10-QPeriod: Q3 FY2013

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 7, 2013For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. (FCNCA) reported solid financial results for the nine months ended September 30, 2013. The company demonstrated a notable increase in net income, driven by a significant reduction in the provision for loan and lease losses, coupled with higher noninterest income. This was partially offset by lower net interest income and increased income tax expense. The company's originated loan portfolio saw growth, particularly in commercial mortgage and commercial and industrial loans, reflecting an improved loan demand and the company's focus on small business customers. Despite a challenging low-interest-rate environment impacting net interest margins, FCNCA maintained strong capital ratios, comfortably exceeding regulatory requirements. The company also continued to manage its balance sheet effectively, with stable deposit balances and a strategic focus on retaining core deposits. The integration of FDIC-assisted transactions continued to influence financial results, contributing to both favorable and unfavorable impacts on earnings due to post-acquisition accounting adjustments and loan performance. Management expressed optimism about continued originated loan growth for the remainder of 2013 and into 2014, contingent on economic stability. The company is actively managing its risk profile, with a particular focus on credit risk, interest rate risk, and liquidity risk, and is preparing for upcoming regulatory changes such as Basel III implementation.

Financial Highlights

32 data points
Beta

Net Income

$40.98M

EPS (Diluted)

$4.26

Total Assets

$21.51B

Cash & Equivalents

$569.12M

Free Cash Flow

$106.85M

Financial Statements
Beta
Interest Expense$13.45M
Net Income$40.98M
EPS (Basic)$4.26
Shares Outstanding (Basic)9.62M

Key Highlights

  • 1Net income increased to $140.5 million for the first nine months of 2013, up from $112.6 million in the same period of 2012, driven by lower loan loss provisions and higher noninterest income.
  • 2Originated loans and leases grew by 2.7% to $11.9 billion from December 31, 2012, to September 30, 2013, indicating improving loan demand.
  • 3Total deposits remained stable at $18.1 billion, with a shift from time deposits to demand deposit accounts.
  • 4The company maintained strong capital adequacy ratios, with a Tier 1 leverage ratio of 9.84% and a total risk-based capital ratio of 16.54% at September 30, 2013, both well above regulatory minimums.
  • 5Net interest income decreased by 13.5% for the nine months ended September 30, 2013, compared to the prior year, primarily due to lower asset yields and a reduction in acquired loan balances.
  • 6Noninterest income increased by 24.6% for the nine months ended September 30, 2013, primarily due to higher recoveries of acquired loan balances previously charged off.
  • 7Noninterest expense increased by 1.2% for the nine months ended September 30, 2013, driven by higher employee benefits and equipment costs, partially offset by lower foreclosure-related expenses.

Frequently Asked Questions

The primary driver of the increase in net income to $140.5 million was a significant reduction in the provision for loan and lease losses, alongside higher noninterest income, largely from recoveries of acquired loans. These factors were partially offset by lower net interest income and increased income tax expense.

Originated loans and leases increased by 2.7% to $11.9 billion, reflecting improved loan demand, particularly in commercial mortgage and commercial and industrial segments. Acquired loan balances continued to decline due to repayments and charge-offs. Overall, the company maintained a focus on asset quality, with a slight decrease in nonperforming assets as a percentage of total loans and leases.

First Citizens BancShares maintained a strong capital position, exceeding regulatory requirements. The Tier 1 leverage ratio was 9.84% and the total risk-based capital ratio was 16.54%, both comfortably above the well-capitalized minimums of 5.00% and 10.00%, respectively.

The FDIC-assisted transactions continued to significantly influence financial results. While they provided growth opportunities and loss-sharing agreements provided protection, post-acquisition accounting adjustments, including amortization of FDIC receivables and accretion of discounts on acquired loans, contributed to volatility. Recoveries of previously charged-off acquired loans also positively impacted noninterest income.