First Citizens BancShares Inc. (“BancShares”) (Nasdaq: FCNCA)
reported strong earnings for the third quarter of 2020. Key results
for the quarter ended September 30, 2020 are presented below:
THIRD QUARTER RESULTS |
Q3 2020 |
Q3 2019 |
|
Q3 2020 |
Q3 2019 |
|
Q3 2020 |
Q3 2019 |
|
Q3 2020 |
Q3 2019 |
|
Q3 2020 |
Q3 2019 |
Net income (in millions) |
|
Net income per share |
|
Net interest margin |
|
Return on average assets |
|
Return on average equity |
$142.7 |
$124.8 |
|
$14.03 |
$11.27 |
|
3.06% |
3.77% |
|
1.18% |
1.32% |
|
14.93% |
13.83% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR-TO-DATE (“YTD”) RESULTS |
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
2019 |
|
2020 |
2019 |
Net income (in millions) |
|
Net income per share |
|
Net interest margin |
|
Return on average assets |
|
Return on average equity |
$353.6 |
$355.5 |
|
$33.96 |
$31.50 |
|
3.23% |
3.80% |
|
1.05% |
1.29% |
|
12.59% |
13.41% |
THIRD QUARTER HIGHLIGHTS |
|
|
|
Net income |
|
Net income for the third quarter of 2020 totaled $142.7 million, an
increase of $17.9 million, or 14.3%, compared to the same quarter
in 2019. Net income per common share increased to $14.03 for the
third quarter of 2020, from $11.27 per share during the same
quarter in 2019. |
|
|
|
Return on average assets and equity |
|
Return on average assets for the third quarter of 2020 was 1.18%,
down from 1.32% during the same quarter in 2019. Return on average
equity for the third quarter of 2020 was 14.93%, up from 13.83%
during the same period of 2019. |
|
|
|
Net interest income and net interest margin |
|
BancShares reported total net interest income of $353.7 million for
the third quarter of 2020, an increase of $17.2 million, or 5.1%,
compared to the same quarter in 2019. The taxable-equivalent net
interest margin (“NIM”) was 3.06% for the third quarter of 2020,
down 71 basis points from 3.77% during the same quarter in 2019 and
down 8 basis points from 3.14% during the second quarter of
2020. |
|
|
|
Allowance for credit losses |
|
The allowance for credit losses (“ACL”) was $223.9 million at
September 30, 2020, compared to $225.1 million at December 31,
2019. The change relates primarily to a $37.9 million reduction in
the ACL as a result of adopting the Current Expected Credit Loss
model (“CECL”), partially offset by a reserve build of $36.1
million due to an increase in potential loan losses related to the
impact of COVID-19. |
|
|
|
Operating performance |
|
Noninterest income totaled $120.6 million for the third quarter of
2020, an increase of $19.6 million, or 19.5%, compared to the same
quarter of 2019. Noninterest expense was $291.7 million for the
third quarter of 2020, an increase of $21.3 million, or 7.9%,
compared to the same quarter of 2019. |
|
|
|
Loans and credit quality |
|
Total loans grew to $32.85 billion, an increase of $3.96 billion,
or by 18.3% on an annualized basis, since December 31, 2019.
Excluding $3.11 billion of loans originated under the Small
Business Administration Paycheck Protection Program (“SBA-PPP”),
total loans increased $851.0 million since December 31, 2019, or by
3.9% on an annualized basis. The net charge-off ratio was 0.03% and
0.07% for the three and nine months ended September 30, 2020,
respectively, compared to 0.10% for both the three and nine months
ended September 30, 2019. |
|
|
|
Deposits |
|
Total deposits grew to $42.25 billion, an increase of $7.82
billion, or by 30.3% on an annualized basis, since December 31,
2019. Excluding estimated SBA-PPP deposits which combined totaled
$1.30 billion, total deposits increased $6.52 billion since
December 31, 2019, or by 25.3% on an annualized basis. |
|
|
|
Capital |
|
During the third quarter of 2020, BancShares repurchased 117,700
shares of Class A common stock for $47.1 million. BancShares
remained well capitalized with a total risk-based capital ratio of
13.7%, a Tier 1 risk-based capital ratio of 11.5%, a common equity
Tier 1 ratio of 10.4% and a Tier 1 leverage ratio of 7.8%. |
|
|
|
ONGOING COVID-19 RESPONSE
BancShares remains in a very strong capital and
liquidity position providing stability in navigating the COVID-19
crisis. Our leadership team continues to ensure appropriate
measures are in place to protect the welfare of our employees and
soundness of the organization, while continuing to support our
customers. Our branches have re-opened with enhanced safety
protocols, and our corporate locations remain at limited occupancy
due to current virus trends.
Through September 30, 2020, over 94% of all
COVID-19 related loan extensions have begun repayment. Delinquency
trends among loans entering repayment are in line with the
remainder of the portfolio. We have not seen significant declines
in overall credit quality, though the impacts of the SBA-PPP and
payment extensions could be delaying signs of credit
deterioration.
During 2020, BancShares originated over 23,000
SBA-PPP loans with an outstanding balance of $3.11 billion at
September 30, 2020. We collected $117.2 million in SBA-PPP related
loan fees per the program terms. These fees were deferred and are
being recognized in interest income over the life of the respective
loans. We have begun accepting and processing applications for
forgiveness during the third quarter, and we anticipate
acceleration of the fee income as the volume of approved
forgiveness applications increases and payments are received from
the SBA.
