First Citizens BancShares Reports Earnings For First Quarter 2019

RALEIGH, N.C. — First Citizens BancShares Inc. (BancShares) (Nasdaq: FCNCA) reported strong earnings for the first quarter of 2019, according to Frank B. Holding, Jr., Chairman of the Board. Key results for the quarter ended March 31, 2019, are presented below:

FINANCIAL HIGHLIGHTS

• Net income for the first quarter of 2019 totaled $111.4 million, an increase of $11.2 million, or 11.1% compared to the same quarter in 2018. Net income increased $1.32 on a per share basis to $9.67 in the first quarter of 2019, from $8.35 per share during the same period in 2018.
• Return on average assets for the first quarter of 2019 improved by 8 basis points over the first quarter of 2018 to 1.27%. Return on average equity improved 66 basis points to 12.86% for the first quarter of 2019 compared to the same period in 2018.
• Net interest income and margin remained strong. BancShares reported total net interest income of $320.5 million for the first quarter of 2019, an increase of $36.1 million or 12.7%, compared to the same quarter in 2018. The taxable-equivalent net interest margin totaled 3.89% for the first quarter of 2019, an increase of 32 basis points compared to 3.57% for the same quarter in 2018.
• Noninterest income totaled $103.7 million for the first quarter of 2019, compared to $122.7 million for the first quarter of 2018.
• Noninterest expense was $267.7 million for the first quarter of 2019, compared to $268.1 million during the first quarter of 2018.
• Deposit growth was strong during the first quarter of 2019. Total deposits increased $525.6 million or 6.9% on an annualized basis, from December 31, 2018. Total deposits were up $1.2 billion or by 4.1% since March 31, 2018.
• BancShares repurchased 243,000 shares of Class A common stock during the first quarter of 2019 totaling approximately $100.7 million. At March 31, 2019, BancShares remained well capitalized with a Tier 1 risk-based capital ratio and common equity Tier 1 ratio of 12.7%, a total risk-based capital ratio of 14.0% and a leverage ratio of 9.8%.

RECENT MERGER ACTIVITY

On April 23, 2019, BancShares' and its subsidiary, First-Citizens Bank & Trust Company (FCB), and Entegra Financial Corp. (Entegra), entered into a definitive merger agreement for the acquisition by FCB of Franklin, North Carolina-based Entegra and its bank subsidiary, Entegra Bank. Under the terms of the agreement, cash consideration of $30.18 per share will be paid to the shareholders of Entegra for each share of common stock and for each restricted stock unit after conversion to common stock, and each outstanding option to purchase Entegra common stock will be canceled and each option holder will receive a cash payment. The total transaction value, including applicable termination fees, is anticipated to be approximately $219.8 million. The transaction is anticipated to close during the second half of 2019, subject to the receipt of regulatory approvals, the approval of Entegra's shareholders, and the satisfaction of other customary closing conditions. As of December 31, 2018, Entegra reported $1.64 billion in consolidated assets, $1.22 billion in deposits and $1.08 billion in loans.

On April 2, 2019, FCB completed the merger of Coconut Grove, Florida-based Biscayne Bancshares, Inc. (Biscayne Bancshares) and its bank subsidiary, Biscayne Bank. Under the terms of the agreement, cash consideration of $25.05 per share was paid to the shareholders of Biscayne Bancshares for each share of common stock, totaling approximately $118.9 million. The merger will allow FCB to expand its presence in Florida and enhance banking efforts in South Florida. As of March 31, 2019, Biscayne Bancshares reported $1.02 billion in consolidated assets, $879.9 million in loans and $788.2 million in deposits.

On January 10, 2019, FCB and First South Bancorp, Inc. (First South Bancorp) entered into a definitive merger agreement for the acquisition of Spartanburg, South Carolina-based First South Bancorp and its bank subsidiary, First South Bank. Under the terms of the agreement, cash consideration of $1.15 per share will be paid to the shareholders of First South Bancorp for each share of common stock, totaling approximately $37.5 million. The transaction is anticipated to close in the second quarter of 2019, as all regulatory approvals and First South Bancorp's shareholder approval have been received. As of March 31, 2019, First South Bancorp reported $236.0 million in consolidated assets, $183.3 million in loans and $206.1 million in deposits.

NET INTEREST INCOME

Net interest income for the first quarter of 2019 totaled $320.5 million, an increase of $36.1 million, or 12.7%, compared to the first quarter of 2018. The taxable-equivalent net interest margin was 3.89% in the first quarter of 2019, an increase of 32 basis points from the same quarter in the prior year. The primary driver for this increase was a $38.9 million, or 30 basis points, increase to interest and fees on loans due to a $1.85 billion increase in average loans outstanding, as well as a higher loan yields. This increase was partially offset by a $9.2 million, or 20 basis point increase to interest expense on deposits due to higher rates on time deposits and money market accounts.

Net interest income for the first quarter of 2019 decreased $0.4 million, compared to the fourth quarter of 2018. The net decline was driven by a lower day count and higher deposit costs, offset by increased loan yields and volumes. The taxable equivalent net interest margin was 3.89% in the first quarter of 2019, an increase of 7 basis points over the fourth quarter of 2018. This increase in margin was primarily due to the impact of higher loan and investment yields and higher average loans, partially offset by higher deposit costs.

