10-QPeriod: Q1 FY2020

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 5, 2020For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. (FCNCA) reported a net income of $57.2 million for the first quarter of 2020, a significant decrease of 48.7% compared to the same period in 2019. This decline was primarily driven by a substantial unrealized loss of $51.4 million in their marketable equity securities portfolio and an increased provision for credit losses of $21.5 million, largely attributed to the anticipated economic impact of COVID-19. Despite the decrease in net income, the company maintained a strong financial position. Total assets grew to $41.6 billion, supported by a robust increase in total deposits to $35.3 billion. Loan growth was modest, increasing by 5.0% to $29.2 billion. The company also successfully completed a $695 million capital raise through subordinated notes and preferred stock issuance, strengthening its capital position. Regulatory capital ratios remained well above well-capitalized limits, indicating resilience in the face of economic uncertainties.

Financial Highlights

32 data points
Beta

Net Income

$57.17M

EPS (Diluted)

$5.46

Total Assets

$41.59B

Cash & Equivalents

$454.22M

Free Cash Flow

-$9.32M

Financial Statements
Beta
Interest Expense$31.16M
Net Income$57.17M
EPS (Basic)$5.46
Shares Outstanding (Basic)10.47M

Key Highlights

  • 1Net income decreased by 48.7% year-over-year to $57.2 million, largely due to a $51.4 million decline in the value of marketable equity securities and a $21.5 million increase in the provision for credit losses related to COVID-19.
  • 2Total assets grew by 4.4% to $41.6 billion, while total deposits saw a significant increase of 10.7% (annualized) to $35.3 billion.
  • 3Net interest income increased by 5.6% to $338.4 million, driven by loan growth, though the net interest margin (NIM) compressed by 31 basis points to 3.55% due to lower yields on assets and higher rates paid on deposits.
  • 4The company successfully raised $695 million in capital through subordinated notes and Series A preferred stock, bolstering its financial flexibility.
  • 5Loan growth was moderate at 5.0% ($359.5 million increase) to $29.2 billion, with the allowance for credit losses decreasing to $209.3 million from $225.1 million, reflecting the adoption of ASC 326 and the impact of COVID-19.
  • 6Regulatory capital ratios remain strong, significantly exceeding well-capitalized requirements, indicating a robust capital position.
  • 7The company actively participated in the SBA Paycheck Protection Program (PPP), processing approximately 23,000 loan applications for $3.4 billion in funding.

Frequently Asked Questions

The primary drivers for the decrease in net income were a $51.4 million decline in the fair value of marketable equity securities and an increase in the provision for credit losses by $21.5 million, largely due to anticipated impacts from the COVID-19 pandemic.

The company's capital position remains strong. They successfully raised $695 million in capital through subordinated notes and preferred stock, and all regulatory capital ratios, including Tier 1 risk-based capital and Common Equity Tier 1, remained well above well-capitalized limits.

Loan growth was moderate at 5.0% year-over-year. While the company is actively monitoring its loan portfolio due to COVID-19, with approximately $6.5 billion in loan payment extensions granted, they have not seen significant shifts in credit line utilization or overall declines in credit quality. The allowance for credit losses has been adjusted to reflect potential economic impacts.

The company implemented measures to support customers, including waiving early withdrawal penalties, offering payment deferrals, providing special unsecured loans, and actively participating in the SBA PPP. For employees, they facilitated remote work, adjusted branch operations for safety, and increased access to employee assistance programs.