Strong Liquidity and Capital Position
We maintain a strong level of liquidity. As of
September 30, 2020, liquid assets (available cash and unencumbered
high quality liquid assets at market value) totaled approximately
$8.51 billion, representing 17.5% of consolidated assets as of
September 30, 2020.
In addition to liquid assets, we had contingent
sources of liquidity totaling approximately $11.37 billion in the
form of Federal Home Loan Bank borrowing capacity, Federal Reserve
Discount Window availability, fed funds lines and a committed line
of credit.
At September 30, 2020, BancShares’ regulatory
capital ratios were well in excess of Basel III capital
requirements with a total risk-based capital ratio of 13.7%, a Tier
1 risk-based capital ratio of 11.5%, a common equity Tier 1 ratio
of 10.4%, a Tier 1 leverage ratio of 7.8% and a capital
conservation buffer of 5.5%, more than twice the required level of
2.5%.
RECENT MERGER ACTIVITY
On October 15, 2020, BancShares, First-Citizens
Bank & Trust Company, the bank subsidiary of BancShares
(“FCB”), FC Merger Subsidiary IX, Inc., a subsidiary of FCB, and
CIT Group Inc. (“CIT”) entered into a definitive merger agreement
through which the companies will combine in an all-stock merger of
equals. The transaction is anticipated to close during the first
half of 2021 subject to the receipt of regulatory approvals, the
approval of CIT’s and BancShares’ stockholders and the satisfaction
of other customary closing conditions.
NET INTEREST INCOME
Net interest income for the third quarter of
2020 totaled $353.7 million, an increase of $17.2 million, or 5.1%,
compared to the third quarter of 2019. This was primarily due to an
increase in interest earned on loans, driven by SBA-PPP loans and
organic loan growth, and lower rates paid on interest-bearing
liabilities, partially offset by declines in yields on
interest-earning assets and increased borrowings. SBA-PPP loans
contributed $28.9 million in interest and fee income during the
quarter. The taxable-equivalent NIM was 3.06% during the third
quarter of 2020, a decrease of 71 basis points from 3.77% for the
comparable quarter in the prior year. The margin decline was
primarily due to a decrease in the yield on interest-earning
assets, partially offset by a decline in rates paid on deposits and
borrowings. The taxable-equivalent NIM declined 8 basis points from
3.14% in the linked quarter primarily related to a decline in yield
on interest-earning assets, partially offset by a decline in the
rate paid on interest-bearing deposits.
Net interest income for the nine months ended
September 30, 2020, totaled $1.03 billion, an increase of
$45.2 million, or 4.6% compared to the same period of 2019. The
change was primarily due to SBA-PPP loans and organic loan growth
coupled with lower rates paid on deposits and borrowings. This was
partially offset by declines in the yield on interest-earning
assets and higher deposit and borrowing balances. SBA-PPP loans
contributed $47.9 million in interest and fee income during 2020.
The taxable equivalent NIM decreased 57 basis points to 3.23%
compared to 3.80% for the nine months ended September 30, 2019,
primarily due to a decline in yield on interest-earning assets
coupled with an increase in total borrowings, only partially offset
by a decline in the rate paid on interest-bearing
deposits.
PROVISION FOR CREDIT LOSSES
Provision expense was $4.0 million and $52.9
million for the three and nine month periods ended
September 30, 2020, respectively, as compared to $6.8 million
and $23.7 million for the three and nine month periods ended
September 30, 2019, respectively. The increase in the nine
month period was primarily COVID-19 related as loss estimates
consider the potential impact of slower economic activity and
elevated unemployment, as well as potential mitigants due to
government stimulus and loan accommodations. The year-to-date
provision expense includes $36.1 million of reserve build for
credit losses specifically related to the potential impacts of
COVID-19. The decrease in the three month period was due to
stabilization in the macroeconomic forecasts, limited movement in
credit quality metrics and continued low net charge-offs.
Total net charge-offs in the third quarter of
2020 were $2.6 million, a decrease from $6.5 million in the third
quarter of 2019 due to a lower volume of charge-offs and increased
recoveries. Net charge-offs were $17.4 million and $20.6 million
for the nine months ended September 30, 2020 and 2019,
respectively. The net charge-off ratio was 0.03% and 0.07% for the
three and nine month periods ended September 30, 2020,
respectively, compared to 0.10% for both the three and nine month
periods ended September 30, 2019. Excluding the impact of SBA-PPP
loans on average loan balances, the net charge-off ratio was 0.03%
and 0.08% for the three and nine month periods ended September 30,
2020.
NONINTEREST INCOME
Noninterest income for the third quarter of 2020
totaled $120.6 million compared to $100.9 million for the third
quarter of 2019, an increase of $19.7 million, or 19.5%. The third
quarter of 2020 included realized gains on available for sale
securities totaling $21.4 million and negative fair value
adjustments on marketable equity securities totaling $2.7 million.
This compares to realized gains on available for sale securities of
$1.1 million and negative fair value adjustments on marketable
equity securities of $1.0 million for the third quarter of 2019.
The remaining $1.1 million increase was primarily driven by a $5.7
million increase in mortgage income due to increased production
resulting from lower mortgage interest rates and a $3.8 million
increase in cardholder services income, partially offset by a $6.3
million decrease in net service charges on deposits.
