First Citizens Reports Earnings for Fourth Quarter 2011

RALEIGH, N.C., March 7, 2012 (GLOBE NEWSWIRE) -- First Citizens BancShares Inc. (Nasdaq:FCNCA) reports earnings for the quarter ending December 31, 2011, of $30.5 million, compared to $30.1 million for the corresponding period of 2010, according to Frank B. Holding Jr., chairman of the board. Net income for the fourth quarter of 2011 increased $462,000, or 1.5 percent, from the same quarter of 2010.

Per share income for the fourth quarter of 2011 totaled $2.97, compared to $2.88 for the same period a year ago. First Citizens' current quarter results generated an annualized return on average assets of 0.58 percent and an annualized return on average equity of 6.48 percent, compared to respective returns of 0.56 percent and 6.91 percent for the same period of 2010. Higher earnings during the fourth quarter 2011 were caused by improvements in net interest income resulting from the favorable impact of the assets acquired in the FDIC-assisted transactions and higher noninterest income from favorable adjustments to the FDIC receivable, offset by significantly higher provision for loan losses during the fourth quarter of 2011.

For the year ending December 31, 2011, net income equaled $195.0 million, or $18.80 per share, compared to $193.0 million, or $18.50 per share, earned during 2010. Net income as a percentage of average assets was 0.92 percent during 2011, compared to 0.93 percent during 2010. The return on average equity was 10.77 percent for 2011, compared to 11.54 percent for 2010. The $2.0 million, or 1.0 percent, increase in net income reflects increases in net interest income and noninterest income substantially offset by higher provision expense and noninterest expense.

The comparability of BancShares' results of operations for the fourth quarter and year ending December 31, 2011, are affected by the FDIC-assisted transactions. Acquisition gains are recorded at the date of the transaction and result from the difference between the estimated fair values of acquired assets and assumed liabilities. Various post-acquisition adjustments to the carrying value of acquired assets may have a significant impact on net interest income, provision for loan and lease losses and noninterest income. Accretable fair value discounts recorded on acquired loans are recognized in income over the estimated life of the loans, with accelerated accretion recognized if repayments occur sooner than originally estimated. In cases where post-acquisition deterioration of credit quality is identified for acquired loans, allowances are established through the provision for loan and lease losses. When credit quality improves subsequent to the date of acquisition, fair value discounts that were initially identified as nonaccretable are reclassified as accretable and are recognized over the remaining life of the loan. For loans covered under FDIC loss share agreements, the net increase or decrease in the estimated recoverable amount resulting from deterioration or improvement is recognized as an adjustment to the FDIC receivable with an offset to noninterest income.

FOURTH QUARTER 2011 HIGHLIGHTS

• Fourth quarter net interest income totaled $242.4 million, up 6.1 percent from the fourth quarter of 2010.
• Average loans and leases, including those acquired in FDIC-assisted transactions, increased $452.0 million, or 3.3 percent from the fourth quarter of 2010.
• Average deposits, including those assumed in FDIC-assisted transactions, decreased $191.5 million, or 1.1 percent from the fourth quarter of 2010.
• Fourth quarter 2011 earnings were influenced by several significant items arising from the FDIC-assisted transactions, including $70.4 million of provision for loan and lease losses, $104.1 million in interest income from accretion of fair value discounts primarily related to various items including unscheduled payments, and a $57.7 million reduction in charges to noninterest income arising from adjustments to the FDIC receivable.
• Net charge-offs on noncovered loans equaled $17.1 million, or 0.58 percent of average noncovered loans.

2011 YEAR-TO-DATE HIGHLIGHTS

• Net interest income for 2011 totaled $871.0 million, up 12.5 percent from 2010.
• Average loans and leases, including loans acquired in FDIC-assisted transactions, increased $184.6 million, or 1.3 percent from 2010.
• Average deposits, including those assumed in FDIC-assisted transactions, increased $234.1 million, or 1.3 percent from 2010.
• Earnings for 2011 were influenced by significant items arising from FDIC-assisted transactions: $150.4 million in acquisition gains, $174.5 million in provision for loan and lease losses, $319.4 million in interest income from accretion of fair value discounts including discounts related to unscheduled repayments and $19.3 million of charges to noninterest income for adjustments to the FDIC receivable.
• Earnings for 2010 were influenced by significant items arising from FDIC-assisted transactions: $136.0 million in acquisition gains, $86.9 million in provision for loan and lease losses, $181.4 million in interest income from accretion of fair value discounts including discounts related to unscheduled repayments and $46.8 million of charges to noninterest income for adjustments to the FDIC receivable.
• Net charge-offs on noncovered loans equaled $53.4 million, or 0.5 percent of average noncovered loans.
• Noninterest expenses increased $59.5 million, or 8.1 percent, due primarily to FDIC-assisted transactions.

