10-QPeriod: Q3 FY2020

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 3, 2020For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. (FCNCA) reported solid financial results for the third quarter and first nine months of 2020. Net income increased by 14.3% year-over-year in the third quarter, reaching $142.7 million, with earnings per share rising to $14.03. For the nine-month period, net income was $353.6 million, a slight decrease of 0.5% compared to the prior year, though earnings per share increased by 7.8% to $33.96. The company maintained a strong capital position, with regulatory capital ratios well exceeding Basel III requirements. Total assets grew significantly to $48.67 billion by September 30, 2020, driven by a substantial increase in deposits, which grew by 7.4% in the third quarter and 25.3% year-to-date (excluding SBA-PPP deposits). Loan growth was also robust, increasing by 5.2% in the third quarter and 3.9% year-to-date (excluding SBA-PPP loans). The company announced a significant merger with CIT Group Inc. on October 15, 2020, expected to close in the first half of 2021, which is anticipated to expand its market presence.

Financial Highlights

34 data points
Beta

Net Income

$142.68M

EPS (Diluted)

$14.03

Total Assets

$48.67B

Cash & Equivalents

$352.42M

Free Cash Flow

$79.70M

Financial Statements
Beta
Interest Expense$20.68M
Net Income$142.68M
EPS (Basic)$14.03
EPS (Diluted)$14.03
Shares Outstanding (Basic)9.84M
Shares Outstanding (Diluted)9.84M

Key Highlights

  • 1Net income for Q3 2020 was $142.7 million, up 14.3% year-over-year, with EPS of $14.03.
  • 2Total assets grew to $48.67 billion as of September 30, 2020.
  • 3Total deposits increased by 7.4% in Q3 and 25.3% year-to-date (excluding SBA-PPP deposits).
  • 4Loans and leases held for investment increased by 5.2% in Q3 and 3.9% year-to-date (excluding SBA-PPP loans).
  • 5The company announced a merger agreement with CIT Group Inc. on October 15, 2020, expected to close in H1 2021.
  • 6Net interest income increased by 5.1% in Q3 2020 compared to Q3 2019.
  • 7The company maintained strong capital ratios, with a Common Equity Tier 1 ratio of 10.4%.

Frequently Asked Questions

The company noted that while it maintained a strong capital and liquidity position, the COVID-19 pandemic caused disruptions, leading to uncertainty and volatility in financial markets. Management noted that the impact of SBA-PPP loans and payment extensions could be delaying signs of credit deterioration. The company also saw a decrease in service charges on deposit accounts due to waived fees and reduced customer activity.

The adoption of ASC 326 (CECL model) on January 1, 2020, resulted in a net decrease of $37.9 million in the Allowance for Credit Losses (ACL). This was primarily driven by a $56.9 million decrease in the ACL on non-PCD loans, offset by a $19.0 million increase in the ACL on PCD loans. The company also recorded a $36.9 million increase in retained earnings due to these adjustments.

The merger with CIT Group Inc. is a significant strategic move that is expected to close in the first half of 2021. It will combine the operations of BancShares and CIT Bank, creating a larger financial institution. The merger is anticipated to expand the company's market presence and was approved by the boards of directors of both companies.

Total noninterest income increased by 19.5% to $120.6 million in the third quarter of 2020, primarily driven by a $20.3 million increase in realized gains on the sale of investment securities available for sale, and a $5.7 million increase in mortgage income due to higher origination volumes.