RALEIGH, N.C., July 28, 2008 (PRIME NEWSWIRE) -- First Citizens BancShares Inc. (Nasdaq:FCNCA) reports earnings for the quarter ending June 30, 2008, of $26.2 million compared to $30.9 million for the corresponding period of 2007, a decrease of 15.0 percent, according to Lewis R. Holding, chairman of the board.
Per share income for the second quarter 2008 totaled $2.51, compared to $2.96 for the same period a year ago. First Citizens' results generated an annualized return on average assets of 0.64 percent for the second quarter of 2008 compared to 0.79 percent for the second quarter of 2007. The annualized return on average equity was 7.11 percent during the current quarter, compared to 9.14 percent for the same period of 2007. Although First Citizens' earnings benefited from improved revenues, a significant increase in the provision for credit losses and higher noninterest expense more than offset the impact of the favorable variance.
Net interest income increased $5.8 million or 4.9 percent during the second quarter of 2008. Average loans and leases increased $793.5 million or 7.7 percent during the second quarter of 2008 due to growth in revolving home equity loans, commercial real estate and other commercial loans. Average interest-bearing liabilities increased $583.4 million or 5.0 percent during the second quarter of 2008 due to growth among deposits and long-term obligations. The taxable-equivalent net yield on interest earning assets equaled 3.45 percent, unchanged from the second quarter of 2007, but an improvement of 4 basis points from the first quarter of 2008 and 10 basis points from the fourth quarter of 2007.
The provision for credit losses increased $12.4 million during the second quarter of 2008 when compared to the same period of 2007. This higher provision for credit losses resulted from a $6.4 million increase in net charge-offs during the second quarter of 2008 and the favorable impact of refinements to the methodology used to calculate the allowance for loan and lease losses implemented during 2007. The 2007 modifications to the allowance methodology triggered a $6.1 million reduction in provision for credit losses. Net charge-offs totaled $10.4 million or 0.38 percent of average loans and leases during the second quarter of 2008 compared to $4.0 million or 0.16 percent of loans and leases during the second quarter of 2007. Second quarter 2008 net charge-offs included $3.4 million in losses on residential construction loans.
Noninterest income for the current quarter increased $6.4 million or 8.8 percent compared to the same period of 2007. The increase resulted from growth in service charges on deposit accounts, cardholder and merchant services income, wealth management services and fees from processing services. Noninterest expense increased $6.6 million during the second quarter of 2008. This 4.6 percent increase resulted primarily from higher salary expense and occupancy costs, partially offset by lower cardholder costs.
For the six-month period ending June 30, 2008, net income equaled $58.6 million or $5.62 per share, compared to $59.8 million or $5.73 per share earned during the same period of 2007. Annualized net income as a percentage of average assets was 0.72 percent during 2008, compared to 0.77 percent during 2007. The annualized return on average equity was 8.00 percent for the first six months of 2008, compared to 9.02 percent for the same period of 2007. Net income during 2008 benefited from higher net interest income and improved noninterest income, but these favorable variances were offset by increased provision for credit losses and noninterest expenses.
Year-to-date net interest income increased $10.2 million or 4.3 percent during 2008. Average loans and leases increased $761.8 million or 7.4 percent during the first half of 2008. However, highly competitive loan and deposit pricing caused the taxable-equivalent net yield on interest-earning assets to decline 4 basis points to 3.43 percent during 2008, versus 3.47 percent recorded during the comparable period of 2007.
Noninterest income increased $21.0 million or 14.9 percent during the first six months of 2008. The increase included an $8.1 million gain recognized in the first quarter of 2008 from the cash redemption of a portion of the Visa Inc. stock owned by BancShares following Visa's initial public offering. Service charges on deposit accounts increased $4.5 million or 12.5 percent during the first six months of 2008 due to higher commercial service charge income and overdraft fees. Fees from wealth management services increased $2.6 million or 11.2 percent during the first six months of 2008, when compared to the same period of 2007, primarily due to growth in broker-dealer services. Fees from processing services increased $1.8 million or 11.1 percent during the first six months of 2008 due to higher volumes.
The provision for credit losses amounted to $23.5 million for the first six months of 2008, a $19.0 million increase over 2007. The 2008 increase resulted from higher net charge-offs, additional allowances recognized on residential construction loans, and a reduction in the provision for credit losses during 2007 due to changes to the allowance methodology. Net charge-offs for 2008 total $15.7 million or 0.29 percent of loans and leases outstanding compared to $6.7 million or 0.13 percent of loans and leases recorded during the same period of 2007. Nonperforming assets totaled $47.3 million at June 30, 2008 compared to $18.8 million at June 30, 2007, the result of deterioration in the residential construction portfolio. Nonperforming assets represent 0.42 percent of total loans and leases as of June 30, 2008 compared to 0.18 percent of loans and leases as of June 30, 2007.
