10-QPeriod: Q2 FY2013

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 7, 2013For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. /DE/ (FCNCA) reported a net income of $43.9 million for the second quarter of 2013, a notable increase from $37.6 million in the same period of 2012. This improved profitability was driven by a significant reduction in the provision for loan and lease losses, higher noninterest income primarily from merchant and mortgage activities, and lower noninterest expense, particularly in foreclosure-related costs. Despite a decrease in net interest income due to lower asset yields and a shrinking acquired loan portfolio, the company's strategic focus on operational efficiency and prudent risk management contributed to a stronger financial performance. The company continues to navigate a challenging economic environment marked by low interest rates and evolving regulatory landscapes. However, First Citizens BancShares has demonstrated resilience, successfully integrating acquisitions from FDIC-assisted transactions and maintaining a strong liquidity position. The balance sheet remains robust with stable deposit levels and sufficient capital adequacy ratios, exceeding regulatory requirements. The company's ongoing investment in technology modernization aims to enhance efficiency and manage operational risks.

Financial Highlights

31 data points
Beta

Net Income

$43.91M

EPS (Diluted)

$4.56

Total Assets

$21.31B

Cash & Equivalents

$542.64M

Free Cash Flow

$53.14M

Financial Statements
Beta
Interest Expense$14.40M
Net Income$43.91M
EPS (Basic)$4.56
Shares Outstanding (Basic)9.62M

Key Highlights

  • 1Net income for Q2 2013 was $43.9 million, up from $37.6 million in Q2 2012.
  • 2Provision for loan and lease losses decreased significantly, becoming a credit of $13.2 million in Q2 2013 compared to an expense of $29.7 million in Q2 2012.
  • 3Noninterest income increased by $7.7 million in Q2 2013, driven by growth in merchant and mortgage income.
  • 4Noninterest expense decreased by $6.2 million in Q2 2013, largely due to lower foreclosure-related expenses.
  • 5Total assets remained stable at approximately $21.3 billion.
  • 6The company continues to exceed minimum capital requirements, with a Tier 1 risk-based capital ratio of 14.91% at June 30, 2013.

Frequently Asked Questions

The increase in net income was primarily driven by a significant reduction in the provision for loan and lease losses, higher noninterest income (particularly from merchant and mortgage activities), and lower noninterest expenses (especially foreclosure-related costs). These factors helped offset a decline in net interest income.

Originated loans saw a slight increase, while acquired loans continued to decline due to repayments and charge-offs. The company made enhancements to its allowance for loan and lease losses methodology, increasing granularity and incorporating more specific loan class data. Nonperforming assets as a percentage of total loans and leases, plus other real estate owned, decreased to 1.8% from 2.3% in the prior year.

The company anticipates continued pressure on net interest income due to persistently low interest rates. While a significant portion of the acquired loan portfolio continues to yield accretion income, this is expected to decrease as balances decline. The company is monitoring reinvestment rates on securities and expects yields to remain low until benchmark rates increase.

The company is subject to extensive federal and state regulations, including those stemming from the Dodd-Frank Act. Key changes include evolving capital requirements impacting trust preferred securities and the implementation of Basel III guidelines, which will affect future capital definitions. The company believes it remains well-capitalized even under these future requirements.