NET INTEREST INCOME

Fourth quarter net interest income increased $14.0 million, or 6.1 percent, from the same period of 2010, due to the accretion of fair value discounts. Average interest-earning assets decreased $68.3 million, or 0.4 percent, due primarily to reductions in deposit funding. During the fourth quarter of 2011, interest income included $104.1 million of fair value discount accretion related to covered loans. The taxable-equivalent net yield on interest-earning assets increased 31 basis points when compared to the fourth quarter of 2010. The increase in the net yield was primarily due to lower rates on interest-bearing liabilities and the favorable impact of acquired loans and assumed deposits, including the impact of fair value discounts accreted into income during the fourth quarter of 2011.

Interest-earning assets averaged $18.67 billion during the fourth quarter of 2011. Average loans increased $452.0 million, or 3.3 percent, since the fourth quarter of 2010, due to acquisition activity. Average investment securities grew $106.8 million, or 2.7 percent, principally resulting from the investment of the proceeds from the reduction in overnight investments.

Average interest-bearing liabilities decreased by $668.8 million, or 4.4 percent, during the fourth quarter of 2011, due to lower levels of deposits. The rate on interest-bearing liabilities decreased 34 basis points to 0.81 percent during the fourth quarter of 2011 as market interest rates continued to contract.

Net interest income increased $96.7 million, or 12.5 percent, during 2011, due to balance sheet growth resulting primarily from the FDIC-assisted transactions and $319.4 million of accretion of fair value discounts recorded in 2011.

Average interest-earning assets for 2011 increased $366.5 million, or 2.0 percent, due primarily to the FDIC-assisted transactions. Average loans and leases grew $184.6 million, or 1.3 percent, during 2011. The taxable-equivalent net yield on interest-earning assets increased 43 basis points to 4.65 percent during 2011 versus 4.22 percent recorded during 2010, primarily due to acquired loan fair value discount accretion recognized during 2011.

Average interest-bearing liabilities decreased $190.4 million, or 1.2 percent, due to anticipated runoff of assumed deposits. 

PROVISION FOR LOAN AND LEASE LOSSES

The provision for loan and lease losses equaled $89.3 million during the fourth quarter of 2011, a $54.4 million increase from the same period of 2010, primarily due to a $46.0 million increase in the amount recognized for post-acquisition deterioration of acquired loans covered by FDIC loss share agreements. Net charge-offs on noncovered loans during the fourth quarter of 2011 equaled $17.1 million, compared to $9.0 million during the fourth quarter of 2010 due primarily to higher charge-offs on revolving mortgage loans. On an annualized basis, noncovered net charge-offs for the fourth quarter of 2011 represented 0.58 percent of average noncovered loans and leases, compared to 0.31 percent for the same period of 2010. Net charge-offs resulting from post-acquisition deterioration of covered loans equaled $56.2 million during the fourth quarter of 2011.

The provision for loan and lease losses totaled $232.3 million for 2011, compared to $143.5 million during 2010, an $88.8 million increase. The provision for acquired loans increased $87.6 million in 2011 resulting from post-acquisition deterioration of acquired loans covered by FDIC loss share agreements. Net charge-offs on noncovered loans totaled $53.4 million in 2011, up $3.8 million from the $49.6 million of net charge-offs recorded during 2010. Net charge-offs on noncovered loans for 2011 represent 0.46 percent of average noncovered loans and leases, compared to 0.43 percent for 2010. Net charge-offs on covered loans during 2011 equaled $136.5 million, or 5.49 percent of average covered loans compared to $39.1 million, or 1.76 percent, of average covered loans during 2010.

