First Citizens’ strong consistent production of shareholder return is reflected in our long track record of solid financial performance derived from asset quality, margins, efficiency and capital. Shareholder return, inclusive of dividends, increased 10% when comparing March 2014 to March 2015. Our solid financial performance was recently recognized again in American Banker Magazine who ranked First Citizens as #49 in the Top 200 Community Banks of 2014 (based on three-year average return on equity). Seifried & Brew, a well-known banking economic and consulting group also recently announced that First Citizens National Bank was included in the 2014 Top 15th Percentile of Community Banks for the fourth year in a row. The benchmark for this ranking includes institutions with assets between $100 million and $5 billion, and the review was based on a total risk/return composite rating.
At First Citizens we strive to deliver a unique customer experience with exceptional customer centric service across all service delivery channels. Recently your company was evaluated on various customer service benchmarks, and we are humbly proud to state we exceeded the benchmark in every category.
RESULTS OF OPERATIONS
Total asset growth of 26.5% and capital growth of 28.0% from March 2014 to March 2015 is primarily a result of the merger with Southern Heritage Bancshares, Inc. which closed on October 1, 2014. Capital growth is also due to unrealized appreciation in the investment portfolio (net of tax) reflected in accumulated other comprehensive income which totaled $8.7 million as of March 31, 2015 compared to $1.3 million as of March 31, 2014. Strong asset and capital growth which outpaced earnings growth result in downward pressure on return on assets and return on equity. Return on equity was 10.2% and 13.3% for first quarter 2015 and 2014, respectively. Return on assets was 1.01% and 1.32%, respectively. Net gain on sale of securities is the most significant contributing factor to the decrease in these two ratios in 2015 compared to 2014. Net gain on sale of securities (included in non-interest income on the Condensed Results of Operations) totaled approximately $372,000 in first quarter 2015 compared to $1.3 million in first quarter 2014.
Net income totaled $3.7 million for first quarter 2015 which is a decrease of 3.0% compared to first quarter 2014. Earnings per share for first quarter 2015 totaled $0.93 per share compared to $1.06 per share in first quarter of 2014. Net income excluding net gain on sale of securities (net of tax) totaled $3.5 million for first quarter 2015 compared to $3.0 million for first quarter 2014 which is a 15.6% increase. Increased core earnings in 2015 are attributable to organic growth in earning assets as well as the acquisition. Net interest income to average assets was 3.06% and 3.23% for first quarters 2015 and 2014 and the decline is partially due to increased interest expense associated with new debt at the holding company level issued or assumed in 2014 in relation to the acquisition. Other factors influencing net interest income to average assets are balance sheet mix and the continued low interest rate environment keeping loan and investment rates at or near historical lows.
The Company’s strong asset quality is evidenced by low levels of provision expense which totaled $176,000 and $225,000 during first quarters 2015 and 2014, respectively. Net loans recovered in excess of those charged-off totaled approximately $28,000 in first quarter 2015 compared to $172,000 in net charged-off loans in first quarter 2014.
Much of our success can be attributed to a deep commitment to our teammates, customers, shareholders and communities which we define as our mission. Katie Winchester, Chairperson, has been part of First Citizens team over 50 years. She inspired, coached and led our company for many years. Katie believed in long term planning, especially investing in succession action plans. At our annual shareholders’ meeting held April 15, 2015, Katie Winchester was named Chairman Emeritus, Jeff Agee, Chairman and CEO and Judy Long, President and COO. We were by-products of Katie Winchester and Stallings Lipford. We will carry their legacy forth into the future. In addition, our new partner, Southern Heritage Bank, promoted Lee Stewart to Chairman and CEO and Steve Ledbetter to President and CFO.
On behalf of our team we thank you for your continued support. We have been blessed and are excited about our future.
Jeff Agee Judy Long
Chairman & President &
Chief Executive Officer Chief Operating Officer