10-QPeriod: Q3 FY2014

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 5, 2014For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. (FCNCA) reported its third-quarter and nine-month results for 2014, highlighting a mixed financial performance influenced by the ongoing integration of acquisitions and a dynamic economic environment. The company experienced a year-over-year decrease in net income, largely attributed to a decline in accretion income from acquired loans and a reduction in loan loss provision credits. Despite these headwinds, originated loan growth and improved credit quality remained positive trends. The balance sheet shows growth in total assets, driven by a significant merger with First Citizens Bancorporation, Inc. completed on October 1, 2014. While deposits saw a modest increase, the company also increased its short-term borrowings to manage liquidity. Capital ratios remain strong, exceeding regulatory requirements, indicating a stable financial position. Investors should note the company's continued focus on managing risk, particularly credit risk, and its ongoing investments in technology to maintain competitiveness.

Financial Highlights

32 data points
Beta

Net Income

$26.50M

EPS (Diluted)

$2.76

Total Assets

$21.94B

Cash & Equivalents

$400.99M

Free Cash Flow

-$50.23M

Financial Statements
Beta
Interest Expense$11.40M
Net Income$26.50M
EPS (Basic)$2.76
Shares Outstanding (Basic)9.62M

Key Highlights

  • 1Net income for the nine months ended September 30, 2014, was $75.3 million, a decrease from $140.5 million in the same period of 2013.
  • 2Total assets grew to $21.94 billion as of September 30, 2014, up from $21.20 billion at December 31, 2013, largely due to the merger with First Citizens Bancorporation, Inc.
  • 3The company completed a significant merger with First Citizens Bancorporation, Inc. on October 1, 2014, creating a more diversified financial institution.
  • 4Originated loan growth continued, with total loans and leases increasing to $13.8 billion at September 30, 2014, up 5.1% from December 31, 2013.
  • 5Nonperforming assets decreased to $157.1 million at September 30, 2014, or 1.13% of total loans and leases plus OREO, down from 1.48% in the prior year.
  • 6The allowance for loan and lease losses as a percentage of originated loans and leases decreased to 1.37% at September 30, 2014, from 1.50% at September 30, 2013.
  • 7The company maintained strong capital ratios, with the Tier 1 risk-based capital ratio at 14.26% and the Leverage capital ratio at 9.79% as of September 30, 2014.

Frequently Asked Questions

The merger with First Citizens Bancorporation, Inc., completed on October 1, 2014, contributed to an increase in total assets and created a more diversified financial institution. While the initial accounting for the merger is not complete, the company incurred merger expenses of $2.4 million for the nine months ended September 30, 2014, and anticipates total merger costs between $28 million and $32 million.

Net interest income decreased by 7.2% year-over-year in the third quarter of 2014, largely due to a $18.8 million decrease in accretion income from acquired loans compared to the prior year. The taxable-equivalent net interest margin also declined to 3.26% in Q3 2014 from 3.67% in Q3 2013, primarily driven by loan yield compression from the runoff of the acquired loan portfolio and modest improvements in investment yields.

Asset quality remains strong, with nonperforming assets decreasing to $157.1 million (1.13% of total loans and leases plus OREO) as of September 30, 2014. Originated loan growth was a positive factor, increasing 5.1% from December 31, 2013. The allowance for loan and lease losses as a percentage of originated loans and leases decreased slightly year-over-year, reflecting improved credit quality.

First Citizens BancShares maintained strong capital adequacy, with its Tier 1 risk-based capital ratio at 14.26% and Tier 1 leverage ratio at 9.79% as of September 30, 2014, well above regulatory minimums. Liquidity is managed through a diverse mix of funding sources, including a stable retail deposit base and access to wholesale funding, with total deposits increasing by 3.0% since December 31, 2013.