RALEIGH, N.C., Oct. 27, 2008 (GLOBE NEWSWIRE) -- First Citizens BancShares Inc. (Nasdaq:FCNCA) reports earnings for the quarter ending September 30, 2008, of $21.5 million, compared to $22.6 million for the corresponding period of 2007, a decrease of 5.0 percent, according to Lewis R. Holding, chairman of the board.
During the third quarter of 2008, the combined impact of higher provision for credit losses and noninterest expense exceeded growth in net interest income.
Per share income for the third quarter 2008 totaled $2.06, compared to $2.17 for the same period a year ago. First Citizens' results generated an annualized return on average assets of 0.52 percent for the third quarter of 2008, compared to 0.56 percent for the third quarter of 2007. The annualized return on average equity was 5.71 percent during the current quarter, compared to 6.48 percent for the same period of 2007.
Net interest income increased $6.7 million or 5.5 percent during the third quarter of 2008, due to a 10 basis point increase in the net yield on interest-earning assets as well as higher levels of interest-earning assets. Average loans and leases increased $817.3 million or 7.7 percent during the third quarter of 2008, when compared to the same period in 2007. Growth in funding sources was slow, as average interest-bearing liabilities increased $134.8 million or 1.1 percent over 2007. Growth in money market deposits and long-term borrowings was largely offset by reductions in customer investments in commercial cash management products.
The provision for credit losses increased $2.9 million or 16.5 percent during the third quarter of 2008 when compared to the same period of 2007, due to continued deterioration in the residential construction loan portfolio. Nonperforming assets totaled $62.2 million or 0.53 percent of loans plus other real estate owned as of September 30, 2008, compared to $23.4 million or 0.22 percent of total loans plus other real estate owned as of September 30, 2007. Net charge-offs equaled $11.6 million during the third quarter of 2008, compared to $12.9 million during the third quarter of 2007. Net charge-offs for 2008 resulted primarily from losses among residential construction and consumer loans, while 2007 losses were primarily attributable to losses recorded on two non-real estate-secured relationships. The annualized ratio of net charge-offs to average loans and leases equaled 0.40 percent during the third quarter of 2008, compared to 0.48 percent during the same period of 2007.
Noninterest income decreased slightly during the third quarter of 2008, primarily due to a $1.0 million reduction in securities gains, partially offset by improved service charges on deposit accounts. Noninterest expense increased $5.5 million during the third quarter of 2008. This 3.7 percent increase resulted primarily from higher salary expense and costs related to branch expansion. Salary expense increased $3.9 million or 6.3 percent, due to branch expansion and the impact of merit increases.
For the nine-month period ending September 30, 2008, net income equaled $80.1 million or $7.68 per share, compared to $82.5 million or $7.90 per share earned during the same period of 2007. Annualized net income as a percentage of average assets was 0.65 percent during 2008, compared to 0.70 percent during 2007. The annualized return on average equity was 7.22 percent for the first nine months of 2008, compared to 8.14 percent for the same period of 2007. Net income during 2008 declined due to higher provision for credit losses and noninterest expense. Net income benefited from improved net interest income and noninterest income.
Net interest income totaled $375.6 million during 2008, an increase of $16.9 million or 4.7 percent over 2007. Average loans and leases increased $780.0 million or 7.5 percent during the first nine months of 2008. The impact of lower interest rates offset the benefit of strong loan growth, resulting in a net yield on interest earning assets of 3.44 percent, unchanged from 2007.
The provision for credit losses totaled $43.7 million during 2008, an increase of $21.9 million over 2007. Net charge-offs for 2008 totaled $27.3 million, compared to $19.6 million recorded during the same period of 2007. The higher net charge-offs during 2008 relate to residential construction loans and consumer loans. Year-to-date net charge-off ratios totaled 0.33 percent for 2008, compared to 0.25 percent for 2007. During 2007, provision for credit losses included an $8.6 million credit resulting from refinements to the methodology used to calculate the allowance for commercial loans and home equity lines of credit, partially offset by $2.5 million of additional allowances recognized for market trends suggesting credit deterioration.
Noninterest income increased $21.0 million or 9.6 percent during the first nine months of 2008. Gains from securities transactions totaled $8.4 million during 2008, up $7.0 million from 2007. Service charges on deposit accounts increased $5.5 million or 9.6 percent during 2008, primarily due to higher commercial service charges resulting from lower earnings credit rates during 2008. Favorable variances were also recorded in fees from processing services, cardholder and merchant services income and wealth management services.
