10-QPeriod: Q1 FY2023

FIRST CITIZENS BANCSHARES INC /DE/ Quarterly Report for Q1 Ended Mar 31, 2023

Filed May 10, 2023For Securities:FCNCAFCNCPFCNCBFCNCOFCNCN

Summary

First Citizens BancShares, Inc. /de/ (FCNCA) reported a substantial increase in assets and net income for the quarter ending March 31, 2023, primarily driven by the acquisition of Silicon Valley Bridge Bank, N.A. (SVBB). The SVBB acquisition significantly expanded the company's balance sheet, with total assets more than doubling to $214.66 billion, largely due to the inclusion of $68.50 billion in loans and $35.28 billion in cash and interest-earning deposits. This strategic move also significantly boosted net income, which surged to $9.52 billion, largely attributed to a preliminary gain on acquisition of $9.82 billion (net of tax). However, this was partially offset by a substantial provision for credit losses related to the acquired SVBB portfolio. Despite the significant integration efforts and associated expenses, FCNCA maintained strong capital ratios, exceeding regulatory requirements. Management highlighted the continued growth in core banking segments and expressed optimism about the strategic benefits and synergies expected from the SVBB acquisition, while acknowledging the ongoing integration and the evolving economic and banking environment.

Financial Highlights

36 data points
Beta

Net Income

$9.52B

EPS (Diluted)

$653.64

Total Assets

$214.66B

Cash & Equivalents

$1.60B

Free Cash Flow

-$406.00M

Financial Statements
Beta
Interest Expense$361.00M
Net Income$9.52B
EPS (Basic)$654.22
EPS (Diluted)$653.64
Shares Outstanding (Basic)14.53M
Shares Outstanding (Diluted)14.54M

Key Highlights

  • 1Total Assets grew significantly to $214.66 billion from $109.30 billion, primarily due to the SVBB acquisition.
  • 2Net Income soared to $9.52 billion, largely driven by a $9.82 billion preliminary gain on acquisition related to the SVBB transaction.
  • 3Provision for Credit Losses increased significantly to $783 million, primarily due to a $716 million 'day 2' provision for credit losses on acquired SVBB loans and commitments.
  • 4Total Deposits increased to $140.05 billion from $89.41 billion, with SVBB deposits contributing significantly, though experiencing some outflow post-acquisition.
  • 5Total Borrowings increased substantially to $46.09 billion from $6.65 billion, mainly due to the $35.15 billion Purchase Money Note to the FDIC related to the SVBB Acquisition.
  • 6Net Interest Margin (NIM) improved slightly to 3.41% from 3.36%, benefiting from higher asset yields that outpaced rising deposit and borrowing costs.
  • 7Capital ratios remained strong, with Common Equity Tier 1 at 12.53% and Total Risk-Based Capital at 14.86%, comfortably exceeding regulatory requirements.

Frequently Asked Questions

The primary driver was the acquisition of Silicon Valley Bridge Bank, N.A. (SVBB) on March 27, 2023. This acquisition significantly increased total assets by adding $68.50 billion in loans and $35.28 billion in cash and deposits. The acquisition also resulted in a substantial preliminary gain on acquisition of $9.82 billion (net of tax), which significantly boosted net income.

The SVBB acquisition led to a significant increase in the provision for credit losses, rising to $783 million from $79 million in the previous quarter. This increase was primarily due to a 'day 2' provision of $716 million allocated to the acquired SVBB loans and unfunded commitments, reflecting the credit quality of the acquired portfolio.

Total deposits increased significantly due to the SVBB acquisition, but SVBB segment deposits have experienced some outflow since the acquisition date, attributed to industry-wide uncertainty. However, the pace of outflow has slowed, and deposits in the company's core segments have shown organic growth, mitigating some of the pressure. Management is focused on deposit retention and growth.

First Citizens BancShares maintained strong capital ratios post-acquisition. Its Common Equity Tier 1 ratio was 12.53% and Total Risk-Based Capital ratio was 14.86% as of March 31, 2023, both well above regulatory requirements. This robust capital position provides a buffer against the ongoing integration of SVBB and potential market volatility.