
TOTAL SHORT TERM BORR. 4.65 4.12 4.15 5.60 4.50 5.12 5.50
OTHER LIABILITIES:
ACCRUED INT. PAYABLE - - - - - - -
OTHER LIABILITIES - - - - - - -
TOTAL OTHER LIABILITIES - - - - - - -
TOTAL LIABILITIES 3.91 4.10 3.80 4.80 4.41 4.99 5.41
CAPITAL:
COMMON STOCK - - - - - - -
SURPLUS - - - - - - -
UNREALIZED GAIN (LOSSES) - - - - - - -
UNDIVIDED PROFITS - - - - - - -
TOTAL CAPITAL - - - - - - -
TOTAL LIAB'S & CAPITAL 3.58 4.10 3.80 4.80 4.41 4.99 5.41
GAP (SPREAD) 3.87 5.20 4.34 3.30 3.10 3.43 3.10
GAP % TOTAL ASSETS
CUMULATIVE GAP
CUM. GAP % TOTAL ASSETS
SENSITIVITY RATIO
36
CONDENSED GAP REPORT
12/31/94 CURRENT BALANCES
(in thousands)
1-2 2+
YEARS YEARS
TIME DEPOSITS:
FLEX-CD 5.45 6.13
LARGE CD-FLEX 6.08 6.21
IRA-FLOATING - -
IRA-FIXED 5.84 6.07
CHRISTMAS CLUB - -
TOTAL TIME 5.60 6.12
TOTAL DEPOSITS 5.60 2.88
SHORT TERM BORROWINGS:
TT&L - -
SECURITIES SOLD-SWEEP - -
SECURITIES SOLD-FIXED 5.29 6.05
FHLB-LIBOR INVESTMENT - -
FHLB-LONG TERM - 5.50
TOTAL SHORT TERM BORR. 5.29 5.58
OTHER LIABILITIES:
ACCRUED INT. PAYABLE - -
OTHER LIABILITIES - -
TOTAL OTHER LIABILITIES - -
TOTAL LIABILITIES 5.60 2.90
CAPITAL:
COMMON STOCK - -
SURPLUS - -
UNREALIZED GAIN (LOSSES)
UNDIVIDED PROFITS - -
TOTAL CAPITAL - -
TOTAL LIAB'S & CAPITAL 5.60 2.43
GAP (SPREAD) 2.58 4.13
GAP % TOTAL ASSETS
CUMULATIVE GAP
CUM. GAP % TOTAL ASSETS
SENSITIVITY RATIO
37
RETURN ON EQUITY AND ASSETS
FIRST CITIZENS BANCSHARES, INC.
1994 1993 1992 1991 1990
Percentage of Net Income to:
Average Total Assets 1.20% 1.17% .95% .89% .60%
Average Shareholders Equity 12.93% 13.48% 11.79% 11.65% 8.43%
Percentage of Dividends Declared
Per Common Share to Net Income
Per Common Share 29.23% 25.62% 27.67% 28.86% 42.57%
Percentage of Average Shareholders'
Equity to Average Total Assets 9.27% 8.71% 8.07% 7.60% 7.27%
An analysis of Bancshares Return on Assets reflects
sustained improvement in earnings when comparing 1990 thru
1994. Return on Assets as of 12/31/94 were 1.20% compared to
1.17%, .95%, .89%, and .60% for the previous four years
respectively. Improved earnings are reflective of an ongoing
effort to control expenses and maximize earnings to achieve
earnings comparable to peer group banks. The company's
strategic plan addresses objectives to sustain improved
earnings, maintain a quality loan and investment portfolio and
to maintain market share by providing quality customer
service. The Bank's management and employees are rewarded
with incentive compensation based on the level of ROA achieved
at year end. A return on assets of 1.15% is required if
maximum benefits are to be realized.
Total Shareholders' equity (including Loan Loss Reserve)
of First Citizens Bancshares as of 12/31/94 was $23,879,000
compared to $21,700,000
at 12/31/93. Total Capital (excluding Reserve for Loan
Losses) as a percentage of total assets is presented in the
following table for years indicated:
CAPITAL RESOURCES/TOTAL ASSETS - YEAR-END TOTALS
FIRST CITIZENS BANCSHARES, INC.
1994 1993 1992 1991 1990
9.30% 9.24% 8.05% 7.75% 7.34%
Cash Dividends to Shareholders for 1994, 1993 and 1992
respectively were $1.19, $2.10, and $2.30. Total shares
outstanding was 714,821 at 12/31/94 and 706,656 at 12/31/93.
An Amendment to the Articles of Association ratified by the
Shareholders in April, 1993 approved an increase in number of
shares authorized from 750,000 to 2,000,000. In September,
1993 a 2.5 for l stock split on the Common Capital Stock of
Bancshares was declared to holders of record as of October 15,
1993. The number of shares outstanding increased
proportionately with changes to the capital account. In
addition a 10% stock dividend was declared payable December
15, 1992 which provided for issuance of one share of stock for
each 10 shares owned, with payment of fractional shares being
made in cash. 25,158 shares were issued as a result of the
dividend.
A stock repurchase program has been approved by the Board
of Directors effective the fourth quarter of 1994. The
purpose of this action is to acquire shares to service the
Dividend Reinvestment and Optional Stock Purchase programs.
Under the terms of the program, the Company will repurchase up
to $200,000 of Bancshares' stock in a calendar quarter on a
first come, first served basis.
Risk-based capital focuses primarily on broad categories
of credit risk and incorporates elements of transfer, interest
rate and market risks. The calculation of risk-based capital
ratio is accomplished by dividing qualifying capital by
weighted risk assets. The minimum risk-based capital ratio is
8.00%. At least one-half or 4.00% must consist of core
capital (Tier 1), and the remaining 4.00% may be in the form
of core (Tier 1) or supplemental capital (Tier 2). Tier 1
capital/core capital consists of common stockholders equity,
qualified perpetual stock and minority interests in
consolidated subsidiaries.
