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FIRST CITIZENS BANCSHARES INC /DE/ 8-K Report, Material Agreement (Feb 4, 2010)

Filed February 4, 2010For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares Inc. (FCNCA), through its subsidiary First-Citizens Bank & Trust Company (FCB), announced on January 29, 2010, a significant acquisition of substantially all assets and the majority of liabilities of First Regional Bank of Los Angeles, California, from the Federal Deposit Insurance Corporation (FDIC) acting as Receiver. This transaction, structured as a purchase and assumption agreement, involves no deposit premium, with FCB acquiring the assets at a discount of $299.4 million. To mitigate risk, FCB has entered into loss share agreements with the FDIC. These agreements provide substantial protection against future losses on the acquired loans and real estate, with the FDIC reimbursing 80% of net losses above a first loss tranche up to $1.017 billion, and 95% of net losses exceeding that threshold. This structured protection is crucial for investors to understand as it significantly reduces the potential downside risk for FCB from the acquired portfolio.

Key Highlights

  • 1FCB acquired substantially all assets and assumed majority of liabilities of First Regional Bank from FDIC.
  • 2The acquisition occurred on January 29, 2010.
  • 3No deposit premium was paid; the transaction resulted in a $299.4 million discount on assets.
  • 4Loss share agreements with the FDIC provide significant protection against future credit losses on acquired assets.
  • 5FDIC will reimburse 80% of net losses above a first loss tranche up to $1.017 billion, and 95% above that threshold.
  • 6First Regional Bank had $2.2 billion in total assets and $1.9 billion in total deposits as of September 30, 2009.
  • 7Detailed financial statements and pro forma information for the acquisition will be filed in a later amendment.

Frequently Asked Questions

First Citizens BancShares, through its subsidiary FCB, is acquiring a portfolio of assets and liabilities from First Regional Bank. The key financial aspect is that the acquisition is at a discount of $299.4 million, meaning FCB is acquiring assets valued at $299.4 million less than their recorded value. This discount, coupled with loss share agreements, aims to make the transaction financially beneficial.

The loss share agreements are designed to protect FCB from potential losses on the acquired loans and real estate. The FDIC will cover 80% of net losses above an initial tranche up to $1.017 billion, and 95% of losses beyond that amount. This significantly reduces FCB's exposure to credit risk within the acquired portfolio.

Detailed financial statements of the acquired entity and pro forma financial information reflecting the acquisition's impact are not included in this initial filing. FCNCA has stated that this information will be provided in an amendment to the report, due no later than April 10, 2010, once the FDIC provides final asset and liability details.

As of September 30, 2009, First Regional Bank reported total assets of $2.2 billion and total deposits of $1.9 billion. This provides context for the scale of the transaction.