Noninterest income for the first nine months of
2020 totaled $350.0 million compared to $311.5 million for the same
period of 2019, an increase of $38.5 million, or 12.4%.
Year-to-date 2020 noninterest income included realized gains on
available for sale securities totaling $55.0 million, positive fair
value adjustments on marketable equity securities totaling $10.5
million, and impairment of mortgage servicing rights of $4.3
million. This compares to realized gains on available for sale
securities of $6.9 million and positive fair value adjustments on
marketable equity securities of $13.5 million for the same period
of 2019. The remaining decrease was driven primarily by a $13.2
million decrease in net service charges on deposits and a $13.8
million decrease in purchased credit impaired (“PCI”) recoveries,
which following the adoption of CECL, are recorded to the ACL.
These declines were partially offset by a $16.3 million increase in
mortgage income due to increased production resulting from lower
mortgage interest rates and a $4.4 million increase in cardholder
services.
NONINTEREST EXPENSE
Noninterest expense totaled $291.7 million for
the third quarter of 2020, a $21.2 million, or 7.9%, increase
compared to the same period in 2019. The increase was largely
driven by a $12.9 million increase in personnel-related expenses
primarily due to increased salaries and wages as a result of
personnel from acquisitions and merit increases. In addition,
processing fees paid to third parties increased by $4.7 million
reflecting continued investment in digital and technological
capabilities.
Noninterest expense totaled $883.3 million for
the first nine months of 2020, a $71.8 million, or 8.9%, increase
compared to the same period of 2019. The increase was largely
driven by a $42.0 million increase in personnel expenses as a
result of merit increases and personnel from acquisitions, an $11.5
million increase in processing fees paid to third parties
reflecting continued investment in digital and technological
capabilities and a $6.2 million increase in pension expense as a
result of a decline in the discount rate.
INCOME TAXES
Income tax expense totaled $35.8 million and
$35.4 million for the third quarter of 2020 and 2019, respectively,
representing effective tax rates of 20.1% and 22.1% for the
respective periods.
Income tax expense totaled $89.5 million and
$105.0 million for the first nine months of 2020 and 2019,
respectively, representing effective tax rates of 20.2% and 22.8%
for the respective nine month periods.
The effective tax rates for the third quarter
and first nine months of 2020 were favorably impacted by $3.5
million and $10.4 million, respectively, due to BancShares’
decision in the second quarter to utilize an allowable alternative
for computing its 2020 federal income tax liability. Without this
alternative, the effective tax rate would have been approximately
22.0% and 22.6% for the third quarter and first nine months of
2020, respectively. The allowable alternative provides BancShares
the ability to use the federal income tax rate for certain current
year deductible amounts related to prior year FDIC-assisted
acquisitions that was applicable when these amounts were originally
subjected to tax.
LOANS AND DEPOSITS
At September 30, 2020, loans totaled $32.85
billion, an increase of $3.96 billion since December 31, 2019. Of
this growth, $3.11 billion was related to SBA-PPP loans
originations. Excluding SBA-PPP loans, total loans increased $851.0
million since December 31, 2019, or by 3.9% on an annualized
basis.
At September 30, 2020, deposits totaled
$42.25 billion, an increase of $7.82 billion since December 31,
2019. This growth includes estimated deposits of $1.30 billion
related to the SBA-PPP. Excluding the impact of these deposits,
total deposits increased $6.52 billion since December 31, 2019, or
by 25.3% on an annualized basis.
ALLOWANCE FOR CREDIT LOSSES
The ACL was $223.9 million at September 30,
2020, compared to $225.1 million at December 31, 2019. The ACL as a
percentage of total loans was 0.68% at September 30, 2020,
compared to 0.78% at December 31, 2019. The reduction was due
primarily to the adoption of CECL, resulting in a $37.9 million
reduction in the ACL, partially offset by a reserve build of $36.1
million due to an increase in potential loan losses related to the
impact of COVID-19. Excluding SBA-PPP loans, which have no
associated ACL, the ACL as a percentage of total loans was 0.75% as
of September 30, 2020. The ACL as of September 30, 2020, excluding
SBA-PPP loans, covered approximately 9.4 times annualized
year-to-date net charge-offs compared to 6.5 times at January 1,
2020 with the adoption of CECL.
NONPERFORMING ASSETS
Nonperforming assets, including nonaccrual loans
and other real estate owned, were $239.2 million, or 0.73% of total
loans and other real estate owned at September 30, 2020,
compared to $168.3 million or 0.58% at December 31, 2019.
Contributing to the increase was the dissolution of PCI pools as
part of the adoption of CECL, which moved loans from performing PCI
pools into nonaccrual status, and represents $27.5 million of
nonaccrual loans as of September 30, 2020. Excluding the
impact of the accounting change, the nonperforming asset ratio at
September 30, 2020 would have been relatively consistent with
December 31, 2019.
CAPITAL TRANSACTIONS
During the third quarter of 2020, BancShares
repurchased 117,700 shares of Class A common stock for $47.1
million at an average cost per share of $399.82 compared to a total
of 295,900 shares of Class A common stock for $135.4 million at an
average cost per share of $457.50 for the third quarter of 2019.
For the nine months ended September 30, 2020, BancShares
repurchased 813,090 shares of Class A common stock for $333.8
million at an average cost per share of $410.48 compared to 744,400
shares of Class A common stock for $325.9 million at an average
cost per share of $437.84 for the nine months ended September 30,
2019. All Class A common stock repurchases completed in 2020 and
2019 were consummated under previously approved authorizations.
