RALEIGH, N.C., Oct. 25, 2010 (GLOBE NEWSWIRE) -- First Citizens BancShares Inc. (Nasdaq:FCNCA) reports earnings for the quarter ending September 30, 2010, of $27.7 million, compared to $82.5 million for the corresponding period of 2009, according to Frank B. Holding Jr., chairman of the board. Net income for the third quarter of 2010 declined $54.7 million, or 66.4 percent, from the same quarter of 2009. Per share income for the third quarter 2010 totaled $2.66, compared to $7.90 for the same period a year ago. The decline primarily results from significant acquisition gains reported during the third quarter of 2009 that resulted from two FDIC-assisted transactions. The 2009 acquisition gains represented $63.5 million after tax, or $6.09 per share. 

First Citizens' current quarter results generated an annualized return on average assets of 0.52 percent and an annualized return on average equity of 6.46 percent, compared to respective returns of 1.83 percent and 22.45 percent for the same period of 2009.

The comparability of BancShares' results of operations for the third quarter of 2010 is affected by the FDIC-assisted transactions, due to the acquisition gains and post-acquisition transactions related to acquired loans and assumed deposits, which impact net interest income, provision for loan and lease losses, noninterest income and noninterest expense. Allowances are established through the provision for loan and lease losses on acquired loans as deterioration in credit quality is identified. For loans covered under loss share agreements, the estimated recoverable portion of any deterioration is recognized as an adjustment to the FDIC receivable with an offset to noninterest income. Additionally, fair value discounts are accreted into income over the estimated life of the loans, with accelerated accretion recognized if repayments occur sooner than the original estimates.  

Third quarter net interest income increased $94.7 million, or 70.0 percent, from the same period of 2009, due to an increase in interest-earning assets and the accretion of fair value discounts. Average interest-earning assets increased $2.74 billion, or 17.3 percent, due to assets acquired through the 2010 FDIC-assisted transactions. Large unscheduled loan payments received through the third quarter 2010 resulted in $74.9 million of fair value discount accretion, which increased interest income. The taxable-equivalent net yield on interest-earning assets increased 152 basis points when compared to the third quarter of 2009, primarily due to reduced deposit costs and the favorable impact of acquired loans and assumed deposits, including the impact of fair value discounts accreted into income during the third quarter of 2010. 

Interest-earning assets averaged $18.6 billion during the third quarter of 2010. Average loans increased $1.8 billion, or 15.2 percent, since the third quarter of 2009, due to acquisition activity. Average investment securities grew $213.6 million, or 5.9 percent, principally resulting from strong deposit growth within the legacy branch network. 

Average interest-bearing liabilities increased by $2.3 billion, or 17.5 percent, during the third quarter of 2010, due to higher levels of deposits. The rate on interest-bearing liabilities decreased 39 basis points to 1.25 percent during the third quarter of 2010 as market interest rates continued to contract.

The provision for loan and lease losses equaled $59.9 million during the third quarter of 2010, a $41.6 million increase from the same period of 2009, due to $43.1 million of post-acquisition deterioration of acquired loans covered by FDIC loss share agreements. The corresponding increase in the indemnification asset is recorded by the recognition of $35.9 million of noninterest income. Net charge-offs on noncovered loans during the third quarter 2010 equaled $15.2 million, compared to $15.3 million during the third quarter 2009. On an annualized basis, noncovered net charge-offs for the third quarter of 2010 represented 0.52 percent of average noncovered loans and leases, compared to 0.53 percent for the same period of 2009. Net charge-offs on covered loans equaled $14.8 million during the third quarter of 2010. No covered loan charge-offs were recorded during the third quarter of 2009. 

Total noninterest income declined $130.9 million, or 72.4 percent, from the third quarter of 2009, due to prior year acquisition gains of $104.4 million and $28.7 million of 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 loan payments, partially offset by increases to the receivable resulting from post-acquisition deterioration of other loans. Cardholder and merchant services income increased $2.7 million during the third quarter of 2010. Due to changes in regulations governing deposit account overdrafts that became effective in mid-August, deposit service charges declined $2.3 million, or 11.2 percent, during the third quarter versus the third quarter of 2009. 

Noninterest expense equaled $176.9 million during the third quarter of 2010, up $12.4 million, or 7.5 percent, $8.5 million of which resulted from the FDIC-assisted transactions. Salary expense increased $8.6 million, or 13.0 percent, due to higher head count, including $5.3 million for branch associates in acquired branches, and merit increases. Occupancy expense increased, due to the new facilities resulting from the FDIC-assisted transactions, while equipment costs increased as a result of higher hardware and software expenses. Higher transaction volume caused cardholder and merchant processing expense to increase. These increases were partially offset by reduced foreclosure-related costs and employee benefits expense. 

