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Southern Heritage Bank is a division of FIRST CITIZENS NATIONAL BANK

Comments From Corporate

To Our Shareholders:


Your two banks were recognized by the national publication, American Banker Magazine, as one of the “Best Banks to Work For.” First Citizens National Bank ranked #4 in the United States while our fellow teammates, Southern Heritage Bank, ranked #30. We are humbled and pleased to receive these powerful recognitions. We will not lose sight of our fortress-strong mission: retaining the right teammates, compounding customer centric actions and creating superior shareholder returns. We believe the difference between winners and losers in banking can be traced to how well the company brings out the talents of its teammates and culture.
Reflective of the acquisition of Southern Heritage Bank effective October 1, 2014, total asset and capital growth from September 2014 to September 2015 were 26.2% and 23.2%, respectively. In order to support both growth strategies and regulatory demands, a strong capital is necessary but results in downward pressure on return on assets and return on equity. Return on equity was 10.4% and 11.4% and return on assets was 1.03% and 1.15% for first nine months of 2015 and 2014, respectively. 
The Company’s liquidity position remains very strong with deposits accounting for 92.3% of total funding. Deposit growth of 29.5% reflects both the acquisition and organic growth. Recently, the FDIC published its annual deposit market share data for 2015 which indicated overall favorable trends compared to 2014 for all markets served. First Citizens National Bank continues to hold greater than 62% market share in Dyer County. Southern Heritage Bank held its position with second highest market share in Bradley County but increased with 15.3% for 2015 compared to 14.3% in 2014.
Net income totaled $11.7 million for nine months ended September 30, 2015 which is an increase of 13.9% compared to $10.3 million for nine months ended September 30, 2014. Earnings per share were $2.93 and $2.85 for the nine months ended September 30, 2015 and 2014, respectively. Net income excluding net gain on sale of securities (net of tax) increased 16.8% and totaled $11.0 million for first nine months of 2015 compared to $9.4 million for first nine months of 2014. 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 3.10% and 3.26% for first three quarters 2015 and 2014, respectively.  This 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. 
 Non-performing assets to capital continue to improve and totaled 7.7% and 10.3% as of September 30, 2015 and 2014, respectively. Net loans charged off totaled approximately $558,000 and $893,000 year-to-date September 30, 2015 and 2014, respectively.
Year-to-date return on average tangible equity for First Citizens is 12.7%.  An analysis commonly used by investment bankers indicates banks must produce 8.00% return on tangible equity to break even before increasing shareholder value.  Your holding company is adding 470 incremental basis points to shareholder return. We will continue to focus on: asset quality, quality loan and asset growth, net interest margin and efficiency thereby producing strong returns on tangible equity.  
On behalf of our team, we thank you for your support.
Jeff Agee                                                    Judy Long
Chairman &                                               President &
Chief Executive Officer                           Chief Operating Officer