Upon completion of the share repurchase authorization on July 31,
2020, share repurchase activity was suspended.
EARNINGS CALL DETAILS
In light of the announcement earlier today of
entry into a definitive merger agreement with CIT, BancShares has
cancelled its live conference call originally scheduled for October
28, 2020, at 9 a.m.
There will be a joint conference call to discuss
the transaction and third quarter 2020 earnings at 8 a.m. Eastern
time today. To listen to the live call, please dial 1-888-317-6003
(U.S.), 1-866-284-3684 (Canada) or 1-412-317-6061 (international)
and enter the participant code 7110614.
A link to the live webcast, along with the
related presentations, will be available on the investor relations
section of each company’s website at ir.cit.com/CorporateProfile
and firstcitizens.com/investor-relations.
An audio replay will be available an hour after
the conclusion of the call. To access the replay, dial
1-877-344-7529 (U.S.), 1-855-669-9658 (Canada) or 1-412-317-0088
(international) and use access number 10149208. This replay will be
available through November 30, 2020.
For investor inquiries, contact Tom Heath,
director of Investor Relations, 919-716-4565.
ABOUT FIRST CITIZENS
BANCSHARES
BancShares is the financial holding company for
Raleigh, North Carolina-headquartered First Citizens Bank. First
Citizens Bank provides a broad range of financial services to
individuals, businesses, professionals and the medical community
through branch offices in 19 states, including digital banking,
mobile banking, ATMs and telephone banking. As of
September 30, 2020, BancShares had total assets of $48.67
billion.
For more information, visit First Citizens’
website at firstcitizens.com. First Citizens Bank. Forever
First®.
FORWARD-LOOKING STATEMENTS
This communication contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 regarding the financial condition, results of
operations, business plans and future performance of BancShares.
Words such as “anticipates,” “believes,” “estimates,” “expects,”
“forecasts,” “intends,” “plans,” “projects,” “targets,” “designed,”
“could,” “may,” “should,” “will” or other similar words and
expressions are intended to identify these forward-looking
statements. These forward-looking statements are based on
BancShares’ current expectations and assumptions regarding
BancShares’ business, the economy, and other future conditions.
Because forward-looking statements relate to
future results and occurrences, they are subject to inherent risks,
uncertainties, changes in circumstances and other factors that are
difficult to predict. Many possible events or factors could
affect BancShares’ future financial results and performance and
could cause the actual results, performance or achievements of
BancShares to differ materially from any anticipated results
expressed or implied by such forward-looking statements. Such risks
and uncertainties include, among others, the impacts of the global
COVID-19 pandemic on BancShares’ business, the financial success or
changing conditions or strategies of BancShares’ customers or
vendors, fluctuations in interest rates, actions of government
regulators, the availability of capital and personnel, the delay in
closing (or failure to close) one or more of BancShares’ previously
announced acquisition transaction(s), the failure to realize the
anticipated benefits of BancShares’ previously announced
acquisition transaction(s), and general competitive, economic,
political, and market conditions, as well as risks related to the
proposed transaction with CIT including, in addition to those
described above and among others, (1) the risk that the cost
savings, any revenue synergies and other anticipated benefits of
the proposed transaction may not be realized or may take longer
than anticipated to be realized, including as a result of the
impact of, or problems arising from, the integration of the two
companies or as a result of the condition of the economy and
competitive factors in areas where BancShares and CIT do business,
(2) disruption to BancShares’ and CIT’s businesses as a result of
the announcement and pendency of the proposed transaction and
diversion of management’s attention from ongoing business
operations and opportunities, (3) the occurrence of any event,
change or other circumstances that could give rise to the right of
one or both of the parties to terminate the definitive merger
agreement, (4) the risk that the integration of BancShares’ and
CIT’s operations will be materially delayed or will be more costly
or difficult than expected or that BancShares and CIT are otherwise
unable to successfully integrate their businesses, (5) the failure
to obtain the necessary approvals of the stockholders of BancShares
and/or CIT, (6) the outcome of any legal proceedings that may be
instituted against BancShares and/or CIT, (7) the failure to obtain
required governmental approvals (and the risk that such approvals
may result in the imposition of conditions that could adversely
affect the combined company or the expected benefits of the
proposed transaction), (8) reputational risk and potential adverse
reactions of BancShares’ and/or CIT’s customers, suppliers,
employees or other business partners, including those resulting
from the announcement or completion of the proposed transaction,
(9) the failure of any of the closing conditions in the definitive
merger agreement to be satisfied on a timely basis or at all, (10)
delays in closing the proposed transaction, (11) the possibility
that the proposed transaction may be more expensive to complete
than anticipated, including as a result of unexpected factors or
events, (12) the dilution caused by BancShares’ issuance of
additional shares of its capital stock in connection with the
proposed transaction, (13) general competitive, economic, political
and market conditions, (14) other factors that may affect future
results of BancShares and CIT including changes in asset quality
and credit risk, the inability to sustain revenue and earnings
growth, changes in capital markets, inflation, customer borrowing,
repayment, investment and deposit practices, the impact, extent and
timing of technological changes, capital management activities, and
other actions of the Federal Reserve Board and legislative and
regulatory actions and reforms, and (15) the impact of the global
COVID-19 pandemic on CIT’s business, the parties’ ability to
complete the proposed transaction and/or any of the other foregoing
risks.