38
Tier 2 Capital/Supplementary capital consists of the allowance
for loan and lease losses, perpetual preferred stock, term
subordinated debt, and other debt and stock instruments.
Bancshares has historically maintained capital in excess
of minimum levels established by the Federal Reserve Board.
The risk-based capital ratio for Bancshares and First Citizens
National Bank as of 12/31/94 and 12/31/93 was 14.06 percent
and 12.96 percent respectively, significantly above the 8.0
percent level required by regulation. With the exception of
the Reserve for Loan and Lease Losses, all capital is Tier 1
level. Growth in capital will be maintained through retained
earnings. There is no reason to assume that income levels
will not be sufficient to maintain an adequate capital ratio.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Board of Directors
First Citizens Bancshares, Inc.
Dyersburg, Tennessee 38024
We have audited the accompanying consolidated balance sheets of First
Citizens Bancshares, Inc., and Subsidiary as of December 31, 1994 and 1993,
and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years ended December 31, 1994. These
financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of First Citizens
Bancshares, Inc., and Subsidiary as of December 31, 1994 and 1993, and
their results of operations and cash flows for the three years ended
December 31, 1994, in conformity with generally accepted accounting
principles.
Dyersburg, Tennessee
January 27, 1995
39
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
1994 1993
ASSETS
Cash and due from banks - Note 13 $ 9,784,155 $ 8,407,663
Federal funds sold 2,900,000 5,200,000
Investment securities - Notes 1 and 2
(market value $61,789,052 at December 31, 1993)
60,747,040
Investment securities - Notes 1 and 2
Securities held-to-maturity (fair value
of $45,151,062 at December 31, 1994) 47,294,807
Securities available-for-sale, at fair value 16,873,500
Loans - Notes 1 and 3 (net of unearned income
of $1,333,952 in 1994 and $1,065,608 in 1993) 168,781,491 149,322,178
Less: Allowance for loan losses - Notes 1 and 4 2,053,843 1,676,133
Net Loans 166,727,648 147,646,045
Premises and equipment - Notes 1 and 5 8,392,199 7,778,246
Accrued interest receivable 3,001,337 2,572,669
Other assets - Notes 1 and 6 1,712,888 2,540,369
TOTAL ASSETS $256,686,534 $234,892,032
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits: Note 7
Demand $ 26,540,953 $22,324,092
Time 116,590,688 105,189,285
Savings 66,348,610 66,309,872
Total Deposits 209,480,251 193,823,249
Securities sold under agreement to repurchase 16,950,086 16,914,142
Long-term debt - Note 16 4,124,730 30,021
Other liabilities 2,252,719 2,424,143
Total Liabilities 232,807,786 213,191,555
Stockholders' Equity
Common stock, par value $1 in 1994
and $10 in 1993 - Note 11
Authorized - 2,000,000 in 1994 and 750,000 in 1993
Issued and outstanding -
714,824 shares in 1994
706,656 shares in 1993 714,824 7,066,560
Surplus 9,000,485 2,356,082
Retained earnings 14,423,084 12,338,242
Unrealized gain (loss) on securities available-for
sale, net of applicable deferred income taxes (259,543)
Less treasury stock, at cost 3 shares in 1994
and 2,024 shares in 1993 (102) (60,407)
Total Stockholders' Equity 23,878,748 21,700,477
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $256,686,534 $234,892,032
See accompanying notes and accountant's report.
40
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1994, 1993 and 1992
1994 1993 1992
Interest Income
Interest and fees on loans $15,309,792 $14,029,313 $14,289,129
Interest and dividends on investment
securities:
Taxable 2,950,541 3,499,964 3,994,589
Tax-exempt 598,515 447,114 321,501
Dividends 160,085 91,738 19,245
Other interest income 113,435 81,203 257,470
Lease financing income 4,271 6,426 11,182
Total Interest Income 19,136,639 18,155,758 18,893,116
Interest Expense
Interest on deposits 7,106,421 6,588,376 7,846,697
Interest on long-term debt 233,659 26,557 27,836
Other interest expense 631,006 646,021 629,606
Total Interest Expense 7,971,086 7,260,954 8,504,139
Net Interest Income 11,165,553 10,894,804 10,388,977
Provision for loan losses - Note 4 402,000 401,273 411,001
Net interest income after provision
for loan losses 10,763,553 10,493,531 9,977,976
Other Income
Income from fiduciary activities 625,293 521,284 522,540
Service charges on deposit accounts 426,348 439,756 434,058
Other service charges, commissions,
and fees 703,599 771,024 559,284
Securities gains (losses) - net - Note 2 (69,534) 31,758 159,820
Other income 494,996 316,496 322,311
Total Other Income 2,180,702 2,080,318 1,998,013
Other Expenses
Salaries and employee benefits -
Note 8 4,970,061 4,750,184 4,510,654
Net occupancy expenses 317,614 348,702 309,921
Furniture and equipment expense 144,805 135,895 148,616
Depreciation 823,599 798,220 596,221
Data processing expense 177,288 154,670 802,398
Legal and professional fees 86,818 128,574 116,959
Stationery and office supplies 146,685 161,796 172,542
Other expenses 2,143,276 2,254,641 2,089,716
Total Other Expenses 8,810,146 8,732,682 8,747,027
Net income before income taxes $4,134,109 $3,841,167 $ 3,228,962
Provision for income tax expense -
Note 9 1,187,860 1,202,708 1,054,252
Net income from operations 2,946,249 2,638,459 2,174,710
Cumulative change in accounting
principle - Note 9 125,278
Net Income $2,946,249 $2,763,737 $ 2,174,710
Earnings Per Common Share - Note 10:
Net income from operations $ 4.15 $ 3.76 $ 3.40
Net income $ 4.15 $ 3.94 $ 3.40
Weighted average shares outstanding 709,434 700,958 640,363
See accompanying notes and accountants' report.
