10-QPeriod: Q3 FY2006

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q3 Ended Sep 30, 2006

Filed November 7, 2006For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares Inc. /DE/ (FCNCA) reported solid financial results for the nine months ended September 30, 2006, with net income increasing by 9.7% to $93.3 million compared to the same period in 2005. This growth was driven by improved net interest income and noninterest income, partially offset by higher noninterest expenses. The company saw a notable increase in its loan portfolio, with total loans and leases growing by $769.9 million year-over-year, primarily in commercial and industrial, and commercial mortgage lending. Key to this growth was the performance of its two subsidiaries, FCB and ISB. FCB, the mature banking institution, continued its steady performance, while IronStone Bank (ISB), the de novo growth subsidiary, showed significant improvement, moving from a net loss in the prior year to a net income of $654,000. Despite ISB's improved profitability, management notes that its profitability is expected to remain low due to ongoing expansion costs and interest rate curve pressures. The company also reported a strong capital position, exceeding regulatory requirements.

Key Highlights

  • 1Net income increased by 9.7% to $93.3 million for the first nine months of 2006 compared to the prior year.
  • 2Total assets grew to $15.63 billion as of September 30, 2006.
  • 3Loans and leases increased by $769.9 million to $10.13 billion, driven by commercial and industrial and commercial mortgage growth.
  • 4Net interest income rose by 7.3% to $354.6 million for the first nine months of 2006.
  • 5Noninterest income increased by 5.1% to $208.0 million for the first nine months of 2006.
  • 6The provision for credit losses decreased by 30.8% to $13.5 million for the first nine months of 2006.
  • 7IronStone Bank (ISB) significantly improved its financial performance, moving from a net loss to a net income of $654,000 for the first nine months of 2006.

Frequently Asked Questions

First Citizens BancShares reported a solid increase in net income of 9.7% to $93.3 million for the nine months ended September 30, 2006, compared to the same period in 2005. This growth was driven by increases in net interest income and noninterest income, alongside a reduction in the provision for credit losses, though partially offset by higher noninterest expenses.

The loan and lease portfolio experienced substantial growth, increasing by $769.9 million to $10.13 billion as of September 30, 2006. This growth was primarily concentrated in commercial and industrial loans and commercial mortgage loans, indicating a strategic focus on business lending.

First-Citizens Bank & Trust Company (FCB) showed steady growth in net income of 6.3%. IronStone Bank (ISB), which is in a de novo growth phase, significantly improved its financial performance, turning a net loss in the prior year into a net income of $654,000 for the first nine months of 2006. However, management anticipates ISB's profitability to remain low in the near future due to expansion costs.

The company's asset/liability management strategy focuses on maintaining liquidity and managing interest rate risk. While historically not relying on derivatives, they entered into an interest rate swap in Q2 2006 to convert variable rate debt to a fixed rate. Management notes a shift towards a net liability-sensitive position, which could impact net interest income in a rising rate environment.