10-QPeriod: Q1 FY2007

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2007

Filed May 4, 2007For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. (FCNCA) reported solid financial performance for the first quarter of 2007, with net income increasing slightly to $29.0 million from $28.7 million in the same period of 2006. While net interest income saw a marginal decrease, this was offset by strong growth in noninterest income, particularly from cardholder and merchant services, and reduced provisions for credit losses. The company's loan portfolio expanded by 4.2% to $10.22 billion, driven by commercial mortgage and commercial and industrial loans, while its deposit base also grew, reflecting higher interest rates. The company continues to focus on strategic growth, including expansion into new geographic markets through its IronStone Bank subsidiary, which is incurring operating costs associated with this expansion but is expected to reach near breakeven operations in 2007. Despite these investments, First Citizens BancShares maintains strong capital adequacy ratios, exceeding regulatory minimums, and emphasizes a conservative approach to asset quality and risk management.

Key Highlights

  • 1Net income for Q1 2007 was $29.0 million, a 1.1% increase from $28.7 million in Q1 2006.
  • 2Total assets grew to $15.85 billion as of March 31, 2007, up from $15.10 billion in the prior year.
  • 3Loans and leases increased by 4.2% to $10.22 billion, with notable growth in commercial mortgage and commercial and industrial loans.
  • 4Total deposits increased by 1.7% to $12.72 billion year-over-year.
  • 5Noninterest income increased by 8.3% to $71.2 million, driven by cardholder/merchant services and commission income.
  • 6The provision for credit losses decreased significantly to $3.5 million from $6.7 million in the prior year's quarter.
  • 7Capital ratios remain strong, with Tier 1 capital at 13.09% and total capital at 15.52%, well above regulatory requirements.

Frequently Asked Questions

First Citizens BancShares reported a slight increase in net income, from $28.7 million in Q1 2006 to $29.0 million in Q1 2007. This modest growth was driven by higher noninterest income and a lower provision for credit losses, which offset a marginal decrease in net interest income and increased noninterest expenses.

The loan and lease portfolio grew by 4.2% to $10.22 billion as of March 31, 2007. Key growth areas include commercial mortgage loans, which increased by 5.9%, and commercial and industrial loans, which saw a 13.9% increase. The company anticipates continued growth in these segments due to expanding operations and customer demand.

The company is pursuing growth through its IronStone Bank (ISB) subsidiary, which is expanding into new geographic markets. This expansion involves significant operating costs that have impacted ISB's financial performance, resulting in a net loss for the quarter. However, ISB is expected to operate near breakeven in 2007, and the company believes these investments are critical for future success and diversification.

First Citizens BancShares maintains a strong capital position, with its Tier 1 and total capital ratios significantly exceeding regulatory minimums. The company emphasizes rigorous underwriting, continuous monitoring of asset quality, and a well-diversified loan portfolio to manage credit risk. It also prioritizes balance sheet liquidity and manages interest rate risk through its asset and liability structure.