41
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1994, 1993, and 1992
Common Stock
Shares Amount Surplus
Balance, January 1, 1992 254,089 $ 2,540,890 $ 5,324,833
Net income, year ended
December 31, 1992
Cash dividends paid - $2.30 per share
Ten percent stock dividend -
December, 1992 - Note 10 25,158 251,580 1,069,215
Payment of principal on note
Balance, December 31, 1992 279,247 2,792,470 6,394,048
Net income, year ended December 31, 1993
Cash dividends paid - $2.10 per share
Sale of common stock 4,711 47,110 189,014
Stock split - Note 10 422,698 4,226,980 (4,226,980)
Payment of principal on note
Treasury stock transactions-net
Balance, December 31, 1993 706,656 7,066,560 2,356,082
Net income, year ended December 31, 1994
Cash dividends paid - $1.19 per share
Conversion of par value of common stock
from $10 to $1 - Note 11 (6,378,246) 6,378,246
Sale of common stock 8,168 26,510 265,710
Adjustment to record unrealized
gain (loss) in securities
available-for-sale, net of
applicable deferred income taxes
effective January 1, 1994 - Note 2
Adjustment of unrealized gain (loss)
on securities available-for-sale,
net of applicable deferred income
taxes during the year - Note 2
Treasury Stock transactions - net 447
Balance, December 31, 1994 714,824 $ 714,824 $ 9,000,485
See accompanying notes and accountants' report.
42
Unrealized
Gain (Loss) on
Securities
Available-for-
Obligation Sale, Net of
of employee Applicable
Retained Stock Ownership Deferred Income Treasury
Earnings Plan Taxes Stock
$10,030 ,420 $(320,000) $ -0- $ -0-
2,174,710
(601,878)
(1,320,795)
160,000
10,282,457 (160,000) -0- -0-
2,763,737
(707,952)
160,000
(60,407)
12,338,242 -0- -0- (60,407)
2,946,249
(861,407)
94,696
(354,239)
60,305
$14,423,084 $ -0- $(259,543) $ (102)
43
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
Years Ended December 31, 1994, 1993, and 1992
1994 1993 1992
Operating Activities
Net income $ 2,946,249 $ 2,763,737 $ 2,174,710
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for loan losses 402,000 401,273 411,001
Provision for losses on other
real estate 3,000 7,600
Provision for depreciation 823,599 798,220 596,221
Amortization of investment
security discounts (25,919) (31,849)
Deferred income taxes (31,737) (175,989)
(Gains) losses on sales of
other real estate (4,289) (13,903)
Realized and unrealized
investment security (gains)
losses 69,534 (31,758) (159,820)
(Increase) decrease in accrued
interest receivable (428,668) 284,995 469,832
Increase (decrease) in accrued
interest payable 29,159 (471,601)
(Increase) decrease in other
assets 1,151,106 765,721 669,033
Increase (decrease) in other
liabilities (171,424) 722,887 (757,368)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 4,760,659 5,531,037 2,893,856
Investing Activities
Proceeds of maturities of
investment securities 10,826,000 17,618,000
Proceeds from sales of trading
and investment securities 5,300,252 10,096,833
Purchases of trading and
investment securities (2,367,925) (42,868,559)
Proceeds of maturities of held-to-
maturity investment securities 19,405,141
Purchases of held-to-maturity
investment securities (17,780,040)
Proceeds of sales of available-
for-sale investment securities 5,109,625
Purchases of available-for-sale
investment securities (10,625,663)
Increase in loans - net (19,483,603) (14,089,936) (3,237,807)
Purchases of premises and
equipment (1,588,847) (362,041) (1,545,185)
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (24,963,387) (693,650) (19,936,718)
See accompanying notes and accountants' report.
44
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
Years Ended December 31, 1994, 1993, and 1992
1994 1993 1992
Financing Activities
Net increase (decrease) in
demand deposits, NOW accounts
and savings accounts $ 4,255,599 $ 450,967 $12,169,387
Increase (decrease) in time
deposits - net 11,401,403 (87,052) (11,773,657)
Increase in long-term borrowing 4,124,730
Payment of principal on
long-term debt (30,021) (132,943) (130,906)
Proceeds from sale of common stock 292,220 236,124
Cash dividends paid (861,407) (707,952) (601,878)
Net increase (decrease) in short-
term borrowings 35,944 (8,219,777) 12,271,124
Treasury stock transactions - net 60,752 (60,407)
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 19,279,220 (8,521,040) 11,934,070
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (923,508) (3,683,653) (5,108,792)
Cash and cash equivalents at
beginning of year 13,607,663 17,291,316 22,400,108
CASH AND CASH EQUIVALENTS
AT END OF YEAR $12,684,155 $13,607,663 $17,291,316
Cash payments made for interest and income taxes during the years presented
are as follows:
1994 1993 1992
Interest $7,838,662 $ 7,231,795 $ 8,975,740
Income taxes 1,260,380 1,131,310 912,156
See accompanying notes and accountants' report.
45
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
Note 1 - Summary of Significant Accounting and Reporting Policies
The accounting and reporting policies of First Citizens Bancshares,
Inc., and Subsidiary conform to generally accepted accounting
principles. The significant policies are described as follows:
BASIS OF PRESENTATION
The consolidated financial statements include all accounts of First
Citizens Bancshares, Inc., and First Citizens National Bank. First
Citizens Bancshares, Inc.'s, investment in its Subsidiary shown on the
Parent Company Balance Sheet, is stated at equity in the underlying
assets. All inter-company items are eliminated in consolidation.
