10-QPeriod: Q3 FY2009

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 9, 2009For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. reported a significant increase in net income for the nine months ended September 30, 2009, primarily driven by substantial gains from the FDIC-assisted acquisitions of Temecula Valley Bank (TVB) and Venture Bank (VB). Excluding these acquisition gains, core operating performance showed mixed results, with a decrease in net interest income due to lower yields and some noninterest income categories softening, offset by growth in fees from processing services and mortgage income. The company's balance sheet expanded considerably due to the acquisitions, with total assets growing substantially. Deposits also saw significant growth, reflecting a strong customer preference for stable banking relationships amidst economic uncertainty. While asset quality on non-covered loans saw some deterioration, particularly in residential construction, the FDIC loss-sharing agreements on acquired assets provided a buffer. The company successfully integrated two acquired banks, leading to a notable increase in total assets and deposits. The strategic acquisitions, facilitated by the FDIC, provided a significant boost to reported net income and expanded the company's geographic footprint. However, underlying operational performance faced headwinds from the challenging economic environment, including lower interest rates impacting net interest income and reduced customer transaction volumes affecting certain fee-based revenue streams. The company remains focused on managing credit risk, maintaining strong capital levels, and navigating the ongoing economic uncertainties.

Financial Highlights

28 data points
Beta

Net Income

$82.47M

Total Assets

$18.51B

Cash & Equivalents

$723.03M

Free Cash Flow

$47.65M

Financial Statements
Beta
Interest Expense$54.41M
Net Income$82.47M

Key Highlights

  • 1Net income surged to $97.3 million for the nine months ended September 30, 2009, up from $78.2 million in the prior year, largely due to $105 million in gains from the acquisitions of Temecula Valley Bank and Venture Bank.
  • 2Total assets grew significantly to $18.51 billion as of September 30, 2009, from $16.67 billion at the end of 2008, primarily driven by the acquisitions and deposit growth.
  • 3Total deposits increased to $15.35 billion as of September 30, 2009, from $13.37 billion at December 31, 2008, reflecting strong customer demand for secure banking.
  • 4Net interest income for the nine months decreased by 1.6% to $368.1 million, impacted by declining interest rates and yields, although the net yield on interest-earning assets saw a slight improvement in the third quarter.
  • 5Noninterest income, excluding acquisition gains, decreased by 7.8% to $222.4 million for the nine months, attributed to lower service charges, wealth management, securities gains, and cardholder/merchant services.
  • 6Nonperforming assets not covered by loss-sharing agreements increased to $106.3 million (0.92% of non-covered loans/OREO) as of September 30, 2009, primarily due to weakness in residential construction loans in specific markets.
  • 7The company maintained strong capital adequacy ratios, exceeding minimum regulatory requirements and remaining 'well-capitalized'.

Frequently Asked Questions

The primary driver of the significant increase in net income to $97.3 million was the recognition of $105 million in gains from the FDIC-assisted acquisitions of Temecula Valley Bank and Venture Bank. Without these gains, the underlying operating performance would have shown a different trend.

The acquisitions of Temecula Valley Bank and Venture Bank led to a substantial increase in total assets, which grew to $18.51 billion by September 30, 2009. This growth was also supported by a significant increase in deposits, reaching $15.35 billion, as customers sought stability in the banking system.

Nonperforming assets not covered by FDIC loss-sharing agreements increased to $106.3 million, representing 0.92% of non-covered loans and other real estate owned. This increase was mainly attributed to weakness in residential construction loans in the Atlanta, Georgia, and southwest Florida markets. However, nonperforming assets covered by FDIC loss-sharing agreements were substantial at $205.1 million.

Falling interest rates and lower yields negatively impacted net interest income, which decreased by 1.6% for the nine-month period. However, the company managed to increase its net yield on interest-earning assets in the third quarter, partly due to deposit growth and strategic management of interest-bearing liabilities. The company's net interest income spread for the third quarter was 3.02%.