10-QPeriod: Q1 FY2010

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 10, 2010For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. /DE/ (FCNCA) reported a significant increase in net income for the first quarter of 2010 compared to the same period in 2009, largely driven by gains from FDIC-assisted acquisitions. Total assets grew substantially, reflecting the successful integration of newly acquired entities. The company experienced strong deposit growth, which is crucial for funding its operations and loan portfolio expansion. While core earnings were impacted by the recessionary environment, strategic acquisitions and a strong net interest margin contributed to overall positive financial performance. Key financial highlights include a substantial rise in net income per share and return on equity, underscoring the positive impact of strategic initiatives. The company's balance sheet strengthened with significant increases in loans (particularly those covered under loss share agreements) and deposits. Management emphasized prudent risk management and capital adequacy, noting that regulatory capital ratios remain well above minimum requirements. The company continues to navigate a challenging economic landscape by focusing on deposit growth, managing credit quality, and leveraging acquisition opportunities.

Financial Highlights

27 data points
Beta

Net Income

$106.61M

Total Assets

$21.22B

Cash & Equivalents

$745.18M

Free Cash Flow

$113.33M

Financial Statements
Beta
Interest Expense$49.66M
Net Income$106.61M

Key Highlights

  • 1Net income increased dramatically to $107.6 million in Q1 2010 from $8.7 million in Q1 2009, primarily due to $137.6 million in pre-tax gains from FDIC-assisted acquisitions.
  • 2Total assets grew to $21.2 billion as of March 31, 2010, up from $17.2 billion in the prior year, reflecting substantial balance sheet expansion through acquisitions.
  • 3Loans and leases, including those covered under loss share agreements, increased significantly to $14.2 billion, indicating growth in the loan portfolio, partly due to acquired assets.
  • 4Total deposits reached $17.8 billion, up from $14.2 billion in the prior year, demonstrating strong customer confidence and a stable funding base.
  • 5Net interest income improved by 30.4% to $151.0 million, driven by balance sheet growth and an improved net yield on interest-earning assets.
  • 6The company maintained strong capital adequacy ratios, with Tier 1 risk-based capital at 13.83% and Total risk-based capital at 16.07%, well above regulatory minimums.

Frequently Asked Questions

The primary driver of the significant increase in net income was the recognition of substantial gains from FDIC-assisted acquisitions. Specifically, the FDIC-assisted transactions involving First Regional Bank and Sun American Bank generated after-tax gains totaling $83.7 million.

Total assets increased significantly to $21.2 billion from $17.2 billion in the prior year, largely due to the acquisition of assets from failed banks. Loans and leases also grew substantially, with a notable increase in loans covered under loss share agreements. Deposits also showed strong growth, increasing to $17.8 billion from $14.2 billion, which provides a stable funding source.

The company anticipates very limited non-acquisition loan growth for 2010 due to weak demand and customer deleveraging. While credit quality for non-covered loans showed some deterioration, management believes the allowance for loan and lease losses is adequate, though subject to change based on economic conditions. The FDIC loss share agreements provide significant protection against losses on covered loans.

The company manages interest rate risk by simulating future net interest income under various scenarios and using the market value of equity as a tool. They have limited use of interest rate swaps. Liquidity is primarily managed through its deposit base, supplemented by short-term borrowings. The company has access to additional borrowing facilities and maintains substantial immediately available liquidity in cash and overnight investments.