BASIS OF ACCOUNTING
The consolidated financial statements are presented using the accrual
basis of accounting.
CASH EQUIVALENTS
Cash equivalents include amounts due from banks which do not bear
interest and federal funds sold. Generally, federal funds are
purchased and sold for one day periods.
SECURITIES
Effective January 1, 1994, the Company adopted Statement No. 115 of
the Financial Accounting Standards Board according to which investment
securities are classified as follows:
Held-to-maturity which includes those investment securities which the
Company has the intent and the ability to hold until maturity;
Trading securities which includes those investment securities which
are held for short-term resale; and
Available-for-sale which includes all other investment securities.
Securities which are held-to-maturity are reflected at cost, adjusted
for amortization of premiums and accretion of discounts using methods
which approximate the interest method. Securities which are
available-for-sale are carried at fair value, and unrealized gains and
losses are recognized as direct increases or decreases in
stockholders' equity. Trading securities, where applicable, are
carried at fair value, and unrealized gains and losses on these
securities are included in net income. During the years presented,
First Citizens Bancshares, Inc. had no trading security transactions.
Realized gains and losses on investment securities transactions are
also included in net income.
ALLOWANCE FOR LOAN LOSSES
The provision for loan losses which is charged to operations is based
on management's assessment of the quality of the loan portfolio,
current economic conditions and other relevant factors. In
management's judgment, the provision for loan losses will maintain the
allowance for loan losses at adequate level to absorb potential loan
losses which may exist in the portfolio.
PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated
depreciation. The provision for depreciation is computed using
straight-line and accelerated methods for both financial reporting and
income tax purposes. Expenditures for maintenance and repairs are
charged against income as incurred. Cost of major additions and
improvements are capitalized and depreciated over their estimated
useful lives.
46
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 1 - Summary of Significant Accounting and Reporting Policies(Continued)
REAL ESTATE ACQUIRED BY FORECLOSURE
Real estate acquired through foreclosure is reflected in other assets
and is recorded at the lower of the related outstanding loan amount or
estimated net realizable value at the date of acquisition.
Adjustments made at the date of foreclosure are charged to the
allowance for loan losses. Expenses incurred in connection with
ownership, subsequent adjustments to book value, and gains and losses
upon disposition are included in other non-interest expenses.
Adjustments to net realizable value are made annually subsequent to
acquisition based on appraisal.
INCOME TAXES
First Citizens Bancshares, Inc., uses the accrual method of accounting
for federal income tax reporting. Deferred tax assets or liabilities
are computed for significant differences in financial statement and
tax bases of assets and liabilities which result from temporary
differences in financial statement and tax accounting.
LOANS AND INTEREST INCOME ON LOANS
Interest income on commercial and real estate loans is computed on the
basis of the daily principal balance outstanding using the accrual
method. Interest on installment loans is credited to operations by
the rule of 78ths method, which does not represent a significant
financial deviation from the interest method.
NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is computed by dividing net
income by the weighted average number of shares of common stock
outstanding during the period, after giving retroactive effect to
stock dividends and stock splits.
INCOME FROM FIDUCIARY ACTIVITIES
Income from fiduciary activities is recorded on the accrual basis.
Note 2 - Investment Securities
As specified in Note 1, First Citizens Bancshares, Inc. adopted Statement
No. 115 of the Financial Accounting Standards Board, effective January 1,
1994. The following tables reflect amortized cost, unrealized gains,
unrealized losses and fair value of investment securities at December 31,
1994, segregated into held-to-maturity and available-for-sale categories:
Held-To-Maturity
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U. S. Treasury securities
and obligations of U. S.
government corporations
and agencies $36,280,060 $ 2,933 $1,692,832 $34,590,161
Obligations of states and
political subdivisions 9,425,893 4,640 437,806 8,992,727
Other debt securities 1,588,854 16,692 37,372 1,568,174
Total Securities
Investments $47,294,807 $24,265 $2,168,010 $45,151,062
47
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 2 - Investment Securities (Continued)
Available-For-Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U. S. Treasury securities
and obligations of U. S.
government corporations
and agencies $12,595,786 $13,791 $405,474 $12,204,103
Obligations of states and
political subdivisions 1,444,561 16,235 3,289 1,457,507
Other debt securities 1,050,574 3,429 1,013 1,052,990
Total Debt Securities 15,090,921 33,455 409,776 14,714,600
Other securities
investments 2,215,150 56,250 2,158,900
Total $17,306,071 $33,455 $466,026 $16,873,500
The following tables reflect amortized cost, unrealized gains and losses,
and approximate market value for investment securities at December 31,
1993:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U. S. Treasury securities
and obligations of U. S.
