First Citizens’ second-quarter profit falls

08/08/2014 12:12 PM

08/08/2014 12:13 PM

The corporate parent of First Citizens Bank reported that net income fell 40 percent in the second quarter compared to a year ago.

Net income totaled $26.6 million in the second quarter, or $2.76 per share. That compares to $43.9 million, or $4.56 per share, a year ago.

Raleigh-based First Citizens Bancshares reported in documents filed with the Securities and Exchange Commission that loans it previously acquired “had an unfavorable impact on earnings.”

Spokesman Frank Smith elaborated in an e-mail, noting that the loans the banks obtained in recent years by acquiring other banks paid higher interest rates than newly originated loans. Consequently, as those acquired loans are repaid or refinanced, interest income suffers.

First Citizens acquired a half-dozen failed banks that were taken over by the Federal Deposit Insurance Corp. from 2009 to 2011. The FDIC-assisted transactions include loss-share agreements that protect the bank from losses arising from loans the banks acquired.

Net interest income, which includes income from loan payments, totaled $177.3 million in the quarter, down from $193.9 million.

In addition, First Citizens also recorded a much smaller credit to its provision for loan and lease losses in the second quarter, $7.3 million, down from $13.2 million a year ago.

The credits, said Smith, are the result of “reversing a previously established allowance for loan and lease losses.”

Loans totaled $13.5 billion in the quarter, up 3.3 percent from a year ago.

First Citizens expects to close on its previously announced $600 million-plus acquisition of South Carolina-based First Citizens Bank and Trust, which has 176 branches in South Carolina and Georgia, in the fourth quarter. Raleigh’s Holding family owns a controlling stake in both companies, and the merger would create the nation’s largest family-controlled bank.

When the deal is completed, the combined bank will have more than 575 branches in 18 states and the District of Columbia and will be based in Raleigh.

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