Except to the extent required by applicable law
or regulation, BancShares disclaims any obligation to update such
factors or to publicly announce the results of any revisions to any
of the forward-looking statements included herein to reflect future
events or developments. Further information regarding BancShares
and factors which could affect the forward-looking statements
contained herein can be found in BancShares’ Annual Report on Form
10-K for the fiscal year ended December 31, 2019, its Quarterly
Reports on Form 10-Q for the periods ended March 31, 2020 and June
30, 2020, and its other filings with the Securities and Exchange
Commission.
CONSOLIDATED FINANCIAL
HIGHLIGHTS
(Dollars in thousands, except share data; unaudited) |
Three months ended |
|
Nine months ended September 30 |
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
2020 |
|
2019 |
SUMMARY OF OPERATIONS |
|
|
|
|
|
|
|
|
|
Interest income |
$ |
374,334 |
|
|
$ |
363,257 |
|
|
$ |
362,318 |
|
|
$ |
1,107,150 |
|
|
$ |
1,049,963 |
|
Interest expense |
20,675 |
|
|
25,863 |
|
|
25,893 |
|
|
77,697 |
|
|
65,718 |
|
Net interest income |
353,659 |
|
|
337,394 |
|
|
336,425 |
|
|
1,029,453 |
|
|
984,245 |
|
Provision for credit losses |
4,042 |
|
|
20,552 |
|
|
6,766 |
|
|
52,949 |
|
|
23,714 |
|
Net interest income after provision for credit losses |
349,617 |
|
|
316,842 |
|
|
329,659 |
|
|
976,504 |
|
|
960,531 |
|
Noninterest income |
120,572 |
|
|
165,402 |
|
|
100,930 |
|
|
349,985 |
|
|
311,468 |
|
Noninterest expense |
291,662 |
|
|
291,679 |
|
|
270,425 |
|
|
883,312 |
|
|
811,479 |
|
Income before income taxes |
178,527 |
|
|
190,565 |
|
|
160,164 |
|
|
443,177 |
|
|
460,520 |
|
Income taxes |
35,843 |
|
|
36,779 |
|
|
35,385 |
|
|
89,538 |
|
|
105,023 |
|
Net income |
$ |
142,684 |
|
|
$ |
153,786 |
|
|
$ |
124,779 |
|
|
$ |
353,639 |
|
|
$ |
355,497 |
|
Less: Preferred stock dividends |
4,636 |
|
|
4,790 |
|
|
— |
|
|
9,426 |
|
|
— |
|
Net income available to common shareholders |
$ |
138,048 |
|
|
$ |
148,996 |
|
|
$ |
124,779 |
|
|
$ |
344,213 |
|
|
$ |
355,497 |
|
Net interest income, taxable equivalent |
$ |
354,256 |
|
|
$ |
337,965 |
|
|
$ |
337,322 |
|
|
$ |
1,031,395 |
|
|
$ |
986,896 |
|
PER COMMON SHARE DATA |
|
|
|
|
|
|
|
|
|
Net income |
$ |
14.03 |
|
|
$ |
14.74 |
|
|
$ |
11.27 |
|
|
$ |
33.96 |
|
|
$ |
31.50 |
|
Cash dividends on common shares |
0.40 |
|
|
0.40 |
|
|
0.40 |
|
|
1.20 |
|
|
1.20 |
|
Book value at period-end |
380.43 |
|
|
367.57 |
|
|
327.86 |
|
|
380.43 |
|
|
327.86 |
|
CONDENSED BALANCE SHEET |
|
|
|
|
|
|
|
|
|
Cash and due from banks |
$ |
352,419 |
|
|
$ |
389,233 |
|
|
$ |
288,933 |
|
|
$ |
352,419 |
|
|
$ |
288,933 |
|
Overnight investments |
3,137,945 |
|
|
3,107,575 |
|
|
949,899 |
|
|
3,137,945 |
|
|
949,899 |
|
Investment securities |
9,860,594 |
|
|
9,508,476 |
|
|
7,167,680 |
|
|
9,860,594 |
|
|
7,167,680 |
|
Loans and leases |
32,845,144 |
|
|
32,418,425 |
|
|
27,196,511 |
|
|
32,845,144 |
|
|
27,196,511 |
|
Less allowance for credit losses |
(223,936 |
) |
|
(222,450 |
) |
|
(226,825 |
) |
|
(223,936 |
) |
|
(226,825 |
) |
Other assets |
2,694,707 |
|
|
2,664,935 |
|
|
2,372,126 |
|
|
2,694,707 |
|
|
2,372,126 |
|
Total assets |
$ |
48,666,873 |
|
|
$ |
47,866,194 |
|
|
$ |
37,748,324 |
|
|
$ |
48,666,873 |
|
|
$ |
37,748,324 |
|
Deposits |
$ |
42,250,606 |
|
|
$ |
41,479,245 |
|
|
$ |
32,743,277 |
|
|
$ |
42,250,606 |
|
|
$ |
32,743,277 |
|