government corporations
and agencies $38,515,709 $ 718,878 $ 24,379 $39,210,208
Obligations of states and
political subdivisions 12,773,676 203,304 25,273 12,951,707
Other debt securities 7,442,655 148,426 10,444 7,580,637
Total debt securities 58,732,040 1,070,608 60,096 59,742,552
Other securities
investments 2,015,000 31,500 2,046,500
Total Investment
Securities $60,747,040 $1,102,108 $ 60,096 $61,789,052
The following is a summary of maturities of debt securities held-to-
maturity and available-for-sale as of December 31, 1994:
Securities Securities
Amounts Maturing In: Held-To-Maturity Available-for-Sale
Amortized Fair Amortized Fair
Cost Value Cost Value
One year or less $15,843,293 $15,098,601 $ 5,099,124 $ 4,967,073
After one year through
five years 25,683,274 24,669,699 12,164,447 11,906,427
After five years through
ten years 4,168,308 3,878,041
After ten years 1,599,932 1,504,721
$47,294,807 $45,151,062 $17,263,571 $16,873,500
48
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 2 - Investment Securities (Continued)
A comparison of amortized cost and market value for investment debt
securities held at December 31, 1993 is shown below:
Estimated
Amortized Market
Cost Value
Due in one year or less $18,386,816 $18,630,689
Due after one year through
five years 26,669,724 27,298,941
Due after five years through
ten years 8,540,010 8,725,285
Due after ten years 5,135,490 5,087,637
$58,732,040 $59,742,552
Securities gains (losses) presented in the consolidated statements of
income consist of the following:
Gross
Year Ended December 31 Sales Gains Losses Net
1994 - Securities available-
for sale $ 5,109,625 $ $69,534 $(69,534)
1993 - Investment securities 5,300,252 35,038 3,280 31,758
1992 - Investment securities 10,096,833 182,301 22,481 159,820
At December 31, 1994 and 1993, investment securities were pledged to secure
government, public and trust deposits as follows:
Amortized
December 31 Cost Fair Value
1994 $41,588,244 $39,959,186
1993 35,310,879 36,010,041
Note 3 - Loans
Loans outstanding at December 31, 1994 and 1993 were comprised of the
following:
1994 1993
(In Thousands)
Commercial, financial and agricultural $ 38,843 $ 34,547
Real estate - construction 10,511 7,675
Real estate - mortgage 97,310 84,801
Installment 19,118 15,901
Other loans 3,000 6,398
168,782 149,322
Less: Allowance for possible loan losses 2,054 1,676
$166,728 $147,646
Note 4 - Allowance for Possible Loan Losses
An analysis of the allowance for possible loan losses during the three
years ended December 31, 1994 is as follows:
1994 1993 1992
Balance, beginning of period $1,676,133 $1,703,349 $1,935,544
Provision for loan losses charged
to operations 402,000 401,273 411,001
Loans charged to allowance, net of loan
loss recoveries of $162,474, $173,875
and $365,677 (24,290) (428,489) (643,196)
Balance, end of period $2,053,843 $1,676,133 $1,703,349
49
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
For tax purposes, the Corporation deducts the maximum amount allowable.
During the year ended December 31, 1994, the deduction taken was $13,182.
The deductions for tax purposes in 1993 and 1992 were $418,577 and
$448,003, respectively.
Note 5 - Premises and Equipment
The fixed assets used in the ordinary course of business are summarized as
follows:
Useful Lives
in Years 1994 1993
Land $ 862,472 $ 670,743
Buildings 5 to 50 7,608,266 7,051,184
Furniture and equipment 3 to 20 5,720,763 5,369,850
14,191,501 13,091,777
Less: Accumulated depreciation 5,799,302 5,313,531
$ 8,392,199 $ 7,778,246
During 1994, First Citizens National Bank acquired real estate in
Dyersburg, Tennessee, as a site for a new branch banking facility at a cost
of $337,023. The new branch was constructed during the year and placed in
service at a total cost of building and equipment of $680,406.
Note 6 - Repossessed Real Property
The book value of repossessed real property on the balance sheet is
$816,866 at December 31, 1994 and $1,942,305 at December 31, 1993. The
balance as of December 31, 1993, includes unimproved commercial property
carried at a book value of $1,161,627 which was acquired through
foreclosure by First Citizens Bancshares, Inc. in 1987. This property was
sold in 1994 at a gain of $297,284.
In addition, as of December 31, 1991, First Citizens National Bank sold to
First Citizens Bancshares, Inc., a local shopping center which had been
acquired through foreclosure and which is carried on the books of the
Holding Company at $650,000. The property is occupied and during the years
ended December 31, 1994 and 1993, the Company recognized rental income from
its tenants in the amount of $129,429 and $128,272 respectively.
The balance of repossessed real property is reflected on the balance sheet
of First Citizens National Bank and is carried in "other assets."
Note 7 - Deposits
Included in the deposits shown on the balance sheet are the following time
deposits and savings deposits in denominations of $100,000 or more:
1994 1993
(In Thousands)
Time Deposits $17,004 $17,150
Savings Deposits 21,941 21,710
NOW accounts, included in savings deposits on the balance sheet, totaled
$27,260,734 at December 31, 1994 and $27,153,922 at December 31, 1993.
Note 8 - Employee Stock Ownership Plan
First Citizens National Bank maintains the First Citizens National Bank of
Dyersburg Employee Stock Ownership Plan as an employee benefit. The plan
provides for a contribution annually not to exceed twenty-five percent of
the total compensation of all participants and affords eligibility for
participation to all full-time employees who have completed at least one
year of service. Contributions to the Employee Stock Ownership Plan
totaled $375,914 in 1994, $337,541 in 1993, and $333,159 in 1992.
50
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 9 - Income Taxes
Provision for income taxes is comprised of the following:
1994 1993 1992
Federal income tax expense (benefit)
Current $1,081,655 $1,015,549 $ 760,234
Deferred (137,851) (174,849) 108,529
State income tax expense (benefit)
Current 314,088 230,470 166,337
Deferred (70,032) 6,260 19,152
$1,187,860 $1,077,430 $1,054,252
The ratio of applicable income taxes to net income before income taxes
differed from the statutory rates of 34%. The reasons for these
differences are as follows:
1994 1993 1992
Tax expense at statutory rate $1,405,597 $1,305,997 $1,097,847
Increase (decrease) resulting from:
State income taxes, net of federal
income tax benefit 143,500 155,932 122,423
Tax exempt interest (212,477) (159,408) (110,136)
Other differences (148,760) (49,102) (55,882)
1,187,860 1,253,419 1,054,252
Cumulative effect of adoption of
SFAS No. 109, "Accounting for Income
Taxes" (175,989)
$1,187,860 $1,077,430 $1,054,252
Deferred tax liabilities have been provided for taxable temporary
differences related to depreciation, accretion of securities discounts and
other minor items. Deferred tax assets have been provided for deductible
temporary differences related primarily to the allowance for loan losses
and adjustments for loss on repossessed real estate. The net deferred tax
assets in the accompanying consolidated balance sheets include the
following components:
December 31
1994 1993
Deferred tax liabilities $(321,752) $(398,383)
Deferred tax assets 554,195 458,496
Net deferred tax assets $ 232,443 $ 60,113
Effective January 1, 1994, First Citizens Bancshares, Inc. and its
subsidiary adopted SFAS No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and
reporting for income taxes. Accordingly, the difference between the
financial statement and tax bases of assets and liabilities is determined
periodically. Deferred income tax assets and liabilities are then computed
for those differences that have future tax consequences using the currently
enacted tax laws and rates that apply to the periods in which they are
expected to affect taxable income. Valuation allowances are established,
if appropriate, to reduce the deferred tax asset to the amount which is
actually expected to be realized. Income tax expense is the current tax
payable or refundable for the period plus or minus the net change in the
deferred tax assets or liabilities.