NONINTEREST INCOME

Noninterest income for the first quarter of 2019 totaled $103.7 million, a decrease of $19.0 million from the first quarter of 2018. The reduction was primarily driven by a $25.8 million gain on debt extinguishment recognized during the first quarter of 2018, partially offset by a positive $10.4 million change in the fair value adjustment on marketable equity securities. Excluding these items, noninterest income for the first quarter of 2019 totaled $92.3 million, compared to $95.9 million for the same period in 2018. This $3.6 million decline was primarily driven by a $2.1 million reduction in service charges on deposit accounts and ATM income and a $1.7 million decline in recoveries on acquired loans. These declines were partially offset by a $1.9 million increase in cardholder services income due to increased transaction volume, as well as a $1.4 million increase in wealth services income driven primarily by higher sales volume.

Noninterest income for the first quarter of 2019 increased $21.7 million from the fourth quarter of 2018. The increase was primarily the result of a $16.9 million decline in the fair value of marketable equity securities during the fourth quarter of 2018, compared to a $11.3 million increase in their fair value during the first quarter of 2019.

NONINTEREST EXPENSE

Noninterest expense totaled $267.7 million for the first quarter of 2019, a $0.4 million decline compared to the same period in 2018. The decline was largely driven by a $3.1 million reduction in FDIC insurance expense as the large bank surcharge was eliminated in the fourth quarter of 2018. Additionally, there was a $1.1 million decline in processing fees paid to third parties driven by the elimination of fees on recently converted acquired banks, as well as a $1.1 million decline in collections and foreclosure-related expenses. These decreases were partially offset by a $3.7 million increase in personnel-related expenses, driven by an increase in salaries and wages as a result of 2018 merit increases, as well as increased headcount from recent acquisitions. In addition, equipment expense increased $1.8 million due to our continued investment in technology.

Noninterest expense decreased by $7.7 million in the first quarter of 2019 when compared to the fourth quarter of 2018. The decrease was primarily the result of lower operational expenses driven by repairs for hurricane damage in the prior quarter, reductions in consulting expense, advertising costs, acquisition related expense and other miscellaneous expense items. These declines were partially offset by an increase in personnel-related expense.

INCOME TAXES

Income tax expense totaled $33.4 million for the first quarter of 2019, compared to $26.5 million and $31.2 million for the fourth and first quarters of 2018, respectively. The effective tax rate totaled 23.1% for the first quarter of 2019, compared with 22.8% and 23.8% for the fourth and first quarters of 2018, respectively.

LOANS AND DEPOSITS

Loans at March 31, 2019, were $25.46 billion, a decrease of $59.5 million since December 31, 2018. The decrease was primarily due to $49.2 million decline in the purchased credit impaired (PCI) loan portfolio. Additionally, the non-PCI, or originated loan portfolio, declined $10.3 million. This decline was driven in part by reductions in revolving mortgages due to increasing interest rates and changes in tax laws enacted by the Tax Cuts and Jobs Act of 2017, as well as seasonality in the government lending portfolio. These declines were partially offset by sustained growth in commercial construction and land development, commercial mortgage and consumer auto loans.

At March 31, 2019, deposits were $31.20 billion, an increase of $525.6 million, or 6.9% on an annualized basis, since December 31, 2018. The increase was primarily driven by a $590.8 million increase in demand deposits due to both seasonal fluctuations in commercial demand deposits and a continued focus by branch associates on core deposit growth.

ALLOWANCE AND PROVISION FOR LOAN AND LEASE LOSSES

The allowance for loan and lease losses was $228.8 million at March 31, 2019, an increase of $5.1 million from December 31, 2018. The allowance as a percentage of total loans was 0.90% at March 31, 2019, compared to 0.88% at December 31, 2018.

BancShares recorded net provision expense of $11.8 million during the first quarter of 2019, compared to net provision expense of $11.6 million for the fourth quarter of 2018 and net provision expense of $7.6 million for the first quarter of 2018. The $4.2 million increase from the prior year quarter was largely driven by changes in credit quality, an increase in specific reserves and changes to the provision for PCI loans.

NONPERFORMING ASSETS

BancShares' nonperforming assets, including nonaccrual loans and other real estate owned (OREO), were $133.9 million at March 31, 2019, unchanged from $133.9 million at December 31, 2018. 

SHARES REPURCHASES

In October 2018, BancShares' Board of Directors authorized the purchase of up to 800,000 of BancShares' Class A common stock for the period November 1, 2018, through October 31, 2019. At December 31, 2018, 182,000 shares had been purchased under the authority and BancShares repurchased 243,000 shares for approximately $100.7 million at an average cost per share of $414.58 during the first quarter of 2019. There were no share repurchases made during the first quarter of 2018.

As of March 31, 2019, a total of 425,000 shares had been purchased under the authorized authority.

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 March 31, 2019, BancShares had total assets of $35.96 billion.

For more information, visit First Citizens' website at firstcitizens.com. First Citizens Bank. Forever First®.

Download the First Citizens BancShares First Quarter 2019 Financials (PDF).

Contact Information:

Barbara Thompson
919-716-2716
First Citizens Bank