How did First Citizens BancShares perform in 1997 compared with 1996?

Net income increased 7.8% to $70.6 million, or $6.22 per share, from $65.5 million, or $5.77 per share, in 1996. Growth came from higher net interest income and noninterest income, which outpaced a 7.9% increase in noninterest expense. The 1996 base was depressed by a $6.3 million after-tax FDIC SAIF assessment; excluding that charge, 1997 earnings would have been about 1.7% lower.

Is the company's capital position adequate after the 1997 changes?

Yes, but thinner than before. The Tier 1 ratio fell to 8.63% from 10.2% and the total risk-based ratio to 9.87% from 11.5%, well above Federal Reserve minimums of 4% and 8%. The decline reflects a commitment to repurchase 600,000 Class A shares from a related party for about $58 million (funded January 1998) and the reclassification of pension-plan-held shares to liabilities because of a put option. Leverage ratio was 5.83%, down from 6.4%.

What are the main risks investors should watch?

Key risks include interest rate sensitivity, with a one-year negative gap of $2.32 billion that could hurt net interest income if rates rise; a narrowing net interest margin (4.05% from 4.13%); rising consumer and credit card losses tied to personal bankruptcies; and Year 2000 remediation costs, estimated at $2 to $3 million beyond the $2.2 million already spent in 1997. Management also characterized the outcome of legal proceedings as not material.

What is the company's growth strategy and footprint?

The bank holding company operates 329 offices in North Carolina and Virginia (through the main bank), West Virginia, and Atlanta-area thrift Atlantic States Bank, and is the fifth-largest commercial bank in North Carolina by deposits. Growth has come mainly from acquisitions, including Wachovia and First Union branches in 1997, and from de novo branching. Management expects continued growth in small business loans, EquityLine home equity lending, and indirect auto financing in 1998.

What is the dividend and share repurchase picture?

The board declared a $0.25 quarterly dividend for payment April 6, 1998, and expects comparable dividends going forward. The 1997 full-year dividend was $1.00 per share, a 16.1% payout ratio. The board reauthorized repurchases of up to 300,000 Class A and 100,000 Class B shares, and management described buybacks as a good investment when market conditions are favorable.

FCNCA 10-K FY1997 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 30, 1998. Cited figures are marked; the original filing is the authoritative source.

First Citizens BancShares (FCNCA) reported a solid 1997 under its 10-K filed March 30, 1998.

Net income rose 7.8% to $70.6 million^a ($6.22 per share) from $65.5 million ($5.77 per share) in 1996, with ROA steady at 0.85% and ROE at 11.04%. Growth was driven by higher net interest income (up 6.4% on a taxable-equivalent basis) and noninterest income (up 11.6%), which more than offset a 7.9% rise in noninterest expense. Excluding the 1996 one-time FDIC SAIF assessment, 1997 earnings would have been roughly 1.7% lower than 1996, so the headline growth is flattered by the comparison base.

Total assets reached $8.95 billion^b, deposits $7.58 billion, and loans $5.45 billion, with loan growth of 10.5% including modest acquisition contribution. Credit quality remained strong: net charge-offs were 0.12% of average loans and nonperforming assets were 0.26% of loans, though consumer and credit card losses are rising with personal bankruptcies. Capital ratios declined during the year, with the Tier 1 ratio falling to 8.63% from 10.2% and total risk-based capital to 9.87% from 11.5%, largely because of a $58 million commitment to repurchase 600,000 shares from a related party and a reclassification of pension-held shares to liabilities.

The company remains above regulatory minimums. Investors should also note the balance sheet's interest-rate sensitivity: a one-year negative gap of $2.32 billion^c means rising rates could pressure net interest income. The filing also discloses Year 2000 remediation costs of about $2.2 million in 1997 with an additional $2 to $3 million expected.

The company operates 329 offices across North Carolina, Virginia, West Virginia, and Georgia, and is the fifth-largest commercial bank in North Carolina by deposits. Growth has come largely from acquisitions and de novo branching, and management plans continued expansion in small business lending, EquityLine home equity loans, and indirect auto lending.

02—Key points

Key Highlights

Net income up 7.8% to $70.6 million ($6.22 per share), versus $65.5 million in 1996; ROA 0.85% and ROE 11.04%
Total assets of $8.95 billion, deposits of $7.58 billion (up 9.0%), and loans of $5.45 billion (up 10.5%)
Credit quality strong: net charge-offs 0.12% of average loans; nonperforming assets 0.26% of loans; reserve 1.55% of loans
Tier 1 capital ratio fell to 8.63% (from 10.2%) and total risk-based ratio to 9.87% (from 11.5%), driven by a $58M share repurchase commitment and pension-share reclassification
Net interest margin compressed to 4.05% from 4.13%; interest rate spread narrowed to 3.48% from 3.57%
One-year negative interest-sensitivity gap of $2.32 billion creates exposure to rising rates
Dividend of $0.25 per share declared for April 1998 payment; 1997 full-year dividend $1.00 per share (16.1% payout)

03—Questions

Frequently Asked Questions

How did First Citizens BancShares perform in 1997 compared with 1996?
Net income increased 7.8% to $70.6 million, or $6.22 per share, from $65.5 million, or $5.77 per share, in 1996. Growth came from higher net interest income and noninterest income, which outpaced a 7.9% increase in noninterest expense. The 1996 base was depressed by a $6.3 million after-tax FDIC SAIF assessment; excluding that charge, 1997 earnings would have been about 1.7% lower.
Is the company's capital position adequate after the 1997 changes?
Yes, but thinner than before. The Tier 1 ratio fell to 8.63% from 10.2% and the total risk-based ratio to 9.87% from 11.5%, well above Federal Reserve minimums of 4% and 8%. The decline reflects a commitment to repurchase 600,000 Class A shares from a related party for about $58 million (funded January 1998) and the reclassification of pension-plan-held shares to liabilities because of a put option. Leverage ratio was 5.83%, down from 6.4%.
What are the main risks investors should watch?
Key risks include interest rate sensitivity, with a one-year negative gap of $2.32 billion that could hurt net interest income if rates rise; a narrowing net interest margin (4.05% from 4.13%); rising consumer and credit card losses tied to personal bankruptcies; and Year 2000 remediation costs, estimated at $2 to $3 million beyond the $2.2 million already spent in 1997. Management also characterized the outcome of legal proceedings as not material.
What is the company's growth strategy and footprint?
The bank holding company operates 329 offices in North Carolina and Virginia (through the main bank), West Virginia, and Atlanta-area thrift Atlantic States Bank, and is the fifth-largest commercial bank in North Carolina by deposits. Growth has come mainly from acquisitions, including Wachovia and First Union branches in 1997, and from de novo branching. Management expects continued growth in small business loans, EquityLine home equity lending, and indirect auto financing in 1998.
What is the dividend and share repurchase picture?
The board declared a $0.25 quarterly dividend for payment April 6, 1998, and expects comparable dividends going forward. The 1997 full-year dividend was $1.00 per share, a 16.1% payout ratio. The board reauthorized repurchases of up to 300,000 Class A and 100,000 Class B shares, and management described buybacks as a good investment when market conditions are favorable.

04—Continue

← View all 10-K filings