Noninterest expense increased $13.6 million or 4.8 percent during the first six months of 2008. Salaries and wages increased $8.0 million or 6.8 percent during 2008 as a result of new branch locations and merit increases. Employee benefit costs increased $5.2 million during 2008, primarily due to executive retirement costs. Occupancy expense increased $2.2 million or 7.8 percent during 2008 due to new branch locations and costs related to the headquarters building. Partially offsetting these increases were two credits recorded during 2008 -- a $3.3 million reversal of a liability established during 2007 related to exposures resulting from Visa member bank status and a $2.3 million reduction resulting from the termination of a cardholder reward program.
As of June 30, 2008, First Citizens had total assets of $16.4 billion. BancShares' banking subsidiaries, First Citizens Bank and IronStone Bank, provide a broad range of financial services to individuals, businesses, professionals and the medical community through a network of 401 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.
CONDENSED STATEMENTS OF INCOME
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Three Months Ended Six Months Ended
(thousands, except June 30 June 30
share data; unaudited) 2008 2007 2008 2007
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Interest income $ 202,575 $ 223,473 $ 419,978 $ 441,110
Interest expense 77,147 103,884 171,973 203,332
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Net interest income 125,428 119,589 248,005 237,778
Provision for credit
losses 13,350 934 23,468 4,466
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Net interest income
after provision for
credit losses 112,078 118,655 224,537 233,312
Noninterest income 79,025 72,620 162,693 141,651
Noninterest expense 149,481 142,878 295,122 281,473
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Income before income
taxes 41,622 48,397 92,108 93,490
Income taxes 15,396 17,546 33,497 33,655
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Net income $ 26,226 $ 30,851 $ 58,611 $ 59,835
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Taxable-equivalent
net interest income $ 127,143 $ 121,409 $ 251,573 $ 241,373
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Net income per share $ 2.51 $ 2.96 $ 5.62 $ 5.73
Cash dividends per
share 0.275 0.275 0.55 0.55
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Profitability
Information
(annualized)
Return on average
assets 0.64 0.79% 0.72 0.77%
Return on average
equity 7.11 9.14 8.00 9.02
Taxable-equivalent
net yield on
interest-earning
assets 3.45 3.45 3.43 3.47
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CONDENSED BALANCE SHEETS
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(thousands, except June 30 December 31 June 30
share data; unaudited) 2008 2007 2007
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Cash and due from banks $ 711,651 $ 793,788 $ 845,929
Investment securities 3,013,432 3,236,835 3,023,799
Loans and leases 11,313,155 10,963,904 10,513,041
Allowance for loan and
lease losses (144,533) (136,974) (129,276)
Other assets 1,528,969 1,354,554 1,755,112
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Total assets $ 16,422,674 $ 16,212,107 $ 16,008,605
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Deposits $ 13,075,411 $ 12,928,544 $ 12,772,322
Other liabilities 1,859,981 1,842,355 1,868,303
Shareholders' equity 1,487,282 1,441,208 1,367,980
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Total liabilities and
shareholders' equity $ 16,422,674 $ 16,212,107 $ 16,008,605
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Book value per share $ 142.54 $ 138.12 $ 131.10
Tangible book value
per share 132.24 127.72 120.61
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SELECTED AVERAGE BALANCES
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(thousands, except Three Months Ended Six Months Ended
shares outstanding; June 30 June 30
unaudited) 2008 2007 2008 2007
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Total assets $16,396,288 $15,725,976 $16,354,991 $15,649,720
Investment
securities 3,238,028 3,047,753 3,210,832 3,069,884
Loans and
leases 11,154,400 10,360,913 11,058,053 10,296,245
Interest-earning
assets 14,841,431 14,118,884 14,766,286 14,014,334
Deposits 12,969,423 12,524,786 12,940,377 12,513,558
Interest-bearing
liabilities 12,281,649 11,698,285 12,295,390 11,628,500
Shareholders'
equity $ 1,484,143 $ 1,353,739 $ 1,473,741 $ 1,337,864
Shares
outstanding 10,434,453 10,434,453 10,434,453 10,434,453
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ASSET QUALITY
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June 30 December 31 June 30
(thousands; unaudited) 2008 2007 2007
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Nonaccrual loans and leases $ 34,534 $ 13,021 $ 12,458
Other real estate 12,750 6,893 6,352
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Total nonperforming assets $ 47,284 $ 19,914 $ 18,810
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Accruing loans and leases
90 days or more past due $ 10,885 $ 7,124 $ 9,289
Net charge-offs (year-to-date) 15,719 27,969 6,716
Nonperforming assets to gross
loans and leases plus foreclosed
real estate 0.42% 0.18% 0.18%
Allowance for credit losses to
total loans and leases 1.34 1.32 1.30
Net charge-offs to average loans
and leases (annualized,
year-to-date) 0.29 0.27 0.13
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CAPITAL INFORMATION
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(dollars in thousands; June 30 December 31 June 30
unaudited) 2008 2007 2007
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Tier 1 capital $ 1,611,089 $ 1,557,190 $ 1,513,115
Total capital 1,897,038 1,836,763 1,785,452
Risk-weighted assets 12,257,155 11,961,124 11,592,171
Tier 1 capital ratio 13.14% 13.02% 13.05%
Total capital ratio 15.48 15.36 15.40
Leverage capital ratio 9.89 9.63 9.75
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