Other liabilities |
2,341,853 |
|
|
2,395,505 |
|
|
1,436,565 |
|
|
2,341,853 |
|
|
1,436,565 |
|
Shareholders’ equity |
4,074,414 |
|
|
3,991,444 |
|
|
3,568,482 |
|
|
4,074,414 |
|
|
3,568,482 |
|
Total liabilities and shareholders’ equity |
$ |
48,666,873 |
|
|
$ |
47,866,194 |
|
|
$ |
37,748,324 |
|
|
$ |
48,666,873 |
|
|
$ |
37,748,324 |
|
SELECTED PERIOD AVERAGE BALANCES |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
48,262,155 |
|
|
$ |
45,553,502 |
|
|
$ |
37,618,836 |
|
|
$ |
44,834,045 |
|
|
$ |
36,770,191 |
|
Investment securities |
9,930,197 |
|
|
8,928,467 |
|
|
6,956,981 |
|
|
8,774,840 |
|
|
6,851,348 |
|
Loans and leases |
32,694,996 |
|
|
31,635,958 |
|
|
26,977,476 |
|
|
31,148,683 |
|
|
26,368,922 |
|
Interest-earning assets |
45,617,376 |
|
|
42,795,781 |
|
|
35,293,979 |
|
|
42,151,861 |
|
|
34,473,814 |
|
Deposits |
41,905,844 |
|
|
39,146,415 |
|
|
32,647,264 |
|
|
38,612,836 |
|
|
31,856,771 |
|
Interest-bearing liabilities |
25,591,707 |
|
|
24,407,285 |
|
|
20,551,393 |
|
|
24,388,339 |
|
|
20,204,705 |
|
Common shareholders' equity |
3,679,138 |
|
|
3,648,284 |
|
|
3,580,235 |
|
|
3,651,132 |
|
|
3,545,418 |
|
Shareholders' equity |
$ |
4,019,075 |
|
|
$ |
3,988,225 |
|
|
$ |
3,580,235 |
|
|
$ |
3,896,645 |
|
|
$ |
3,545,418 |
|
Common shares outstanding |
9,836,629 |
|
|
10,105,520 |
|
|
11,060,462 |
|
|
10,137,321 |
|
|
11,286,984 |
|
SELECTED RATIOS |
|
|
|
|
|
|
|
|
|
Annualized return on average assets |
1.18 |
% |
|
1.36 |
% |
|
1.32 |
% |
|
1.05 |
% |
|
1.29 |
% |
Annualized return on average equity |
14.93 |
|
|
16.43 |
|
|
13.83 |
|
|
12.59 |
|
|
13.41 |
|
Net yield on interest-earning assets (taxable equivalent) |
3.06 |
|
|
3.14 |
|
|
3.77 |
|
|
3.23 |
|
|
3.80 |
|
Tier 1 risk-based capital ratio |
11.5 |
|
|
11.4 |
|
|
11.8 |
|
|
11.5 |
|
|
11.8 |
|
Tier 1 common equity ratio |
10.4 |
|
|
10.3 |
|
|
11.8 |
|
|
10.4 |
|
|
11.8 |
|
Total risk-based capital ratio |
13.7 |
|
|
13.6 |
|
|
13.1 |
|
|
13.7 |
|
|
13.1 |
|
Tier 1 leverage capital ratio |
7.8 |
|
|
8.1 |
|
|
9.2 |
|
|
7.8 |
|
|
9.2 |
|
|
ALLOWANCE FOR CREDIT LOSSES AND ASSET
QUALITY DISCLOSURES
|
Three months ended |
|
Nine months ended September 30 |
(Dollars in thousands, unaudited) |
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
2020 |
|
2019 |
ALLOWANCE FOR CREDIT LOSSES (1) |
|
|
|
|
|
|
ACL at beginning of period |
$ |
222,450 |
|
|
$ |
209,259 |
|
|
$ |
226,583 |
|
|
$ |
225,141 |
|
|
$ |
223,712 |
|
Adoption of ASC 326 |
— |
|
|
— |
|
|
— |
|
|
(37,924 |
) |
|
— |
|
Initial PCD allowance on new acquisitions(2) |
— |
|
|
— |
|
|
— |
|
|
1,193 |
|
|
— |
|
Provision for credit losses |
4,042 |
|
|
20,552 |
|
|
6,766 |
|
|
52,949 |
|
|
23,714 |
|
Net charge-offs of loans and leases: |
|
|
|
|
|
|
|
|
|
Charge-offs |
(8,932 |
) |
|
(12,064 |
) |
|
(9,647 |
) |
|
(35,257 |
) |
|
(30,403 |
) |
Recoveries |
6,376 |
|
|
4,703 |
|
|
3,123 |
|
|
17,834 |
|
|
9,802 |
|
Net charge-offs of loans and leases |
(2,556 |
) |
|
(7,361 |
) |
|
(6,524 |
) |
|
(17,423 |
) |
|
(20,601 |
) |
ACL at end of period |
$ |
223,936 |
|
|
$ |
222,450 |
|
|
$ |
226,825 |
|
|
$ |
223,936 |
|
|
$ |
226,825 |
|
ACL at end of period allocated to: |
|
|
|
|
|
|
|
|
|
PCD |
$ |
25,127 |
|
|
$ |
26,928 |
|
|
$ |
6,867 |
|
|
$ |
25,127 |
|
|
$ |
6,867 |
|
Non-PCD |
198,809 |
|
|
195,522 |
|
|
219,958 |
|
|
198,809 |
|
|
219,958 |
|
ACL at end of period |
$ |
223,936 |
|
|
$ |
222,450 |
|
|
$ |
