8-KOther EventsExhibits & Filings

FIRST CITIZENS BANCSHARES INC /DE/ 8-K Report, Corporate Update (Jun 20, 2016)

Filed June 20, 2016For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens Bancshares Inc. (FCNCA) announced on June 20, 2016, that its subsidiary, First-Citizens Bank & Trust Company (FCB), has entered into an agreement with the FDIC to terminate five of its nine loss share agreements. These agreements were originally established between 2009 and 2011 as part of FCB's acquisitions of several banks through FDIC-assisted transactions. The early termination of these loss share arrangements involved a net payment of $20.1 million from FCB to the FDIC. This termination is a strategic move by FCNCA to reduce its exposure to potential future liabilities associated with these legacy FDIC-assisted deals. While the agreement results in an immediate cash outflow, it also aims to provide greater clarity and predictability regarding future financial obligations and potential recoveries. Investors should note the forward-looking statements within the filing, which acknowledge that actual results may differ due to various risks and uncertainties, including the performance of the remaining loss share agreements.

Key Highlights

  • 1FCB is terminating five out of nine existing loss share agreements with the FDIC.
  • 2The terminated agreements originated from FDIC-assisted acquisitions between 2009 and 2011.
  • 3FCB made a net payment of $20.1 million to the FDIC for the early termination.
  • 4This action aims to reduce future contingent liabilities and enhance financial predictability.
  • 5The filing includes forward-looking statements regarding the benefits of the transaction, subject to risks and uncertainties.
  • 6The termination concerns agreements related to the acquisitions of Temecula Valley Bank, Sun American Bank, Colorado Capital Bank, Williamsburg Financial National Bank, and Atlantic Bank & Trust.

Frequently Asked Questions

Loss share agreements with the FDIC are typically entered into when a bank acquires assets and assumes liabilities of another institution through an FDIC-assisted transaction. Under these agreements, the FDIC agrees to share in potential future losses on certain acquired assets, and in return, the acquiring bank may share a portion of any profits or recoveries with the FDIC. These agreements are designed to encourage healthy banks to take over distressed institutions.

First Citizens is terminating these agreements early to reduce potential future liabilities and gain greater clarity and predictability over its financial obligations. While there was an upfront payment of $20.1 million, this action is intended to mitigate risks associated with the uncertainty of future losses and recoveries on these legacy FDIC-assisted deals.

The $20.1 million is a net payment made by FCB to the FDIC for the early termination. This represents an immediate cash outflow for the company. Investors will need to assess how this impacts FCNCA's liquidity and capital position, as well as consider the potential long-term benefits of shedding these contingent liabilities.

Yes, FCNCA is terminating five out of nine loss share agreements. The company still has four other loss share agreements with the FDIC. The filing explicitly mentions that the actual results of the transaction are subject to risks, including the amount of recoveries payable to the FDIC on the remaining loss share agreements, which could cause actual results to differ materially.