10-QPeriod: Q1 FY2019

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 8, 2019For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares Inc. /DE/ (FCNCA) reported solid financial results for the first quarter of 2019, demonstrating growth in key areas and a strong capital position. Net income rose by 11.1% year-over-year to $111.4 million, translating to a 15.8% increase in earnings per share to $9.67, partly due to common stock repurchases. The company's net interest income saw a significant increase of 12.7%, driven by higher average loan balances and improved loan yields, resulting in a widened net interest margin (NIM) of 3.89%. While noninterest income saw a decrease of 15.5%, largely due to the absence of a debt extinguishment gain from the prior year, improvements were noted in cardholder services and wealth management income. Noninterest expense remained stable, with slight decreases in FDIC insurance and foreclosure-related costs offsetting increases in salaries and equipment. The company's loan portfolio remained stable, with a slight decrease of 0.9% in total loans and leases, while deposits showed robust growth of 6.9%, indicating effective deposit gathering strategies. FCNCA maintained a strong capital position, exceeding regulatory requirements, and completed three strategic acquisitions during the quarter, signaling a commitment to expansion and market presence.

Financial Highlights

33 data points
Beta

Net Income

$111.36M

EPS (Diluted)

$9.67

Total Assets

$35.96B

Cash & Equivalents

$268.60M

Free Cash Flow

$116.16M

Financial Statements
Beta
Interest Expense$16.45M
Net Income$111.36M
EPS (Basic)$9.67
Shares Outstanding (Basic)11.52M

Key Highlights

  • 1Net income increased by 11.1% to $111.4 million, with EPS rising 15.8% to $9.67, bolstered by stock repurchases.
  • 2Net interest income grew by 12.7% to $320.5 million, and the net interest margin (NIM) expanded by 32 basis points to 3.89%.
  • 3Total deposits grew by 6.9% to $31.2 billion, primarily driven by an increase in demand and interest-bearing deposit accounts.
  • 4Loans and leases saw a slight decrease of 0.9% to $25.46 billion, influenced by declines in PCI loans and revolving mortgages.
  • 5Noninterest income decreased by 15.5% to $103.7 million, mainly due to the absence of a significant gain on debt extinguishment from the prior year.
  • 6The company completed three strategic mergers: First South Bancorp, Biscayne Bancshares, and entered an agreement to acquire Entegra Financial Corp., demonstrating an active M&A strategy.
  • 7Capital ratios remained strong, exceeding regulatory requirements, with a Tier 1 risk-based capital ratio of 12.69% and a Common Equity Tier 1 ratio of 12.69%.

Frequently Asked Questions

The primary driver of the $36.1 million (12.7%) increase in net interest income was higher average outstanding loan balances and improved loan yields, which led to a $38.9 million increase in interest and fees on loans. This was partially offset by an increase in interest expense on deposits due to higher balances and rates.

Noninterest income decreased by $19.0 million primarily because the first quarter of 2018 included a significant gain of $25.8 million from the extinguishment of debt. While this one-time gain was absent in Q1 2019, there were increases in marketable equity securities gains, cardholder services income, and wealth management services income that partially offset this reduction.

The total loan and lease portfolio decreased slightly by 0.9% to $25.46 billion. This was mainly due to a $49.2 million decline in the Purchased Credit Impaired (PCI) loan portfolio and a $10.3 million net decline in the non-PCI portfolio, influenced by reductions in revolving mortgages and seasonality in the government lending portfolio. However, growth was sustained in commercial construction and land development, commercial mortgage, and consumer auto loans.

First Citizens BancShares is actively pursuing strategic growth through acquisitions. During the first quarter of 2019, they completed the mergers with First South Bancorp and Biscayne Bancshares, and entered into a definitive merger agreement to acquire Entegra Financial Corp. These actions demonstrate a clear strategy to expand their presence and enhance banking efforts in key geographic markets like South Carolina and Florida.