226,825 |
|
|
$ |
223,936 |
|
|
$ |
226,825 |
|
Reserve for unfunded commitments |
$ |
13,971 |
|
|
$ |
13,685 |
|
|
$ |
1,097 |
|
|
$ |
13,971 |
|
|
$ |
1,097 |
|
SELECTED LOAN DATA |
|
|
|
|
|
|
|
|
|
Average loans and leases: |
|
|
|
|
|
|
|
|
|
PCD |
$ |
512,559 |
|
|
$ |
546,998 |
|
|
$ |
530,390 |
|
|
$ |
529,819 |
|
|
$ |
551,065 |
|
Non-PCD |
32,065,084 |
|
|
30,992,001 |
|
|
26,379,156 |
|
|
30,525,411 |
|
|
25,762,098 |
|
Loans and leases at period-end: |
|
|
|
|
|
|
|
|
|
PCD |
495,878 |
|
|
530,651 |
|
|
513,589 |
|
|
495,878 |
|
|
513,589 |
|
Non-PCD |
32,349,266 |
|
|
31,887,774 |
|
|
26,682,922 |
|
|
32,349,266 |
|
|
26,682,922 |
|
RISK ELEMENTS |
|
|
|
|
|
|
|
|
|
Nonaccrual loans and leases(3) |
$ |
186,454 |
|
|
$ |
197,791 |
|
|
$ |
109,645 |
|
|
$ |
186,454 |
|
|
$ |
109,645 |
|
Other real estate owned |
52,789 |
|
|
53,850 |
|
|
46,253 |
|
|
52,789 |
|
|
46,253 |
|
Total nonperforming assets |
$ |
239,243 |
|
|
$ |
251,641 |
|
|
$ |
155,898 |
|
|
$ |
239,243 |
|
|
$ |
155,898 |
|
Accruing loans and leases 90 days or more past due(3) |
$ |
3,587 |
|
|
$ |
3,796 |
|
|
$ |
27,534 |
|
|
$ |
3,587 |
|
|
$ |
27,534 |
|
RATIOS |
|
|
|
|
|
|
|
|
|
Net charge-offs (annualized) to average loans and leases |
0.03 |
% |
|
0.09 |
% |
|
0.10 |
% |
|
0.07 |
% |
|
0.10 |
% |
ACL to total loans and leases(4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCD |
5.07 |
|
|
5.07 |
|
|
1.34 |
|
|
5.07 |
|
|
1.34 |
|
Non-PCD |
0.61 |
|
|
0.61 |
|
|
0.82 |
|
|
0.61 |
|
|
0.82 |
|
Total |
0.68 |
|
|
0.69 |
|
|
0.83 |
|
|
0.68 |
|
|
0.83 |
|
Ratio of total nonperforming assets to total loans, leases and
other real estate owned |
0.73 |
|
|
0.77 |
|
|
0.57 |
|
|
0.73 |
|
|
0.57 |
|
(1) BancShares recorded no ACL on investment
securities as part of the adoption of ASU 2016-13 Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments as of January 1, 2020, June 30, 2020, or
September 30, 2020.
(2) Upon adoption of ASU 2016-13 as of January
1, 2020, the concept of purchased credit impaired loans under ASC
310-30 was eliminated. Loans and leases determined at the date of
acquisition, to have experienced more than insignificant credit
quality since origination are accounted for under the guidance in
ASC Topic 326-20, Credit Losses as purchased credit deteriorated
assets. PCD loans and leases are recorded at fair value at the date
of acquisition with an initial reserve recorded directly to the
allowance for credit losses. Provision is recorded if there is
additional credit deterioration after the acquisition date. Non-PCD
loans include originated and purchased non-credit deteriorated
loans. Loans previously classified as PCI were determined to be
PCD.
(3) Upon adoption of ASU 2016-13, we dissolved
pooling of PCI loans allowed under ASC 310-30. This increased the
amount of nonaccrual loans as those nonaccrual loans within
performing PCI pools were previously excluded from reporting. As of
January 1, 2020, there were $47.0 million of nonaccrual loans
released from performing PCI pools including $24.2 million of loans
that were greater than 90 days past due. Of these nonaccrual loans,
$27.5 million were outstanding as of September 30, 2020.
(4) Loans originated in relation to the SBA-PPP
do not have a recorded ACL. As of September 30, 2020, the ratio of
ACL to total Non-PCD loans excluding SBA-PPP loans was 0.68% while
the ratio of ACL to total loans excluding SBA-PPP loans was
0.75%.
