10-Q/APeriod: Q3 FY2011

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report (Amendment) for Q3 Ended Sep 30, 2011

Filed November 18, 2011For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. reported solid performance for the nine months ended September 30, 2011, with net income of $165.0 million ($15.85 per share). This represents a slight increase over the same period in 2010, primarily driven by significant acquisition gains from FDIC-assisted transactions. The company actively participated in FDIC-assisted acquisitions, notably the United Western Bank and Colorado Capital Bank, which contributed positively to overall asset growth and generated substantial acquisition gains. While core earnings faced pressure from challenging economic conditions, including low interest rates and a growing inability for some customers to meet debt obligations, the company's strategic participation in FDIC-assisted deals, supported by loss-share agreements, provided crucial protection against asset quality risks. This strategic approach has allowed for market expansion and growth. Looking ahead, management anticipates that loan growth will remain constrained by weak loan demand and customer deleveraging efforts. The company is focused on increasing fee income through wealth management, cardholder services, and other fee-based products. While acknowledging potential volatility in net interest income due to discount accretion on acquired loans, the company remains well-capitalized and focused on prudent risk management.

Financial Highlights

31 data points
Beta

Net Income

$81.42M

Total Assets

$21.02B

Cash & Equivalents

$539.34M

Free Cash Flow

-$142.26M

Financial Statements
Beta
Interest Expense$34.99M
Net Income$81.42M
Shares Outstanding (Basic)10.36M

Key Highlights

  • 1Net income for the first nine months of 2011 was $165.0 million, a slight increase from $163.0 million in the same period of 2010.
  • 2The company completed two significant FDIC-assisted acquisitions in 2011: United Western Bank and Colorado Capital Bank, contributing $151.3 million in acquisition gains for the nine-month period.
  • 3Total assets grew, driven by acquisitions, reaching $21.0 billion by September 30, 2011.
  • 4Net interest income for the nine months increased by 15.2% to $628.5 million, primarily due to higher discount accretion on acquired loans.
  • 5The provision for loan and lease losses for the nine months increased by 31.7% to $143.0 million, reflecting post-acquisition deterioration of covered loans.
  • 6Nonperforming assets increased to $739.9 million (5.2% of loans and OREO), largely due to assets acquired in FDIC-assisted transactions, though a significant portion is covered by FDIC loss-share agreements.
  • 7Capital ratios remained strong, exceeding regulatory requirements.

Frequently Asked Questions

The primary driver of the net income increase was the recognition of significant acquisition gains totaling $151.3 million from FDIC-assisted transactions, specifically the acquisitions of United Western Bank and Colorado Capital Bank.

The FDIC-assisted acquisitions led to an increase in total assets. The company acquired assets and assumed liabilities from six distressed financial institutions during 2009-2011, which contributed to asset growth and expanded the company's market presence.

Management anticipates that loan growth will be limited in the near term due to generally weak demand and customers' focus on deleveraging. They are concentrating on increasing fee income from services like wealth management and cardholder services.

Nonperforming assets increased to $739.9 million, mainly due to assets acquired through FDIC-assisted transactions. A substantial portion of these assets is covered by FDIC loss-share agreements, which provide protection against potential losses. The company actively manages credit risk through underwriting and periodic reviews.