FCNCA First Citizens BancShares Inc

First Citizens Reports Earnings for Third Quarter 2003 RALEIGH, N.C., Oct. 27 /PRNewswire-FirstCall/ -- First Citizens BancShares Inc. reports earnings for the quarter ending Sept. 30, 2003, of $20.3 million compared to $23.8 million for the corresponding period of 2002, a reduction of 14.7 percent, according to Lewis R. Holding, chairman of the board. Per share income for the third quarter 2003 totaled $1.94 compared to $2.27 for the same period a year ago. First Citizens' results generated an annualized return on average assets of 0.66 percent for the third quarter of 2003, compared to 0.80 percent for the same period of 2002. The annualized return on average equity was 8.03 percent during the current quarter, compared to 10.09 percent for the same period of 2002. During the third quarter, a reduction in net interest income and higher noninterest expenses more than offset the favorable impact of improved noninterest income and lower income tax expense. During the third quarter of 2003, net interest income decreased $5.3 million or 5.5 percent from the same period of 2002. The reduction in net interest income was due to the unfavorable impact of lower interest rates on interest-earning assets. The taxable-equivalent yield on interest-earning assets fell 104 basis points to 4.51 percent during the third quarter of 2003 when compared to the same period of 2002, while the rate on total interest-bearing liabilities fell 76 basis points to 1.50 percent. The taxable-equivalent net yield on interest-earning assets fell from 3.60 percent for the third quarter of 2002 to 3.28 percent for the third quarter of 2003. Average interest-earning assets increased $401.9 million or 3.8 percent during the third quarter of 2003 when compared to the same period of 2002. Noninterest expense increased $10.3 million or 9.5 percent during the third quarter of 2003. Salary expense increased $3.8 million or 7.9 percent during 2003 due to the continued expansion of Atlantic States Bank's franchise and higher incentive-based compensation. Employee benefit expense increased $1.3 million or 12.2 percent due to higher pension expense and health insurance costs. Equipment expense increased $2.0 million or 17.6 percent, the result of higher depreciation and maintenance costs from continuing technology investments. Noninterest income increased $7.6 million or 13.7 percent during the third quarter, the result of strong refinance activity. Mortgage income increased $2.5 million or 88.7 percent from the third quarter of 2002. Cardholder and merchant services income increased $1.9 million or 14.5 percent due to favorable volume growth. Income tax expense during the third quarter was $7.9 million for 2003 and $13.2 million for 2002. The $5.3 million or 39.9 percent reduction was primarily due to lower pre-tax income and adjustments to valuation reserves for deferred taxes. The provision for loan losses increased $761,000 or 13.6 percent from the third quarter of 2002 to the same period of 2003 due to higher loss estimates following recent loan growth. Net charge-offs were $4.0 million during the third quarter of 2003, compared to $4.5 million during the same period of 2002, an 11.1 percent reduction. For the nine-month period ending Sept. 30, 2003, net income was $59.4 million, or $5.68 per share, compared to $73.4 million, or $7.01 per share earned during the same period of 2002. Annualized net income for 2003 represents 0.65 percent of average assets compared to 0.83 percent for 2002. The annualized return on average equity was 8.02 percent for the first nine months of 2003, compared to 10.72 percent for the same period of 2002. Year-to-date net interest income for 2003 decreased $20.5 million or 7.1 percent from the same period of 2002. During 2003, the unfavorable impact of lower interest rates more than offset the benefit of growth among interest- earning assets. The taxable-equivalent net yield on interest-earning assets fell from 3.70 percent to 3.32 percent during 2003. Noninterest income increased $21.4 million or 12.9 percent during the first nine months of 2003, the result of improved cardholder and merchant services income and mortgage income. Noninterest income also included a $5.7 million nonrecurring gain on the sale of branch offices. Noninterest expense increased $24.9 million or 7.7 percent during the first nine months of 2003, the result of higher personnel expenses as well as higher equipment and occupancy costs. For the nine-month period ending Sept. 30, the