AVERAGE BALANCE AND NET INTEREST MARGIN
SUMMARY
|
Three months ended |
|
September 30, 2020 |
|
June 30, 2020 |
|
September 30, 2019 |
|
Average |
|
|
|
Yield/ |
|
Average |
|
|
|
Yield/ |
|
Average |
|
|
|
Yield/ |
(Dollars in thousands, unaudited) |
Balance |
|
Interest |
|
Rate (2) |
|
Balance |
|
Interest |
|
Rate (2) |
|
Balance |
|
Interest |
|
Rate (2) |
INTEREST-EARNING ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases (1) |
$ |
32,694,996 |
|
|
$ |
336,934 |
|
|
4.06 |
% |
|
$ |
31,635,958 |
|
|
$ |
326,618 |
|
|
4.10 |
% |
|
$ |
26,977,476 |
|
|
$ |
315,621 |
|
|
4.61 |
% |
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
695,419 |
|
|
497 |
|
|
0.28 |
|
|
206,575 |
|
|
679 |
|
|
1.32 |
|
|
834,577 |
|
|
5,262 |
|
|
2.50 |
|
Government agency |
587,377 |
|
|
1,335 |
|
|
0.91 |
|
|
657,405 |
|
|
1,428 |
|
|
0.87 |
|
|
628,322 |
|
|
4,742 |
|
|
3.02 |
|
Mortgage-backed securities |
8,047,247 |
|
|
28,236 |
|
|
1.40 |
|
|
7,555,947 |
|
|
28,532 |
|
|
1.51 |
|
|
5,195,711 |
|
|
27,891 |
|
|
2.15 |
|
Corporate bonds |
489,602 |
|
|
6,433 |
|
|
5.26 |
|
|
299,250 |
|
|
3,782 |
|
|
5.06 |
|
|
149,888 |
|
|
1,912 |
|
|
5.10 |
|
Other investments |
110,552 |
|
|
739 |
|
|
2.66 |
|
|
209,290 |
|
|
2,236 |
|
|
4.30 |
|
|
148,483 |
|
|
636 |
|
|
1.70 |
|
Total investment
securities |
9,930,197 |
|
|
37,240 |
|
|
1.50 |
|
|
8,928,467 |
|
|
36,657 |
|
|
1.64 |
|
|
6,956,981 |
|
|
40,443 |
|
|
2.32 |
|
Overnight investments |
2,992,183 |
|
|
757 |
|
|
0.10 |
|
|
2,231,356 |
|
|
553 |
|
|
0.10 |
|
|
1,359,522 |
|
|
7,151 |
|
|
2.09 |
|
Total interest-earning
assets |
$ |
45,617,376 |
|
|
$ |
374,931 |
|
|
3.24 |
|
|
$ |
42,795,781 |
|
|
$ |
363,828 |
|
|
3.38 |
|
|
$ |
35,293,979 |
|
|
$ |
363,215 |
|
|
4.06 |
|
INTEREST-BEARING LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking with interest |
$ |
9,239,838 |
|
|
$ |
1,369 |
|
|
0.06 |
% |
|
$ |
8,562,145 |
|
|
$ |
1,310 |
|
|
0.06 |
% |
|
$ |
7,361,758 |
|
|
$ |
1,509 |
|
|
0.08 |
% |
Savings |
3,070,619 |
|
|
314 |
|
|
0.04 |
|
|
2,846,557 |
|
|
312 |
|
|
0.04 |
|
|
2,636,583 |
|
|
528 |
|
|
0.08 |
|
Money market accounts |
8,108,832 |
|
|
3,634 |
|
|
0.18 |
|
|
7,618,883 |
|
|
6,519 |
|
|
0.34 |
|
|
6,088,740 |
|
|
6,610 |
|
|
0.43 |
|
Time deposits |
3,205,850 |
|
|
8,151 |
|
|
1.01 |
|
|
3,398,979 |
|
|
9,775 |
|
|
1.16 |
|
|
3,523,658 |
|
|
13,090 |
|
|
1.47 |
|
Total interest-bearing
deposits |
23,625,139 |
|
|
13,468 |
|
|
0.23 |
|
|
22,426,564 |
|
|
17,916 |
|
|
0.32 |
|
|
19,610,739 |
|
|
21,737 |
|
|
0.44 |
|
Securities sold under customer
repurchase agreements |
710,237 |
|
|
395 |
|
|
0.22 |
|
|
659,244 |
|
|
399 |
|
|
0.24 |
|
|
533,371 |
|
|
542 |
|
|
0.40 |
|
Other short-term
borrowings |
— |
|
|
— |
|
|
— |
|
|
45,549 |
|
|
248 |
|
|
2.16 |
|
|
23,236 |
|
|
203 |
|
|
3.50 |
|
Long-term borrowings |
1,256,331 |
|
|
6,812 |
|
|
2.15 |
|
|
1,275,928 |
|
|
7,300 |
|
|
2.26 |
|
|
384,047 |
|
|
3,411 |
|
|
3.51 |
|
Total interest-bearing
liabilities |
$ |
25,591,707 |
|
|
$ |
20,675 |
|
|
0.32 |
|
|
$ |
24,407,285 |
|
|
$ |
25,863 |
|
|
0.42 |
|
|
$ |
20,551,393 |
|
|
$ |
25,893 |
|
|
0.50 |
|
Interest rate spread |
|
|
|
|
2.92 |
% |
|
|
|
|
|
2.96 |
% |
|
|
|
|
|
3.56 |
% |
Net interest income and net yield on interest-earning assets |
|
|
$ |
354,256 |
|
|
3.06 |
% |
|
|
|
$ |
337,965 |
|
|
3.14 |
% |
|
|
|
$ |
337,322 |
|
|
3.77 |
% |
(1) Loans and leases include PCD and non-PCD
loans, nonaccrual loans and loans held for sale.
(2) Yields related to loans, leases and
securities exempt from both federal and state income taxes, federal
income taxes only, or state income taxes only are stated on a
taxable-equivalent basis assuming statutory federal income tax
rates of 21.0%, as well as state income tax rates of 3.4% for all
periods presented. The taxable-equivalent adjustment was $597
thousand, $571 thousand and $897 thousand for the three months
ended September 30, 2020, June 30, 2020 and
September 30, 2019, respectively.
Contact: |
Barbara Thompson |
|
First Citizens BancShares |
|
919.716.2716 |
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