How did First Citizens BancShares perform financially in 1998?

Net income was $71.0 million, roughly flat with 1997 at up 0.6%, while diluted-equivalent EPS rose to $6.62 from $6.22 because the company retired a meaningful number of shares. Growth in net interest income and fee income was largely offset by higher operating expenses and a larger loan loss provision, which compressed return on average assets to 0.77% from 0.85%.

What drove the growth in the loan portfolio?

Gross loans grew 13.8% to $6.20 billion, almost entirely from internal growth rather than acquisitions. Commercial real estate mortgages, commercial and industrial loans (up roughly 27% on average), and indirect automobile lending (up 30%) were the main contributors, reflecting the bank's focus on small and mid-sized business customers.

Is the bank's capital position sound, and did it change in 1998?

Yes. Capital ratios improved meaningfully: the leverage ratio rose to 7.3% from 5.8%, and the Tier 1 risk-based ratio at the holding company was 9.9%, above regulatory minimums. The improvement was driven by a $150 million trust preferred securities issuance in March 1998, which offset capital reduced by large share repurchases.

What risks should investors be aware of?

Key risks include interest-rate sensitivity, since the bank had a one-year negative repricing gap of $2.11 billion that could hurt net interest income if rates rise, and margin pressure as deposit costs and borrowing rates decline more slowly than loan yields. Credit costs also rose, with the provision nearly tripling in some measures, and Year 2000 readiness depended on customers and vendors, though management reported most work complete.

What is the dividend and capital return policy?

The company paid $1.00 per share in cash dividends in 1998 and 1997, and declared a $0.25 quarterly dividend in January 1999, with management expecting comparable payments to continue subject to earnings and capital needs. The board also reauthorized stock repurchases in late 1998, buying back about 760,000 shares during the year for roughly $74.5 million.

FCNCA 10-K FY1998 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 31, 1999. Cited figures are marked; the original filing is the authoritative source.

First Citizens BancShares, Inc. (FCNCA) reported full-year 1998 net income of $71.0 million^a, up 0.6% from $70.6 million in 1997, with diluted-equivalent EPS rising to $6.62 from $6.22.

The improvement came from growth in net interest income ($327.4 million^b, up 7.6%) and noninterest income ($146.1 million, up 26.7%), largely offset by a 14.0% jump in noninterest expense to $342.9 million and a sharp rise in the loan loss provision to $19.9 million from $8.7 million. Return on average assets slipped to 0.77% from 0.85%, though return on average equity held near 11.3%. Total assets reached $9.61 billion, deposits $8.11 billion, and shareholders' equity $660.7 million, with book value per share rising to $62.18.

Balance sheet growth was driven by internal loan expansion: gross loans rose 13.8% to $6.20 billion^c, with commercial and industrial and indirect auto lending leading the way. Management also issued $150 million of 8.05% trust preferred securities in March 1998 to bolster capital after large share repurchases, lifting the leverage ratio to 7.3% from 5.8%. Credit quality remained strong, with nonperforming assets at just 0.23% of loans and net charge-offs at 0.14% of average loans, though the reserve build signals management's expectation of continued loan growth.

Interest-rate risk is a watch item, as the one-year cumulative negative repricing gap stood at $2.11 billion^d. Year 2000 remediation was largely complete, with a total project cost estimated at $8.5 million.

02—Key points

Key Highlights

Net income of $71.0 million in 1998, up 0.6% year over year; EPS of $6.62 versus $6.22 in 1997, aided by a reduced share count after buybacks
Net interest income rose to $327.4 million (up 7.6%), but net interest margin compressed to 3.98% from 4.05% as interest expense outpaced asset yields
Noninterest income surged 26.7% to $146.1 million, driven by credit card income (+27.5%), service charges, and ATM fees; noninterest expense rose 14.0% to $342.9 million
Loan provision more than doubled to $19.9 million, while net charge-offs remained low at 0.14% of average loans and nonperforming assets were 0.23% of total loans
Total assets of $9.61 billion, deposits of $8.11 billion, and shareholders' equity of $660.7 million; leverage ratio improved to 7.3% from 5.8%
Dividend held at $1.00 per share for 1998, with a $0.25 quarterly dividend declared for April 1999; the company continued share repurchases
Negative one-year interest-sensitivity gap of $2.11 billion leaves net interest income exposed if rates rise; Y2K remediation largely complete at an estimated $8.5 million total cost

03—Questions

Frequently Asked Questions

How did First Citizens BancShares perform financially in 1998?
Net income was $71.0 million, roughly flat with 1997 at up 0.6%, while diluted-equivalent EPS rose to $6.62 from $6.22 because the company retired a meaningful number of shares. Growth in net interest income and fee income was largely offset by higher operating expenses and a larger loan loss provision, which compressed return on average assets to 0.77% from 0.85%.
What drove the growth in the loan portfolio?
Gross loans grew 13.8% to $6.20 billion, almost entirely from internal growth rather than acquisitions. Commercial real estate mortgages, commercial and industrial loans (up roughly 27% on average), and indirect automobile lending (up 30%) were the main contributors, reflecting the bank's focus on small and mid-sized business customers.
Is the bank's capital position sound, and did it change in 1998?
Yes. Capital ratios improved meaningfully: the leverage ratio rose to 7.3% from 5.8%, and the Tier 1 risk-based ratio at the holding company was 9.9%, above regulatory minimums. The improvement was driven by a $150 million trust preferred securities issuance in March 1998, which offset capital reduced by large share repurchases.
What risks should investors be aware of?
Key risks include interest-rate sensitivity, since the bank had a one-year negative repricing gap of $2.11 billion that could hurt net interest income if rates rise, and margin pressure as deposit costs and borrowing rates decline more slowly than loan yields. Credit costs also rose, with the provision nearly tripling in some measures, and Year 2000 readiness depended on customers and vendors, though management reported most work complete.
What is the dividend and capital return policy?
The company paid $1.00 per share in cash dividends in 1998 and 1997, and declared a $0.25 quarterly dividend in January 1999, with management expecting comparable payments to continue subject to earnings and capital needs. The board also reauthorized stock repurchases in late 1998, buying back about 760,000 shares during the year for roughly $74.5 million.

04—Continue

← View all 10-K filings