10-QPeriod: Q2 FY2020

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 5, 2020For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. /DE/ (FCNCA) reported a strong second quarter of 2020, with net income available to common shareholders reaching $149.0 million, a significant increase from $119.4 million in the prior year's second quarter. This growth was driven by several factors, including robust noninterest income, particularly from marketable equity securities, and gains on the sale of investment securities. Despite a decline in net interest income after provisioning, the bank benefited from substantial loan and deposit growth, partly fueled by the Paycheck Protection Program (PPP) and government stimulus measures. Despite the ongoing economic uncertainties stemming from the COVID-19 pandemic, which led to an increased provision for credit losses, FCNCA maintained a strong capital and liquidity position. The adoption of the CECL (Current Expected Credit Losses) model at the beginning of 2020 also impacted the allowance for credit losses, resulting in a net decrease initially, but with a reserve build due to COVID-19 impacts. The bank's strategic focus on organic growth and acquisitions, coupled with a solid capital base, positions it to navigate the current economic environment.

Financial Highlights

32 data points
Beta

Net Income

$153.79M

EPS (Diluted)

$14.74

Total Assets

$47.87B

Cash & Equivalents

$389.23M

Free Cash Flow

$47.39M

Financial Statements
Beta
Interest Expense$25.86M
Net Income$153.79M
EPS (Basic)$14.74
Shares Outstanding (Basic)10.11M

Key Highlights

  • 1Net income available to common shareholders increased by 25% year-over-year to $149.0 million for Q2 2020.
  • 2Total assets grew significantly to $47.87 billion as of June 30, 2020, up from $39.82 billion at the end of 2019.
  • 3Total deposits increased by $7.05 billion year-to-date to $41.48 billion, bolstered by SBA-PPP and stimulus deposits.
  • 4Total loans and leases also saw substantial growth, increasing by $3.54 billion year-to-date to $32.42 billion.
  • 5Noninterest income surged by 54.8% in Q2 2020 compared to the prior year, largely due to a significant increase in marketable equity securities gains ($64.6 million in Q2 2020 vs. $3.1 million in Q2 2019).
  • 6The bank successfully raised $695 million in capital during Q1 2020 through subordinated notes and preferred stock issuance.
  • 7Regulatory capital ratios remained well in excess of Basel III requirements, indicating a strong capital position.

Frequently Asked Questions

The COVID-19 pandemic led to an increased provision for credit losses ($20.6 million in Q2 2020 vs. $5.2 million in Q2 2019) to account for potential economic impacts such as slower economic activity and higher unemployment. Despite this, the bank saw strong loan and deposit growth, partly due to government programs like the SBA-PPP. The bank also saw increased operational expenses related to COVID-19 safety measures.

The adoption of ASC 326 on January 1, 2020, resulted in a net decrease of $37.9 million in the Allowance for Credit Losses (ACL). This was primarily due to a $56.9 million decrease in the ACL for non-PCD loans, offset by a $19.0 million increase for PCD loans. However, a $36.1 million reserve build was subsequently added in Q2 2020 due to the potential economic impacts of COVID-19.

The substantial increase in noninterest income, particularly in the second quarter of 2020, was primarily driven by a significant surge in gains from marketable equity securities ($64.6 million in Q2 2020 compared to $3.1 million in Q2 2019). Realized gains on investment securities available for sale also contributed to this increase.

The bank experienced significant growth in both loans and deposits. Total loans and leases increased by $3.54 billion year-to-date to $32.42 billion, with notable growth from SBA-PPP loans and organic expansion. Total deposits grew by $7.05 billion year-to-date to $41.48 billion, also supported by SBA-PPP and stimulus deposits, along with organic growth in checking and money market accounts.