10-QPeriod: Q3 FY2008

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 6, 2008For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. (FCNCA) reported mixed results for the nine months ended September 30, 2008, against the backdrop of a challenging economic environment. While total assets grew to $16.67 billion, up from $16.31 billion a year prior, net income for the period decreased to $78.16 million from $82.45 million in the same period of 2007. This decline was primarily driven by a significant increase in the provision for credit losses and higher noninterest expenses, although these were partially offset by growth in net interest income and noninterest income. The company's balance sheet shows a substantial increase in net loans and leases, which grew to $11.47 billion from $10.63 billion year-over-year, reflecting strategic loan growth, particularly in commercial mortgage and revolving mortgage portfolios. However, this asset growth was accompanied by a rise in nonperforming assets and a higher allowance for credit losses, indicating the impact of a weakening economy on loan quality. Deposit growth also remained robust, with total deposits increasing to $13.37 billion. The company maintained strong capital adequacy ratios, comfortably exceeding regulatory requirements.

Key Highlights

  • 1Total assets increased to $16.67 billion as of September 30, 2008, from $16.31 billion as of December 31, 2007.
  • 2Net income for the nine months ended September 30, 2008, decreased to $78.16 million from $82.45 million in the comparable 2007 period.
  • 3Net loans and leases increased by 8.0% to $11.47 billion as of September 30, 2008, compared to $10.63 billion as of December 31, 2007.
  • 4The provision for credit losses significantly increased to $43.66 million for the nine months ended September 30, 2008, from $21.80 million in the prior year's period.
  • 5Nonperforming assets more than doubled to $62.17 million from $23.43 million year-over-year, indicating a deterioration in loan quality.
  • 6Total deposits grew to $13.37 billion as of September 30, 2008, up from $12.98 billion as of December 31, 2007.
  • 7Capital adequacy ratios remained strong, with Tier 1 risk-based capital at 13.01% and total risk-based capital at 15.33% as of September 30, 2008, well above regulatory minimums.

Frequently Asked Questions

For the nine months ended September 30, 2008, First Citizens BancShares reported a decrease in net income to $78.16 million from $82.45 million in the same period of 2007. This decline was primarily attributed to higher provisions for credit losses and increased noninterest expenses, partially offset by improvements in net interest income and noninterest income.

The net loan and lease portfolio grew by 8.0% to $11.47 billion. However, asset quality showed signs of stress, with nonperforming assets increasing significantly to $62.17 million from $23.43 million year-over-year. This trend, coupled with a substantial rise in the provision for credit losses to $43.66 million, indicates the impact of the challenging economic environment on the loan portfolio.

First Citizens BancShares maintained a strong capital position. As of September 30, 2008, its Tier 1 risk-based capital ratio was 13.01% and its total risk-based capital ratio was 15.33%, both comfortably exceeding the minimum regulatory requirements. This indicates that the company is well-capitalized despite the economic headwinds.

Profitability was impacted by several factors. Increased provision for credit losses due to a weakening economy and higher noninterest expenses related to salaries, benefits, and operational costs were key detractors. On the positive side, net interest income saw growth due to an expanding interest-earning asset base, and noninterest income benefited from items like securities gains and improved service charges on deposit accounts.