provision for loan losses was $19.1 million and $19.4 million for 2003 and 2002, respectively. The reduction in the provision for loan losses resulted from lower levels of net charge-offs. Net charge-offs were $13.9 million and $14.9 million during the respective nine-month periods, a reduction of $1.0 million or 6.8 percent during 2003. Year-to-date net charge-offs represent 0.24 percent of average loans outstanding during 2003, compared to 0.27 percent for the same period of 2002. As of Sept. 30, 2003, First Citizens had total assets of $12.4 billion. First Citizens Bank has 348 branches in North Carolina, Virginia and West Virginia. Atlantic States Bank and its western division IronStone Bank have 46 branches in Georgia, Florida, Texas, Arizona and California. For more information, visit the 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 Nine Months Ended September 30 September 30 (thousands, except share data; unaudited) 2003 2002 2003 2002 Interest income $124,887 $147,742 $385,134 $455,661 Interest expense 34,573 52,127 116,236 166,306 Net interest income 90,314 95,615 268,898 289,355 Provision for loan losses 6,353 5,592 19,108 19,394 Net interest income after provision for loan losses 83,961 90,023 249,790 269,961 Noninterest income 63,205 55,571 186,540 165,155 Noninterest expense 118,947 108,614 346,204 321,335 Income before income taxes 28,219 36,980 90,126 113,781 Income taxes 7,922 13,190 30,763 40,366 Net income $20,297 $23,790 $59,363 $73,415 Taxable-equivalent net interest income $90,568 $95,932 $269,694 $290,388 Net income per share $1.94 $2.27 $5.68 $7.01 Cash dividends per share 0.275 0.250 0.825 0.750 Profitability Information (annualized) Return on average assets 0.66 % 0.80 % 0.65 % 0.83 % Return on average equity 8.03 10.09 8.02 10.72 Taxable-equivalent net yield on interest-earning assets 3.28 3.60 3.32 3.70 CONDENSED BALANCE SHEETS (thousands, except share data; September 30 December 31 September 30 unaudited) 2003 2002 2002 Cash and due from banks $790,166 $811,657 $801,450 Investment securities 2,646,829 2,539,236 2,502,026 Loans 8,026,502 7,620,263 7,521,834 Reserve for loan losses (117,747) (112,533) (111,577) Other assets 1,041,531 1,373,267 1,373,419 Total assets $12,387,281 $12,231,890 $12,087,152 Deposits $10,563,135 $10,439,620 $10,286,825 Other liabilities 807,718 824,979 850,456 Shareholders' equity 1,016,428 967,291 949,871 Total liabilities and shareholders' equity $12,387,281 $12,231,890 $12,087,152 Book value per share $97.39 $92.36 $90.67 Tangible book value per share 87.02 81.73 80.23 SELECTED AVERAGE BALANCES Three Months Ended Nine Months Ended September 30 September 30 (thousands, except shares outstanding; unaudited) 2003 2002 2003 2002 Total assets $12,287,273 $11,871,334 $12,177,404 $11,764,711 Investment securities 2,665,203 2,553,957 2,579,562 2,632,761 Loans 7,946,501 7,450,271 7,801,418 7,324,359 Interest-earning assets 10,994,308 10,592,386 10,876,224 10,480,111 Deposits 10,441,989 10,060,785 10,373,902 9,925,071 Interest-bearing liabilities 9,126,076 9,131,569 9,159,017 9,093,797 Shareholders' equity $1,002,712 $935,735 $989,121 $915,387 Shares outstanding 10,436,345 10,477,886 10,457,976 10,480,011 ASSET QUALITY September 30 December 31 September 30 (dollars in thousands; unaudited) 2003 2002 2002 Nonaccrual loans $13,494 $15,521 $14,944 Other real estate 6,827 7,330 12,092 Total nonperforming assets $20,321 $22,851 $27,036 Accruing loans 90 days or more past due $11,840 $9,566 $8,928 Net charge-offs (year-to-date) $13,894 21,104 $14,904 Nonperforming assets to gross loans plus other real estate 0.25 % 0.30 % 0.36% Reserve for loan losses to gross loans 1.47 1.48 1.48 Net charge-offs to average total loans (annualized, year-to-date) 0.24 0.29 0.27 CAPITAL INFORMATION (dollars in thousands; September 30 December 31 September 30 unaudited) 2003 2002 2002 Tier 1 capital $1,147,124 $1,096,537 $1,084,714 Total capital 1,262,501 1,204,142 1,191,150 Risk-weighted assets 8,618,154 8,123,321 8,086,739 Tier 1 capital ratio 13.31 % 13.50 % 13.41 % Total capital ratio 14.65 14.82 14.73 Leverage capital ratio 9.42 9.17 9.22 2002 data has been restated to reflect the adoption of Statement of Financial Accounting Standards No. 147, which was adopted during the fourth quarter of 2002 with a retroactive effective date of January 1, 2002. DATASOURCE: First Citizens BancShares, Inc. CONTACT: Barbara Thompson of First Citizens Bank, +1-919-716-2716 Web site: http://www.firstcitizens.com/

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