For the nine-month period ending September 30, 2010, net income equaled $163.0 million, or $15.62 per share, compared to $97.3 million, or $9.33 per share, earned during the same period of 2009. Annualized net income as a percentage of average assets was 1.05 percent during 2010, compared to 0.75 percent during 2009. The annualized return on average equity was 13.17 percent for the first nine months of 2010, compared to 9.01 percent for the same period of 2009.   The $65.6 million, or 67.4 percent, increase in net income reflects improved net interest income, higher acquisition gains and other noninterest income, partially offset by higher provision for loan and lease losses and noninterest expense. 

Net interest income increased $177.7 million, or 48.3 percent, during 2010, due to balance sheet growth resulting from the FDIC-assisted transactions, accretion of fair value discounts and an improved net yield on interest-earning assets. Average loans and leases grew $2.15 billion, or 18.3 percent, during the 2010. The taxable-equivalent net yield on interest-earning assets increased 85 basis points to 4.02 percent during 2010, versus 3.17 percent recorded during the comparable period of 2009 primarily due to acquired loan fair value discount accretion recognized during 2010. 

The provision for loan and lease losses totaled $108.6 million for the first nine months of 2010, compared to $57.7 million during 2009, a $50.9 million increase resulting from $63.5 million for post-acquisition deterioration of acquired loans covered by FDIC loss share agreements. The corresponding increase in the indemnification asset is recorded by the recognition of $52.1 million of noninterest income. Net charge-offs on noncovered loans totaled $40.6 million in 2010, down $9.4 million from 2009. Net charge-offs on noncovered loans for 2010 represent 0.47 percent of average noncovered loans and leases compared to 0.57 percent for 2009.   Net charge-offs on covered loans during 2010 equaled $22.1 million. No covered loan losses were incurred in the comparable period of 2009. 

Nonperforming assets covered by FDIC loss share agreements totaled $429.9 million as of September 30, 2010, compared to $205.1 million at September 30, 2009. Nonperforming assets not covered by FDIC loss share agreements totaled $185.7 million at September 30, 2010, compared to $106.3 million at September 30, 2009, due to higher nonaccrual and restructured loans. Nonperforming assets not covered by FDIC loss share agreements represent 1.60 percent of non-covered loans, leases and OREO as of September 30, 2010, compared to 0.92 percent of September 30, 2009.  

Acquisition gains recorded during 2010 totaled $136.0 million, compared to $104.4 million during 2009, all of which resulted from FDIC-assisted transactions. For 2010, other noninterest income includes a net reduction of $13.1 million resulting from adjustments to the FDIC receivable for covered assets. In addition, cardholder and merchant services income increased $9.4 million, due to higher transaction volume, while income from wealth management services increased $4.5 million. Mortgage income declined $2.3 million due to reduced refinancing activity. Deposit service charges declined $947,000, the net impact of lower fees from overdrafts and higher service charges for deposit accounts resulting from FDIC-assisted transactions.

Noninterest expense increased $53.5 million, or 11.2 percent, during the first nine months of 2010. Of the increase in total noninterest expenses, $48.9 million relates to costs incurred in the new locations resulting from the FDIC-assisted transactions. Exclusive of the increase directly resulting from the new branches, salary expense increased $4.6 million during 2010 resulting from staff increases and merit increases. 

