10-QPeriod: Q1 FY2012

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 10, 2012For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. /DE/ (FCNCA) reported a net income of $35.5 million for the first quarter of 2012, a decrease from $61.8 million in the prior year's first quarter. This decline was primarily attributed to the absence of acquisition gains that were present in the first quarter of 2011 from the United Western transaction. Despite this, core operations showed strength with net interest income increasing by $17.0 million, driven by higher discount accretion on acquired loans and lower funding costs. The company's balance sheet remains robust, with total assets reaching $21.14 billion and shareholders' equity at $1.89 billion. Capital ratios comfortably exceed regulatory requirements, indicating a strong financial position. The company's participation in FDIC-assisted transactions continues to be a significant factor, providing growth opportunities while also necessitating careful management of post-acquisition accounting adjustments. The loan portfolio shows a slight increase in non-covered loans, offset by a decrease in covered loans due to ongoing run-off. Non-interest income was impacted by lower debit interchange fees due to new regulations, a recurring trend expected to continue. Overall, FCNCA demonstrates a well-capitalized position and managed core operations, though the absence of prior-year acquisition gains impacted year-over-year net income comparisons.

Financial Highlights

30 data points
Beta

Net Income

$35.49M

Total Assets

$21.23B

Cash & Equivalents

$552.21M

Free Cash Flow

$57.88M

Financial Statements
Beta
Interest Expense$25.80M
Net Income$35.49M
Shares Outstanding (Basic)10.28M

Key Highlights

  • 1Net income decreased to $35.5 million in Q1 2012 from $61.8 million in Q1 2011, primarily due to the absence of significant acquisition gains recorded in the prior year.
  • 2Net interest income increased by $17.0 million to $221.0 million, driven by higher discount accretion on acquired loans and lower funding costs.
  • 3Total assets stood at $21.14 billion and shareholders' equity at $1.89 billion as of March 31, 2012.
  • 4The company's capital ratios remain strong, comfortably exceeding regulatory requirements, with a Tier 1 risk-based capital ratio of 15.74%.
  • 5Non-interest income decreased significantly due to the absence of acquisition gains and lower cardholder and merchant services income resulting from new debit interchange fee regulations.
  • 6The loan portfolio saw a modest increase in non-covered loans ($11.49 billion) while covered loans decreased ($2.18 billion), reflecting ongoing run-off from FDIC-assisted transactions.
  • 7The provision for loan and lease losses decreased to $30.7 million from $44.4 million, mainly due to lower post-acquisition deterioration on FDIC-covered loans.

Frequently Asked Questions

The decrease in net income was primarily due to the absence of significant acquisition gains, specifically $63.5 million from the United Western transaction, which were recorded in the first quarter of 2011. While core operations improved with higher net interest income, this was not enough to offset the loss of these one-time gains.

Total loans and leases stood at $13.67 billion. Non-covered loans increased slightly to $11.49 billion, driven by commercial mortgage demand, while covered loans decreased to $2.18 billion as a result of ongoing run-off from FDIC-assisted transactions. The allowance for loan and lease losses for non-covered loans increased slightly to 1.62% of total non-covered loans.

The enactment of debit interchange fee limits as part of the Dodd-Frank Act significantly impacted cardholder and merchant services income, leading to a decrease of $4.3 million in the first quarter of 2012 compared to the prior year. This reduction is expected to continue affecting income going forward.

Yes, First Citizens BancShares maintains strong capital adequacy. As of March 31, 2012, its Tier 1 risk-based capital ratio was 15.74% and its Tier 1 leverage ratio was 10.16%, both comfortably exceeding the minimum regulatory requirements for well-capitalized institutions.