First Citizens Reports Earnings for First Quarter 2008

April 28, 2008

RALEIGH, N.C. - First Citizens BancShares Inc. (Nasdaq: FCNCA) reports earnings for the quarter ending March 31, 2008, of $32.4 million compared to $29.0 million for the corresponding period of 2007, according to Lewis R. Holding, chairman of the board. During 2008, net income benefited from a nonrecurring investment security gain and improved net interest income. BancShares also reported higher noninterest expense and provision for credit losses.

Per share income for the first quarter of 2008 totaled $3.10, compared to $2.78 for the same period a year ago. First Citizens’ current quarter results generated an annualized return on average assets of 0.80 percent, compared to 0.75 percent for the first quarter of 2007. The annualized return on average equity was 8.88 percent for the first quarters of 2008 and 2007.

First quarter net interest income increased $4.4 million or 3.7 percent from the same period in 2007, due to a $782.5 million or 5.6 percent increase in average interest-earning assets. Changes in interest rates, however, continued to have an adverse impact on net interest income, causing a nine basis point reduction in the net yield on interest-earning assets during the first quarter of 2008, when compared to the same period of 2007. The taxable-equivalent yield equaled 3.41 percent during the first quarter of 2008. When compared to the fourth quarter of 2007, the net yield improved six basis points during the first quarter of 2008.

Average loans and leases increased $730.8 million or 7.1 percent during the first quarter of 2008, when compared to the same period of 2007, due to growth among commercial and revolving real estate loans. Average investment securities increased $91.4 million or 3.0 percent during the same period. Falling interest rates caused the taxable-equivalent yield on interest-earning assets to decline from 6.38 percent during the first quarter of 2007 to 6.00 percent during the first quarter of 2008.

Average interest-bearing liabilities increased by $751.2 million or 6.5 percent during the first quarter of 2008, due to higher levels of money market deposits, time deposits and master note balances. The rate on total interest-bearing liabilities decreased from 3.48 percent during the first quarter of 2007 to 3.10 percent during the same period of 2008.

The provision for credit losses equaled $10.1 million during the first quarter of 2008, an increase of $6.6 million or 86.5 percent over the same period of 2007. The higher provision for credit losses resulted from allowances established for nonaccrual loans and higher net charge-offs. Nonperforming assets at March 31, 2008, equaled $43.2 million, or 0.39 percent of loans, leases and other real estate, up $22.1 million from March 31, 2007. During the first quarter of 2008, $27.9 million of residential construction loans, primarily located in the Atlanta market, were placed on nonaccrual status due to deteriorating borrower cash flow and recognition of reductions in collateral value. Net charge-offs in the first quarter of 2008 totaled $5.3 million, compared to $2.7 million during the first quarter of 2007, a $2.6 million increase. On an annualized basis, net charge-offs for the first quarter of 2008 represented 0.19 percent of average loans and leases, compared to 0.11 percent for the same period of 2007.

Noninterest income totaled $83.7 million during the first quarter of 2008, a $14.6 million or 21.2 percent increase over 2007. The increase included an $8.1 million gain recognized in the first quarter of 2008 arising from the cash redemption of a portion of the Visa Inc. stock owned by BancShares following Visa’s initial public offering. Noninterest income also benefited from growth in service charges on deposit accounts and fees generated by wealth management services. Deposit service charges increased $2.8 million or 16.5 percent during the first three months of 2008, when compared to 2007, due to higher levels of commercial service charges and overdraft fees. Income from wealth management services increased $1.5 million or 12.7 percent primarily as a result of higher broker-dealer income.

Noninterest expense equaled $145.6 million during the first quarter of 2008, an increase of $7.0 million or 5.1 percent. Salaries and wages increased $4.2 million or 7.2 percent over the same period of 2007, the result of additional staff and 2007 merit increases. Employee benefit costs increased $5.0 million during 2008, primarily due to executive retirement costs. Occupancy expense increased $1.5 million or 10.8 percent, as a result of new branch locations and costs related to the new headquarters building. Other expenses decreased $3.8 million or 9.8 percent during the first quarter of 2008, primarily due to a $3.3 million reversal of Visa member bank liabilities that were accrued in 2007 but settled as a result of Visa’s initial public offering. Advertising costs declined $1.8 million during the first quarter of 2008.

As of March 31, 2008, First Citizens BancShares 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 397 branch offices, telephone banking, online banking and ATMs. For more information, visit First Citizens’ Web site at firstcitizens.com.

Click here for First Citizens' First Quarter 2008 Financials.

Barbara Thompson
919.716.2716
First Citizens Bank