10-QPeriod: Q3 FY2022

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 4, 2022For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. /DE/ (FCNCA) reported a significant increase in net income for the third quarter of 2022, driven largely by the completion of the CIT Group merger in January 2022. Net income available to common stockholders was $303 million, a substantial jump from $119 million in the prior year's third quarter. This growth was primarily fueled by a higher net interest income, which benefited from increased loan volumes and higher interest rates, coupled with the inclusion of the Rail segment's rental income. The balance sheet reflects a substantial expansion due to the CIT merger, with total assets growing to $109.3 billion from $58.3 billion at the end of 2021. Loan and lease balances also saw a significant increase to $69.8 billion. The company maintained strong capital ratios, exceeding regulatory requirements. However, the company also experienced a decline in deposits sequentially, attributed to rate-sensitive customers moving funds, and a notable increase in provision for credit losses, reflecting loan growth and updated macroeconomic forecasts. Overall, the results indicate a transformative period for First Citizens BancShares, with the CIT merger significantly altering its scale and operational scope. Investors should monitor deposit trends, credit quality, and the integration of the newly acquired businesses for future performance indicators.

Financial Highlights

38 data points
Beta

Net Income

$315.00M

EPS (Diluted)

$19.25

Total Assets

$109.31B

Cash & Equivalents

$481.00M

Free Cash Flow

$464.00M

Financial Statements
Beta
Operating Expenses$760.00M
Interest Expense$111.00M
Net Income$315.00M
EPS (Basic)$19.27
EPS (Diluted)$19.25
Shares Outstanding (Basic)15.71M
Shares Outstanding (Diluted)15.73M

Key Highlights

  • 1Net income available to common stockholders surged to $303 million for Q3 2022, up from $119 million in Q3 2021.
  • 2Net interest income increased significantly to $795 million for Q3 2022, up 129% year-over-year, driven by the CIT merger and higher interest rates.
  • 3Total assets grew to $109.3 billion as of September 30, 2022, a substantial increase from $58.3 billion at year-end 2021, primarily due to the CIT merger.
  • 4The company reported a strong total risk-based capital ratio of 13.46% as of September 30, 2022, well above regulatory requirements.
  • 5Noninterest income more than tripled year-over-year to $433 million, significantly boosted by $219 million in rental income from operating leases.
  • 6Provision for credit losses increased to $60 million for Q3 2022, up from a benefit of $1 million in the prior year's quarter, reflecting loan growth and updated economic forecasts.
  • 7Deposits sequentially decreased by $1.8 billion to $87.6 billion, attributed to rate-sensitive customers moving funds.

Frequently Asked Questions

The primary driver of the substantial increase in net income was the completion of the merger with CIT Group Inc. on January 3, 2022. This merger significantly expanded the company's asset base, loan portfolio, and interest-earning capacity, leading to higher net interest income. The inclusion of the Rail segment's rental income also contributed to the overall increase in noninterest income.

The CIT merger has dramatically impacted the balance sheet. Total assets grew from $58.3 billion at the end of 2021 to $109.3 billion at the end of Q3 2022. Similarly, total loans and leases increased from $32.4 billion to $69.8 billion, and total deposits grew from $51.4 billion to $87.6 billion. The merger also introduced new asset categories, such as operating lease equipment, significantly broadening the company's asset mix.

Deposits saw a sequential decline of $1.8 billion in the third quarter of 2022. Management attributes this to rate-sensitive customers moving their funds in response to rising interest rates. While total deposits are significantly higher than prior to the merger due to acquisitions, the company is focused on retaining existing deposits and attracting new ones at a reasonable cost to fund future loan growth.

The company manages credit risk through its Allowance for Credit Losses (ACL), which increased to $882 million as of September 30, 2022. This increase reflects loan portfolio growth, updated macroeconomic forecasts including consideration of downside scenarios, and the inclusion of loans acquired in the CIT merger. The provision for credit losses for the quarter was $60 million, up from $42 million in the previous quarter, indicating proactive management of potential credit deterioration.