The effect of adopting SFAS No. 109 on 1993 net income from operations was
an increase of $50,711. The cumulative effect of the accounting change on
years prior to January 1, 1993, of $125,278 is included in 1993 income.
51
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 10 - Stock Dividends
In December, 1992, First Citizens Bancshares, Inc., declared a ten percent
stock dividend. The transaction was recorded by transferring par value
($10 per share) from retained earnings to the capital stock account and the
balance of market value per share ($52.50) from retained earnings to
surplus.
On October 20, 1993, the Board of Directors declared a 2.5 for 1 stock
split, which was paid on November 15, 1993, in the form of a dividend of
one and one-half additional shares of the Company's common stock for each
share owned by the Stockholders of record on October 15, 1993. Par value
remained at $10 per share. The split resulted in the issuance of 422,698
additional shares of common stock from authorized but unissued shares and
in the transfer of $4,226,980 from surplus to common stock, representing
the par value of the shares issued.
All references to earnings per share and to weighted average shares
outstanding have been restated to give retroactive recognition to an
equivalent change in capital structure in those periods.
Note 11 - Common Stock Par Value
During the year ending December 31, 1994, the Company's Board of Directors
voted to reduce par value of the Company's capital stock from $10 to $1.
The transaction was recorded on June 30, 1994, and involved a transfer from
capital stock to surplus in the amount of $6,378,246.
The Board of Directors also voted to increase the Company's number of
shares authorized from 750,000 to 2,000,000.
Note 12 - Regulatory Capital Requirements
First Citizens Bancshares, Inc., is subject to minimum capital requirements
imposed by the Federal Reserve Bank and which are designed to measure
capital adequacy in terms of credit risk. The regulations require that
total capital equal at least 8.0% of weighted risk assets as of December
31, 1994.
In the case of First Citizens Bancshares, Inc., capital consists of common
stockholders' equity and the allowance for loan losses of which in excess
of 90% is stockholders' equity or Tier I capital. At December 31, 1994,
the Corporation's risk-based capital ratio is 12.96%.
Note 13 - Restrictions on Cash and Due From Bank Accounts
The Corporation's bank subsidiary maintains cash reserve balances as
required by the Federal Reserve Bank. Average required reserve balances
during 1994 and 1993 were $160,000 and $362,000, respectively.
Note 14 - Restrictions on Capital and Payment of Dividends
The Corporation is subject to capital adequacy requirements imposed by the
Federal Reserve Bank. In addition, the Corporation's National Bank
Subsidiary is restricted by the Office of the Comptroller of the Currency
from paying dividends in any years which exceed the net earnings of the
current year plus retained profits of the preceding two years. As of
December 31, 1994, approximately $6.15 million of retained earnings was
available for future dividends from the subsidiary to the parent
corporation.
52
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 15 - Condensed Financial Information
First Citizens Bancshares, Inc.
(Parent Company Only)
December 31
1994 1993
BALANCE SHEETS
ASSETS
Cash $ 258,698 $ 109,175
Investment securities, available-for-
sale-at fair value 1,442,085
Investment in subsidiary 21,428,585 19,506,591
Real estate owned 820,402 1,995,500
Other assets 84,060 161,552
TOTAL ASSETS $24,033,830 $21,772,818
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accrued expenses $ 155,082 12,341
Option deposit 60,000
TOTAL LIABILITIES 155,082 72,341
STOCKHOLDERS' EQUITY 23,878,748 21,700,477
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $24,033,830 $21,772,818
STATEMENTS OF INCOME
December 31
1994 1993
INCOME
Dividends from bank subsidiary $ 508,000 $ 546,000
Other income 547,553 159,923
TOTAL INCOME 1,055,553 705,923
EXPENSES
Other expenses 113,797 153,978
TOTAL EXPENSES 113,797 153,978
Income before income taxes and equity in
undistributed net income of bank subsidiary 941,756 551,945
Income tax expense (benefit) 157,583 (54,542)
784,173 606,487
Equity in undistributed net income of bank
subsidiary 2,162,076 2,157,250
NET INCOME $ 2,946,249 $2,763,737
53
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 15 - Condensed Financial Information (Continued)
(Parent Company Only)
STATEMENTS OF CASH FLOW
December 31
1994 1993
Operating Activities
Net income $ 2,946,249 $2,763,737
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 25,487 23,443
Undistributed income of subsidiary (2,162,076) (2,157,250)
Gain on sale of other real estate (297,284)
(Increase) decrease in other assets 77,492 (56,683)
Increase (decrease) in other liabilities 95,715 63,675
NET CASH PROVIDED BY OPERATING ACTIVITIES 685,583 636,922
Investing Activities
Purchase of other real estate (12,016) 38,403
Proceeds of sale of other real estate 1,458,911
Investment in securities (1,474,520)
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES (27,625) (38,403)
Financing Activities
Payment of dividends and payments in lieu of
fractional shares (861,407) (707,952)
Sale of Common Stock 292,220 236,124
Treasury Stock transactions - net 60,752 (60,407)
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (508,435) (532,235)
INCREASE (DECREASE) IN CASH 149,523 66,284
Cash at beginning of year 109,175 42,891
CASH AT END OF YEAR $ 258,698 $ 109,175
Note 16 - Long Term Debt
During the year ended December 31, 1989, First Citizens National Bank
placed in service furniture, fixtures, and equipment with a total cost of
$520,964 which were acquired through capital leases. These leases became
effective at various dates ranging from January, 1989 through October,
1989, and each lease extends for a term of sixty months. The total
liability on these leases as originated was $655,232 with $30,021 remaining
to be paid as of December 31, 1993. The obligation in regard to these
leases was completely retired during 1994.