As of September 30, 2010, First Citizens BancShares had total assets of $21.0 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 436 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
  Three Months Ended September 30 Nine Months Ended September 30
(thousands, except share data; unaudited) 2010 2009 2010 2009
Interest income  $ 278,628  $ 189,690  $ 696,763  $ 546,183
Interest expense  48,688  54,413  150,925  178,069
Net interest income  229,940  135,277  545,838  368,114
Provision for loan and lease losses  59,873  18,265  108,629  57,747
Net interest income after provision for loan and lease losses  170,067  117,012  437,209  310,367
Gain on acquisitions  --   104,434  136,000  104,434
Other noninterest income  49,969  76,419  218,540  217,527
Noninterest expense  176,851  164,499  531,577  478,112
Income before income taxes  43,185  133,366  260,172  154,216
Income taxes  15,439  50,898  97,213  56,885
Net income  $ 27,746  $ 82,468  $ 162,959  $ 97,331
Taxable-equivalent net interest income  $ 231,006  $ 136,426  $ 549,019  $ 372,001
Net income per share  $ 2.66  $ 7.90  $ 15.62  $ 9.33
Cash dividends per share  0.30  0.30 0.90 0.90
Profitability Information (annualized)        
Return on average assets 0.52 % 1.83 % 1.05 % 0.75 %
Return on average equity 6.46 22.45 13.17 9.01
Taxable-equivalent net yield on interest-earning assets  4.93 3.41 4.02 3.17
CONDENSED BALANCE SHEETS
    September 30 December 31 September 30
(thousands, except share data; unaudited)   2010 2009 2009
Assets        
Cash and due from banks    $ 493,786  $ 480,242  $ 723,031
Investment securities   3,789,486 2,932,765  3,287,309
Loans covered by FDIC loss share agreements   2,222,660 1,173,020  1,257,478
Loans and leases not covered by FDIC loss share agreements   11,545,309 11,644,999  11,520,683
Allowance for loan and lease losses   (218,046) (172,282)  (165,282)
Receivable from FDIC for loss share agreements   651,844 249,842  243,000
Other assets   2,564,252 2,157,477  1,646,659
Total assets    $ 21,049,291  $ 18,466,063  $ 18,512,878
Liabilities and shareholders' equity        
Deposits    $ 17,743,028  $ 15,337,567  $ 15,348,955
Other liabilities   1,588,059 1,569,381 1,649,239
Shareholders' equity   1,718,204 1,559,115 1,514,684
Total liabilities and shareholders' equity    $ 21,049,291  $ 18,466,063  $ 18,512,878
Book value per share    $ 164.67  $ 149.42  $ 145.16
Tangible book value per share   153.74  138.98 134.66
SELECTED AVERAGE BALANCES
  Three Months Ended September 30 Nine Months Ended September 30
(thousands, except shares outstanding; unaudited) 2010 2009 2010 2009
Total assets  $ 21,164,235  $ 17,892,599  $ 20,740,796  $ 17,385,950
Investment securities  3,810,057  3,596,422  3,536,952  3,506,187
Loans and leases  13,917,278  12,078,390  13,941,556  11,788,104
Interest-earning assets  18,605,130  15,862,964  18,272,392  15,686,614
Deposits  17,823,807  14,792,449  17,431,667  14,338,639
Interest-bearing liabilities  15,433,653  13,137,412  15,212,048  12,860,140
Shareholders' equity  $ 1,705,005  $ 1,457,599  $ 1,654,900  $ 1,444,605
Shares outstanding  10,434,453  10,434,453  10,434,453  10,434,453
ASSET QUALITY
    September 30 December 31 September 30
(dollars in thousands; unaudited)   2010 2009 2009
Nonaccrual loans covered by FDIC loss share agreements    $ 264,653  $ 116,446  $ 102,473
Nonaccrual loans not covered by FDIC loss share agreements    84,754  58,417  56,628
Other real estate covered by FDIC loss share agreements    99,843  93,774  102,600
Other real estate not covered by FDIC loss share agreements    47,523 40,607  44,703
Troubled debt restructurings covered by FDIC loss share agreements  65,417 10,013  -- 
Troubled debt restructurings not covered by FDIC loss share agreements   53,374 55,025  4,990
Total nonperforming assets    $ 615,564  $ 374,282  $ 311,394
Nonperforming assets covered by FDIC loss share agreements    $ 429,913  $ 220,233  $ 205,073
Nonperforming assets not covered by FDIC loss share agreements   185,651  154,049  106,321
Total nonperforming assets    $ 615,564  $ 374,282  $ 311,394
Allowance for loan and lease losses allocated to:        
Loans covered by FDIC loss share agreements    $ 43,839  $ 3,500  $ -- 
Loans not covered by FDIC loss share agreements    174,207  168,782  165,282
Ratio of allowance for loan and lease losses to loans and leases:        
Covered by FDIC loss share agreements    1.97 %  0.30 %  -- % 
Not covered by FDIC loss share agreements    1.51  1.45  1.43
Net charge-offs of noncovered loans and leases, year-to-date    40,613  64,651  50,034
Ratio of nonperforming assets to loans, leases and other real estate:      
Covered by FDIC loss share agreements    18.51 %  17.39 %  15.08 %
Not covered by FDIC loss share agreements    1.60  1.32  0.92
Total   4.42  2.89  2.41
Net charge-offs of noncovered loans to average noncovered loans and leases (annualized)   0.47 % 0.56 % 0.57 %
CAPITAL INFORMATION
    September 30 December 31 September 30
(dollars in thousands; unaudited)   2010 2009 2009
Tier 1 capital    $ 1,906,806  $ 1,752,384  $ 1,734,984
Total capital    2,180,810  2,047,684  2,028,621
Risk-weighted assets    13,258,598  13,136,815  13,019,522
Tier 1 capital ratio   14.38 % 13.34 % 13.33 %
Total capital ratio   16.45 15.59 15.58
Leverage capital ratio   9.04 9.54 9.73
CONTACT:  First Citizens BancShares          Barbara Thompson          (919) 716-2716