NONINTEREST INCOME

Noninterest income increased $53.6 million, or 103.7 percent, from the fourth quarter of 2010, due primarily to a $57.7 million reduction in net charges resulting from adjustments to the FDIC receivable for assets covered by loss share agreements. The adjustment to the FDIC receivable represents the impact of reductions to the receivable resulting from large unscheduled acquired loan payments and other acquired loan adjustments, partially offset by increases to the receivable resulting from post-acquisition deterioration of acquired loans. Cardholder and merchant services income decreased $4.6 million, or 16.9 percent, during the fourth quarter of 2011, due to newly imposed limitations on interchange fees for debit card transactions. Due to changes in the posting order of transactions and daily overdraft limits that became effective during 2011, deposit service charges declined $1.5 million, or 8.9 percent, during the fourth quarter of 2011 versus the fourth quarter of 2010.

Acquisition gains recorded during 2011 totaled $150.4 million, compared to $136.0 million during 2010, all of which resulted from FDIC-assisted transactions. Exclusive of acquisition gains, noninterest income increased $43.7 million, or 16.2 percent, principally due to a $9.7 million gain on the purchase and redemption of $21.5 million of long-term obligations recognized during 2011. Cardholder and merchant services income increased $3.2 million, due to higher transaction volume, while income from wealth management services increased $3.6 million. Deposit service charges declined $10.0 million, or 13.5 percent, the net impact of lower fees from overdrafts and commercial service charges partially offset by incremental service charges for deposit accounts resulting from FDIC-assisted transactions.

NONINTEREST EXPENSE

Noninterest expense equaled $211.6 million during the fourth quarter of 2011, up slightly from 2010. Salary expense increased $1.7 million, or 2.3 percent, due to higher head count and merit increases. Occupancy expense and collection expenses increased due to the FDIC-assisted transactions, while higher equipment costs were driven by continued technology investments. Growth in transaction volume caused cardholder and merchant processing expense to increase. These increases were partially offset by reduced foreclosure-related costs and employee benefits expense.

Noninterest expense increased $59.5 million, or 8.1 percent, during 2011 with $17.6 million attributable to various costs arising from the FDIC-assisted transactions. Salary expense increased $10.2 million during 2011, resulting from staff increases and merit increases. Equipment expenses increased $3.1 million, or 4.6 percent, due principally to higher hardware and software costs. Foreclosure-related expenses increased $25.7 million from 2010, due to costs incurred in the resolution of covered other real estate owned (OREO). 

NONPERFORMING ASSETS

Nonperforming assets not covered by FDIC loss share agreements totaled $226.9 million on December 31, 2011, compared to $196.7 million as of December 31, 2010. Nonperforming assets not covered by FDIC loss share agreements represent 1.95 percent of non-covered loans, leases and OREO as of December 31, 2011, compared to 1.71 percent as of December 31, 2010. The increase in nonperforming assets was caused by higher levels of restructured loans. Nonperforming assets covered by FDIC loss share agreements totaled $576.9 million as of December 31, 2011, compared to $329.2 million as of December 31, 2010, due to nonperforming assets resulting from the 2011 FDIC-assisted transactions and changes in nonperforming assets related to the 2010 FDIC-assisted transactions.

CAPITAL

First Citizens BancShares remains well capitalized with a leverage capital ratio of 9.90 percent on December 31, 2011, up from 9.18 percent on December 31, 2010, due to strong earnings in 2011 combined with no growth in tangible assets. Both the total risk-based capital and tier 1 risk-based capital ratios increased from December 31, 2010, to levels of 17.27 percent and 15.41 percent on December 31, 2011, respectively.

As of December 31, 2011, BancShares had total assets of $20.88 billion.

ABOUT FIRST CITIZENS BANCSHARES

BancShares is the financial holding company for First Citizens Bank. First Citizens Bank provides a broad range of financial services to individuals, businesses, professionals and the medical community through a network of 430 branch offices, telephone banking, online banking and ATMs. For more information, visit First Citizens' Web site at firstcitizens.com.

This news release may contain forward-looking statements. A discussion of factors that could cause First Citizens' actual results to differ materially from those expressed in such forward-looking statements is included in First Citizens' filings with the SEC.