Long term debt for the year ending December 31, 1994 consists of Federal
Home Loan Bank borrowings. These borrowings are maturity matched with
specific loans and investments. The average for 1994 are as follows:
Average Volume Average Rate Average Maturity
FHLB Borrowings $2,889,000 5.45% 11 years
54
Note 17 - Non-cash Investing and Financing Activities
During the periods presented, the Corporation engaged in the following non-
cash investing and financing activities:
Investing 1994 1993 1992
Other real estate acquired in
satisfaction of loans $188,431 $61,729 $542,510
Note 18 - Financial Instruments with Off-Balance Sheet Risk
First Citizens National Bank is a party to financial instruments with off-
balance sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include commitments to
extend credit and standby letters of credit. These instruments involve, to
varying degrees, elements of credit risk which are not recognized in the
statement of financial position.
The Bank's exposure to credit loss in the event of non-performance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount of
those instruments. The same policies are utilized in making commitments
and conditional obligations as are used for creating on-balance sheet
instruments. Ordinarily, collateral or other security is not required to
support financial instruments with off-balance sheet risk.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Loan commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many commitments are
expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. Each customer's
credit-worthiness is evaluated on a case-by-case basis, and collateral
required, if deemed necessary by the Bank upon extension of credit, is
based on management's credit evaluation of the counter party. At December
31, 1994, First Citizens National Bank had outstanding loan commitments of
$26,472,000. Of these commitments, none had an original maturity in excess
of one year.
Standby letters of credit and financial guarantees are conditional
commitments issued by the Bank to guarantee the performance of a customer
to a third party. Those guarantees are issued primarily to support public
and private borrowing arrangements, and the credit risk involved is
essentially the same as that involved in extending loans to customers. The
bank requires collateral to secure these commitments when it is deemed
necessary. At December 31, 1994, outstanding standby letters of credit
totaled $2,394,000.
In the normal course of business, First Citizens National Bank extends
loans which are subsequently sold to other lenders, including agencies of
the U. S. government. Certain of these loans are conveyed with recourse
creating off-balance sheet risk with regard to the collectibility of the
loan. At December 31, 1994, however, the Bank had no loans sold.
Note 19 - Significant Concentrations of Credit Risk
First Citizens National Bank grants agribusiness, commercial, residential
and personal loans to customers throughout a wide area of the mid-southern
United States. A large majority of the Bank's loans, however, are
concentrated in the immediate vicinity of the Bank or northwest Tennessee.
Although, the Bank has a diversified loan portfolio, a substantial portion
of its debtors' ability to honor their obligations is dependent upon the
agribusiness and industrial economic sectors of that geographic area.
Note 20 - Disclosure of Fair Value of Financial Instruments
The following assumptions were made and methods applied to estimate the
fair value of each class of financial instruments reflected on the balance
sheet of the Corporation:
Cash and Cash Equivalents
For instruments which qualify as cash equivalents, as described in Note 1
of Notes to Financial Statements, the carrying amount is assumed to be fair
value.
55
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Investment Securities
Fair value for investment securities is based on quoted market price, if
available. If quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.
Loans Receivable
Fair value of variable-rate loans with no significant change in credit risk
subsequent to loan origination is based on carrying amounts. For other
loans, such as fixed rate loans, fair values are estimated utilizing
discounted cash flow analyses, applying interest rates currently offered
for new loans with similar terms to borrowers of similar credit quality.
Fair values of loans which have experienced significant changes in credit
risk have been adjusted to reflect such changes.
The fair value of accrued interest receivable is assumed to be its carrying
value.
Deposit Liabilities
Demand Deposits
The fair values of deposits which are payable on demand, such as interest-
bearing and non-interest-bearing checking accounts, passbook savings and
certain money market accounts are equal to the carrying amount of the
deposits.
Variable-Rate Deposits
The fair value of variable-rate money market accounts and certificates of
deposit approximate their carrying value at the balance sheet date.
Fixed-Rate Deposits
For fixed-rate certificates of deposit, fair values are estimated using
discounted cash flow analyses which apply interest rates currently being
offered on certificates to a schedule of aggregated monthly maturities on
time deposits.
Short-Term Borrowings
Carrying amounts of short-term borrowings, which include securities sold
under agreement to repurchase approximate their fair values at December 31,
1993 and 1994.
Long-Term Debt
The fair value of the Corporation's long-term debt is estimated using the
discounted cash flow approach, based on the institution's current
incremental borrowing rates for similar types of borrowing arrangements.
At December 31, 1994, the long-term debt interest rate equals the fair
market rate and, as a result, the carrying value of long-term debt
approximates its fair value.
Other Liabilities
Other liabilities consist primarily of accounts payable, accrued interest
payable and accrued taxes. These liabilities are short-term and their
carrying values approximate their fair values.
