10-QPeriod: Q1 FY2018

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 3, 2018For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. (FCNCA) reported a strong first quarter of 2018 with net income of $100.2 million, an increase of 48.2% compared to the same period in 2017. This performance was driven by robust net interest income growth, a gain from debt extinguishment, and increased noninterest income. The bank's net interest margin improved to 3.57% on a taxable-equivalent basis, reflecting higher loan and investment yields and strong deposit growth. The company also highlighted its solid capital position, with Tier 1 risk-based capital ratio at 13.38%, exceeding regulatory requirements. The recent acquisition of HomeBancorp, Inc. is expected to expand FCB's footprint in Florida. While loan growth was modest, deposit growth was significant, indicating a stable funding base.

Financial Highlights

31 data points
Beta

Net Income

$100.23M

EPS (Diluted)

$8.35

Total Assets

$34.44B

Cash & Equivalents

$248.14M

Free Cash Flow

$434.31M

Financial Statements
Beta
Interest Expense$8.16M
Net Income$100.23M
EPS (Basic)$8.35
Shares Outstanding (Basic)12.01M

Key Highlights

  • 1Net income increased significantly by 48.2% year-over-year to $100.2 million ($8.35 per share).
  • 2Net interest income rose 13.6% year-over-year to $284.4 million, driven by loan growth and improved yields.
  • 3Taxable-equivalent net interest margin improved to 3.57%, up from 3.25% in the prior year's first quarter.
  • 4Noninterest income increased by 23.1% year-over-year to $122.7 million, boosted by a $25.8 million gain from debt extinguishment.
  • 5Total deposits grew by 3.3% year-over-year to $29.97 billion, primarily due to organic growth in demand and interest-bearing accounts.
  • 6The company maintained strong capital adequacy ratios, with the Tier 1 risk-based capital ratio at 13.38%.
  • 7First Citizens Bank & Trust Company completed the acquisition of HomeBancorp, Inc. on May 1, 2018, expanding its presence in Florida.

Frequently Asked Questions

The primary driver of earnings growth was a significant increase in net interest income, which rose 13.6% year-over-year, fueled by higher loan balances and improved yields on both loans and investment securities. Additionally, a substantial gain from the extinguishment of debt contributed positively to noninterest income.

Total loans and leases increased slightly by 0.2% sequentially to $23.61 billion. Non-PCI loans, which represent the majority of the portfolio, saw modest growth, while PCI loans continued to decline due to run-off. The allowance for loan and lease losses remained stable at 0.94% of total loans and leases.

The $25.8 million pre-tax gain on extinguishment of debt in Q1 2018 was primarily from paying off eight Federal Home Loan Bank debt obligations totaling $675.0 million. This transaction significantly reduced long-term obligations and interest expense, contributing positively to net income for the quarter.

The adoption of ASU 2016-01 led to equity securities no longer being classified as available-for-sale, with fair value changes now recognized in net income. This resulted in a $18.7 million increase to retained earnings and a decrease in Accumulated Other Comprehensive Income (AOCI). Additionally, the adoption of ASU 2018-02 resulted in a $31.3 million increase to retained earnings and decrease to AOCI related to stranded tax effects from the Tax Cuts and Jobs Act.