10-QPeriod: Q2 FY2018

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 2, 2018For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. (FCNCA) reported solid financial performance for the second quarter and first half of 2018. The company demonstrated loan and deposit growth, supported by a completed acquisition and organic expansion. Net interest income saw a significant increase year-over-year, driven by higher loan and investment yields, and a favorable interest rate environment. Noninterest income remained robust, though impacted by the absence of large acquisition gains present in the prior year's comparable periods. Capital levels remain strong, exceeding regulatory requirements, and the company is actively managing its balance sheet. The company completed the acquisition of HomeBancorp, Inc. in May 2018 and has announced agreements to acquire Palmetto Heritage Bancshares, Inc. and Capital Commerce Bancorp, Inc. later in the year, signaling continued strategic expansion. Despite a slight decrease in net income compared to the prior year's periods, largely due to the absence of significant acquisition gains in 2017, the underlying operational performance remains positive.

Financial Highlights

33 data points
Beta

Revenue

$90.49M

Net Income

$93.29M

103.1% Net Margin

EPS (Diluted)

$7.77

Total Assets

$35.09B

Cash & Equivalents

$260.52M

Free Cash Flow

$26.06M

Financial Statements
Beta
Revenue$90.49M
Interest Expense$7.66M
Net Income$93.29M
EPS (Basic)$7.77
Shares Outstanding (Basic)12.01M

Key Highlights

  • 1Loans grew by $926.4 million (15.7% annualized) in Q2 2018, primarily due to the HomeBancorp acquisition and organic portfolio growth.
  • 2Deposits increased by $439.6 million (5.9% annualized) in Q2 2018, boosted by the HomeBancorp acquisition and organic growth.
  • 3Net interest income rose 13.2% year-over-year in Q2 2018, driven by higher yields on loans and investments.
  • 4The net interest margin improved by 36 basis points year-over-year in Q2 2018 to 3.64%, reflecting better loan and investment yields.
  • 5Noninterest income, excluding acquisition gains, increased by 6.34% year-over-year in Q2 2018, with wealth management fees being a key driver.
  • 6The company completed the HomeBancorp acquisition in May 2018 and has announced agreements for further acquisitions, indicating a focus on strategic growth.
  • 7Capital ratios remain strong, with Tier 1 risk-based capital at 13.06% and Common Equity Tier 1 at 13.06% as of June 30, 2018.

Frequently Asked Questions

The HomeBancorp acquisition, completed on May 1, 2018, contributed to loan growth of $543.4 million and deposit growth of $582.2 million. It also added $842.7 million in assets and $787.7 million in liabilities, including $550.6 million in non-PCI loans and $15.6 million in PCI loans. Merger-related expenses were $1.5 million and $1.7 million for the three and six months ended June 30, 2018, respectively.

Net interest income increased by $11.8 million (4.1%) in Q2 2018 compared to Q1 2018, and by $34.6 million (13.2%) compared to Q2 2017. The taxable-equivalent net interest margin increased to 3.64% in Q2 2018, up from 3.57% in Q1 2018 and 3.28% in Q2 2017, driven by higher loan and investment yields.

The company is actively pursuing strategic growth through acquisitions. In addition to the completed HomeBancorp merger, agreements were announced for the acquisitions of Palmetto Heritage Bancshares, Inc. and Capital Commerce Bancorp, Inc., both expected to close in Q4 2018. These moves indicate a continued focus on expanding market presence and enhancing banking operations.

The company focuses on maintaining an interest rate risk profile that benefits from a rising rate environment by emphasizing core customer deposits and loans within a targeted interest rate risk profile. They also manage noninterest expenses, optimize their branch network, and enhance technology and delivery channels. Interest rate sensitivity analysis shows a generally positive impact on net interest income from rate increases, and economic value of equity metrics remained stable.