01—Abstract
Summary
Summary of the 10-K/A filed March 24, 1997. Cited figures are marked; the original filing is the authoritative source.
First Citizens BancShares, Inc. (FCNCA) reported a solid 1996 for its fiscal year ended December 31, 1996.
Net income rose about 15% to $65.5 milliona ($5.77 per share, up from $5.37), and return on average assets improved slightly to 0.85%. Growth was driven by a 15.9% increase in taxable-equivalent net interest income to $288.3 million, as average interest-earning assets grew 12.9% through acquisitions (notably Allied Bank Capital in February 1996) and deposit growth. Total assets reached $8.06 billion, deposits $6.95 billion, and shareholders' equity $615.5 million, with the leverage capital ratio at 6.4%.
The main headwinds were credit quality and expenses. Net charge-offs rose to 0.15% of average loans from 0.05%, driven mainly by consumer and credit card losses, and the provision for loan losses nearly doubled to $8.9 millionb. Noninterest expense climbed 13.3% to $278.7 million, including a one-time $10 million SAIF special assessment, and the effective tax rate rose to 35.6%.
Management expects charge-offs in 1997 to approximate 1996 levels and plans to move the credit card operation to Roanoke, Virginia, in mid-1997. For investors, the filing shows a closely held, family-controlled institution: the Holding family and affiliates control a large share of votes through the high-vote Class B stock (16 votes per share).
The company also raised its quarterly dividend to $0.25c for payment in April 1997 and continued share repurchases. Investors should note a one-year interest-sensitivity gap of about $913 million, which means rising rates could pressure net interest income in the near term.
02—Key points
Key Highlights
- Net income up 15% to $65.5 million in 1996; EPS of $5.77 versus $5.37 in 1995; ROA of 0.85%, ROE of 11.4%.
- Total assets of $8.06 billion, deposits of $6.95 billion, and shareholders' equity of $615.5 million at year-end 1996, driven partly by acquisitions such as Allied Bank Capital.
- Taxable-equivalent net interest income rose 15.9% to $288.3 million, though the net interest margin was 4.13%, up 11 basis points.
- Credit quality weakened modestly: net charge-offs rose to $7.4 million (0.15% of loans) from $2.1 million, and the provision for loan losses increased to $8.9 million; nonperforming assets remained low at 0.28% of loans.
- Noninterest expense rose 13.3% to $278.7 million, including a $10 million one-time SAIF special FDIC assessment.
- Capital remained strong, with total risk-based capital of 11.5% and a leverage ratio of 6.4%, well above regulatory minimums; the quarterly dividend was raised to $0.25.
- Ownership is concentrated: the Holding family and affiliates hold a large share of votes via 16-vote Class B shares, and the board proposed raising its maximum size from 26 to 30 directors.
03—Questions
Frequently Asked Questions
How profitable was First Citizens BancShares in 1996 compared with 1995?
Net income was $65.5 million, or $5.77 per share, compared with $56.9 million, or $5.37 per share, in 1995, a gain of about 15%. Return on average assets was 0.85% and return on average equity was 11.4%, both roughly flat with the prior year, as earnings growth kept pace with a larger equity and asset base.
What drove the growth in net interest income, and what risks does the balance sheet carry?
Net interest income grew 15.9% to $288.3 million on a taxable-equivalent basis, mainly from a 12.9% increase in average earning assets, partly from acquisitions. Loan yields fell to 8.53% from 8.63% because of competitive pricing. The company had a one-year negative interest-sensitivity gap of $913 million, so rising rates could hurt net interest income in the near term.
Are credit losses becoming a concern?
Losses increased but remain low by industry standards. Net charge-offs were 0.15% of average loans versus 0.05% in 1995, driven largely by consumer and credit card losses. Nonperforming assets were 0.28% of loans, and the reserve for loan losses was 1.65% of loans. Management expects 1997 charge-offs to be similar to 1996 levels.
Who controls the company, and what does that mean for shareholders?
Ownership is concentrated. Frank B. Holding, Lewis R. Holding, and affiliated family members and entities hold a large share of voting power, with Class B shares carrying 16 votes each versus one vote for Class A. Frank B. Holding alone controls about 33.6% of total votes. This concentration gives the family significant influence over board and strategic decisions, which may limit minority shareholders' ability to affect outcomes.
04—Continue