10-QPeriod: Q2 FY2014

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 8, 2014For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. reported its Q2 2014 financial results, showing a net income of $26.6 million, or $2.76 per share. This represents a decrease from the same quarter in the prior year, largely due to lower net interest margins and a runoff in the acquired loan portfolio, which is being replaced by lower-yielding originated loans. However, the company saw improvements in organic loan growth and asset quality. The company announced a significant merger agreement with First Citizens Bancorporation, Inc., expected to close in Q4 2014, which will involve a combination of stock and cash for Bancorporation shareholders. This strategic move aims to enhance the company's market position. Despite a challenging interest rate environment and margin compression, BancShares remains well-capitalized, exceeding regulatory capital standards. The company continues to focus on risk management, particularly credit and interest rate risk, and has implemented necessary changes to comply with new mortgage regulations. Investors should note the ongoing integration of acquired assets, the strategic impact of the pending merger, and the bank's commitment to maintaining strong capital ratios and asset quality. The financial performance, while showing year-over-year declines in key profitability metrics, reflects a strategic shift towards organic growth and a focus on long-term stability.

Financial Highlights

32 data points
Beta

Net Income

$26.69M

EPS (Diluted)

$2.77

Total Assets

$22.06B

Cash & Equivalents

$566.95M

Free Cash Flow

$6.25M

Financial Statements
Beta
Interest Expense$11.61M
Net Income$26.69M
EPS (Basic)$2.77
Shares Outstanding (Basic)9.62M

Key Highlights

  • 1Net income for Q2 2014 was $26.6 million, or $2.76 per share, down from $43.9 million, or $4.56 per share, in Q2 2013.
  • 2Net interest margin decreased to 3.29% in Q2 2014 from 3.74% in Q2 2013, primarily due to acquired loan portfolio runoff and lower yields on originated loans.
  • 3Total assets grew to $22.06 billion at June 30, 2014, up from $21.20 billion at December 31, 2013.
  • 4The company announced a merger agreement with First Citizens Bancorporation, Inc., expected to close in Q4 2014.
  • 5The allowance for loan and lease losses as a percentage of total originated loans was 1.43% at June 30, 2014, down from 1.56% at June 30, 2013.
  • 6Nonperforming assets as a percentage of total loans and OREO decreased to 1.29% at June 30, 2014, down from 1.80% at June 30, 2013.
  • 7BancShares maintains strong capital ratios, with a Tier 1 risk-based capital ratio of 14.61% and a Tier 1 leverage ratio of 9.71% at June 30, 2014.

Frequently Asked Questions

First Citizens BancShares reported a net income of $26.6 million, or $2.76 per share, for the second quarter of 2014. This was lower than the $43.9 million, or $4.56 per share, reported in the same quarter of 2013.

The merger with First Citizens Bancorporation, Inc., expected to close in Q4 2014, is a significant strategic event. While the full financial impact will be realized post-merger, the company anticipates benefits from expanded market presence and operational synergies. The company has incurred merger-related costs, and the integration process will require management attention and resources.

The company's loan portfolio saw organic growth, with total loans increasing to $13.52 billion at June 30, 2014. However, the acquired loan portfolio continues to run off and yield lower returns compared to originated loans. Asset quality indicators have improved, with nonperforming assets decreasing and the allowance for loan and lease losses as a percentage of originated loans remaining stable.

First Citizens BancShares remains well-capitalized, exceeding regulatory requirements. At June 30, 2014, its Tier 1 risk-based capital ratio was 14.61%, and its Tier 1 leverage ratio was 9.71%. The company is preparing for the implementation of new global regulatory capital guidelines (Basel III).