First Citizens Reports Earnings for Second Quarter 2001

July 23, 2001

RALEIGH, N.C.— First Citizens BancShares Inc. (Nasdaq: FCNCA) reports earnings for the quarter ending June 30, 2001, of $22.0 million, a 2.6 percent increase over the $21.5 million earned during the corresponding period of 2000, according to Lewis R. Holding, chairman of the board.

Per share income for the second quarter of 2001 totaled $2.09 compared to $2.03 for the same period in 2000, an increase of 3.0 percent. First Citizens' current quarter results generated an annualized return on average assets of 0.79 percent and an annualized return on average equity of 10.52 percent. Respective returns for the second quarter of 2000 were 0.88 percent and 11.53 percent.

Holding attributed the second quarter earnings growth to improved noninterest income. He noted that much of the growth was offset by a reduction in net interest income, higher provision for loan losses and increases in noninterest expense.

Due to reductions in market interest rates and a lower loan to deposit ratio in 2001, net interest income declined from the second quarter of 2000 by $518,000, or 0.6 percent. Average loans for the second quarter of 2001 increased by a moderate 3.2 percent over the comparable period of 2000, while average deposits were up 13.7 percent. Much of the liquidity generated by the strong deposit growth was directed to the investment securities portfolio, which increased 28.1 percent from the second quarter of 2000 to the same period of 2001. The growth in the securities portfolio during 2001 caused the net yield on interest-earning assets to fall to 3.69 percent from the 4.23 percent recorded during the same period of 2000.

Noninterest income increased $10.5 million or 23.9 percent from the second quarter of 2000 to the second quarter of 2001. The increase resulted from a $2.7 million improvement in service charge income, a $3.0 million increase in mortgage noninterest income, a $1.6 million increase in securities gains and a $1.4 million increase in credit card income.

The provision for loan losses increased $2.4 million or 81.3 percent during the second quarter of 2001 compared to the same period of 2000, the result of economic changes. Net charge-offs for the second quarter of 2001 were $3.4 million, compared to $2.1 million recorded during the second quarter of 2000. The increase was primarily due to higher commercial charge-offs. Even with the higher 2001 charge-offs, the ratio of net charge-offs to average loans was only 0.19 percent during the second quarter of 2001. The charge-off ratio for the second quarter of 2000 was 0.12 percent.

Total noninterest expense increased $8.0 million or 8.1 percent during the second quarter of 2001 when compared to the same period of 2000. Salaries and wages increased $2.7 million during the second quarter of 2001, an increase of 6.6 percent, while equipment expense increased $1.0 million or 11.3 percent.

Net income for the six months ending June 30, 2001, was $44.9 million, an increase of $3.9 million or 9.5 percent over the $41.0 million recorded during the first six months of 2000. Net income for the first six months of 2001 included the impact of $7.0 million in pre-tax gains resulting from securities transactions.

Per share income was $4.27 for the six-month period ended June 30, 2001, compared to $3.88 for the same period of 2000. The securities gains contributed $0.34 per share to 2001 net income.

Holding attributed the growth in net income to higher noninterest income during 2001. Nonrecurring gains from securities transactions and growth in service charge income and credit card income have more than offset the increases in noninterest expenses and the provision for loan losses. Net interest income was essentially unchanged, while the net yield on interest-earning assets equaled 3.80 percent compared to 4.21 percent for the prior year-to-date period. Due to higher levels of nonperforming assets and the slowing economy, the provision for loan losses increased by $4.6 million from 2000 to $11.1 million.

As of June 30, 2000, First Citizens had total assets of $11.29 billion. Two of BancShares' major subsidiaries are First Citizens Bank with 360 branches in North Carolina, Virginia and West Virginia, and Atlantic States Bank with 44 branches in Georgia and Florida. For more information, visit the First Citizens web site at firstcitizens.com.

For more information, contact:
Barbara Thompson
(919) 716-2716
First Citizens Bank