56
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 20 - Disclosure of Fair Value of Financial Instruments (Continued)
The estimated fair values of the Corporation's financial instruments are as
follows:
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial Assets
Cash and cash equivalents $ 12,684,155 $ 12,684,155 $ 13,607,663 $ 13,607,663
Investment securities 64,168,307 62,340,388 60,747,040 61,789,052
Loans 168,781,491 149,322,178
Less: Allowance for
loan losses (2,053,843) (1,676,133)
Loans, net of allowance 166,727,648 163,079,141 147,646,045 143,637,321
Accrued interest
receivable 3,001,337 3,001,337 2,572,669 2,572,669
Financial Liabilities
Deposits $209,480,251 $209,349,222 $193,823,249 $184,104,215
Short-term borrowings 16,950,086 16,950,086 16,914,142 16,914,142
Long-term debt 4,124,730 4,143,315 30,021 30,021
Other liabilities 2,252,719 2,252,719 2,424,143 2,424,143
Unrecognized Financial
Instruments
Commitments to extend
credit 26,472,000 26,472,000 46,655,000 46,655,000
Standby letter of
credit 2,394,000 2,394,000 2,144,000 2,144,000
Note 21 - Commitments and Contingencies
During the year ended December 31, 1994, the Board of Directors approved a
stock repurchase plan whereby the Company is authorized to acquire up to a
maximum of $200,000 of its outstanding capital stock per calendar quarter.
The stock repurchase plan is designed to enable First Citizens Bancshares,
Inc. to meet the requirements of the Employee Stock Ownership Plan and the
Dividend Reinvestment Plan in place.
57
FIRST CITIZENS BANCSHARES, INC.,
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994
Note 22 - Amounts Receivable From Certain Persons
Year Ended December 31, 1994
(In Thousands)
Column A Column B Column C Column D Column E
Balance at Balance at
Beginning End of
of Period Additions Deductions Period
Amounts
Amounts Written Not
Collected Off Current Current
Aggregate indebtedness
to First Citizens
National Bank of
Directors and Executive
Officers of First
Citizens Bancshares,
Inc. (21) $2,796 $1,451 $1,804 $-0- $2,443 $-0-
Aggregate indebtedness
to First Citizens
National Bank of
Directors and Executive
Officers of First
Citizens National
Bank (23) $2,847 $1,363 $1,675 $-0- $2,535 $-0-
Year Ended December 31, 1993
Aggregate indebtedness
to First Citizens
National Bank of
Directors and Executive
Officers of First
Citizens Bancshares,
Inc. (20) $2,708 $1,310 $1,222 $-0- $2,796 $-0-
Aggregate indebtedness
to First Citizens
National Bank of
Directors and Executive
Officers of First
Citizens National
Bank (21) $2,732 $1,341 $1,226 $-0- $2,847 $-0-
Indebtedness shown represents amounts owed by directors and executive
officers of First Citizens Bancshares, Inc., and First Citizens National
Bank and by businesses in which such persons are general partners or have
at least 10% or greater interest and trust and estates in which they have a
substantial beneficial interest. All loans have been made on substantially
the same terms, including interest rates and collateral as those prevailing
at the time for comparable transactions with others and do not involve
other than normal risks of collectibility.
58
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Bancshares had no disagreements regarding accounting
procedures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information appearing in Bancshares' 1995 Proxy Statement
regarding directors and officers is incorporated herein by
reference in response to this Item (See pages 4 through 6 of the
Proxy Statement).
ITEM 11. EXECUTIVE COMPENSATION
The information required under this Item is set forth in the
1995 Proxy Statement, and is incorporated by reference. (See
page 7 of the Proxy Statement).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Ownership of Bancshares' common stock by certain beneficial
owners and by management is set forth in Bancshares' 1995 Proxy
Statement for the Annual Meeting of Shareholders to be held April
19, 1995, in the sections entitled Voting Securities and Election
of Directors and is incorporated herein by reference. (See pages
1 through 3 of the Proxy Statement).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Officers, Directors and principal shareholders of the
holding company (and their associates) have deposit accounts and
other transactions with First Citizens National Bank. These
relationships are covered in detail on page 11 of the Proxy
Statement under "Certain Relationships and Related Transactions"
and incorporated herein by reference. Additional information
concerning indebtedness to Bancshares and First Citizens by
Directors and/or their affiliates is included herein under Part
III, Page 57 "Amounts Receivable from Certain Persons".
59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, hereunto
duly authorized.
FIRST CITIZENS
BANCSHARES, INC.
By /s/Stallings Lipford
Stallings Lipford,
Chairman & CEO
By /s/Jeff Agee
Jeff Agee
Vice President & Principal
Financial Officer
Dated: 03/6/95
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities
indicated on March 6, 1995.
/s/ Eddie Anderson /s/Milton E. Magee
Eddie Anderson Milton E. Magee
Director Director
/s/Mary Frances McCauley
/s J. Walter Bradshaw Mary Frances McCauley
J. Walter Bradshaw Director
Director
/s/James Daniel Carpenter /s/L. D. Pennington
James Daniel Carpenter L. D. Pennington
Director Director
/s/William C. Cloar /s/G.W. Smitheal, III
William C. Cloar G.W. Smitheal, III
Director Director
/s/Richard Donner /s/H.P. Tigrett, Jr.
Richard W. Donner H. P. Tigrett, Jr.
Director Director
/s/J.E. Heckethorn /s/P. H. White, Jr.
John E. Heckethorn P. H. White, Jr.
Director Director
/s/ E.H. Lannom, Jr. /s/Dwight Steven Williams
E.H. Lannom, Jr. Dwight Steven Williams
Director Director
/s/Stallings Lipford /s/Katie Winchester
Stallings Lipford Katie Winchester
Director Director
/s/Billy S. Yates
Billy S. Yates
Director