Noninterest expense increased $19.1 million or 4.5 percent during the first nine months of 2008. Salaries and wages increased $11.9 million or 6.6 percent as a result of new branch locations and merit increases. Employee benefits increased $3.7 million or 8.9 percent during 2008, due to higher executive retirement costs. Occupancy costs increased $3.2 million or 7.6 percent, due to new branches and a new headquarters building. Costs related to processing services increased $2.4 million or 6.4 percent from 2007 to 2008, due to electronic banking expansion and growth in cardholder transaction volume. Communication costs increased $1.2 million or 14.5 percent in the first nine months of 2008, the result of delivering improved capacity to the branch network. Costs related to cardholder reward programs declined $2.8 million or 29.8 percent, due to the termination of a program for debit cardholders, while advertising expense decreased $2.8 million or 34.7 percent.
As of September 30, 2008, First Citizens had total assets of $16.7 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 Nine Months Ended
(thousands, except September 30 September 30
share data; unaudited) 2008 2007 2008 2007
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Interest income $199,372 $232,120 $619,350 $673,230
Interest expense 71,761 111,185 243,734 314,517
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Net interest income 127,611 120,935 375,616 358,713
Provision for credit losses 20,195 17,333 43,663 21,799
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Net interest income after
provision for credit losses 107,416 103,602 331,953 336,914
Noninterest income 77,244 77,285 239,937 218,936
Noninterest expense 152,395 146,906 447,517 428,379
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Income before income taxes 32,265 33,981 124,373 127,471
Income taxes 10,787 11,362 44,284 45,017
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Net income $ 21,478 $ 22,619 $ 80,089 $ 82,454
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Taxable-equivalent net
interest income $129,164 $122,980 $380,737 $364,353
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Net income per share $ 2.06 $ 2.17 $ 7.68 $ 7.90
Cash dividends per share 0.275 0.275 0.825 0.825
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Profitability Information
(annualized)
Return on average assets 0.52% 0.56% 0.65% 0.70%
Return on average equity 5.71 6.48 7.22 8.14
Taxable-equivalent net yield
on interest-earning assets 3.47 3.37 3.44 3.44
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CONDENSED BALANCE SHEETS
========================
(thousands, except September 30 December 31 September 30
share data; unaudited) 2008 2007 2007
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Cash and due from banks $ 724,216 $ 793,788 $ 827,083
Investment securities 2,977,565 3,236,835 3,266,150
Loans and leases 11,627,635 10,963,904 10,763,158
Allowance for loan and
lease losses (152,946) (136,974) (133,576)
Other assets 1,488,194 1,354,554 1,589,055
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Total assets $16,664,664 $16,212,107 $16,311,870
Deposits $13,372,468 $12,928,544 $12,980,447
Other liabilities 1,786,396 1,842,355 1,929,848
Shareholders' equity 1,505,800 1,441,208 1,401,575
Total liabilities and
shareholders' equity $16,664,664 $16,212,107 $16,311,870
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Book value per share $ 144.31 $ 138.12 $ 134.32
Tangible book value
per share 134.06 127.72 123.88
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SELECTED AVERAGE BALANCES
=========================
(thousands, except Three Months Ended Nine Months Ended
shares outstanding; September 30 September 30
unaudited) 2008 2007 2008 2007
====================================================================
Total assets $16,377,570 $16,092,009 $16,362,573 $15,798,770
Investment
securities 2,998,370 3,162,011 3,139,495 3,100,930
Loans and leases 11,440,563 10,623,247 11,186,487 10,406,443
Interest-earning
assets 14,814,463 14,476,247 14,782,462 14,169,997
Deposits 13,003,821 12,728,527 12,961,679 12,586,002
Interest-bearing
liabilities 12,187,085 12,052,307 12,259,025 11,771,321
Shareholders'
equity $ 1,496,573 $ 1,385,284 $ 1,481,519 $ 1,353,820
Shares
outstanding 10,434,453 10,434,453 10,434,453 10,434,453
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ASSET QUALITY
=============
(dollars in thousands; September 30 December 31 September 30
unaudited) 2008 2007 2007
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Nonaccrual loans and leases $39,598 $13,021 $18,227
Other real estate 21,580 6,893 5,202
Troubled debt restructuring 988 -- --
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Total nonperforming assets $62,166 $19,914 $23,429
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Accruing loans and leases 90
days or more past due $20,902 $ 7,124 $10,322
Net charge-offs (year-to-date) 27,313 27,969 19,574
Nonperforming assets to loans
and leases plus other
real estate 0.53% 0.18% 0.22%
Allowance for credit losses
to total loans and leases 1.38 1.32 1.31
Net charge-offs to average
loans and leases (annualized,
year-to-date) 0.33 0.27 0.25
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CAPITAL INFORMATION
===================
(dollars in thousands; September 30 December 31 September 30
unaudited) 2008 2007 2007
==================================================================
Tier 1 capital $ 1,630,209 $ 1,557,190 $ 1,533,381
Total capital 1,919,838 1,836,763 1,810,076
Risk-weighted assets 12,516,318 11,961,124 11,828,015
Tier 1 capital ratio 13.02% 13.02% 12.96%
Total capital ratio 15.34 15.36 15.30
Leverage capital ratio 10.02 9.63 9.59
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