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RALEIGH, N.C., Jan. 30, 2019 (GLOBE NEWSWIRE) -- First Citizens BancShares Inc. (BancShares) (Nasdaq: FCNCA) reported strong earnings for the year ended 2018 benefiting from net revenue growth and tax reform, according to Frank B. Holding, Jr., Chairman of the Board. Key results for the quarter and year ended December 31, 2018, are presented below:
|For the Quarter ended:|
|Net income (in millions)||$89.5||$117.3||$54.4|
|Net income per share||$7.62||$9.80||$4.53|
|Annualized return on average assets||1.00||%||1.33||%||0.62||%|
|Annualized return on average equity||10.17||%||13.41||%||6.48||%|
|For the Year ended:|
|Net income (in millions)||$400.3||$323.8|
|Net income per share||$33.53||$26.96|
|Return on average assets||1.15||%||0.94||%|
|Return on average equity||11.69||%||10.10||%|
On January 10, 2019, First Citizens Bank (FCB) and First South Bancorp, Inc. (First South Bancorp) entered into a definitive merger agreement for the acquisition by FCB 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 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 during the second quarter of 2019, subject to the receipt of regulatory approvals and the approval of First South Bancorp's shareholders. As of December 31, 2018, First South Bancorp reported $238.5 million in consolidated assets, $180.9 million in loans and $204.1 million in deposits.
On November 15, 2018, FCB and Biscayne Bancshares, Inc. (Biscayne Bancshares) entered into a definitive merger agreement for the acquisition by FCB of Coconut Grove, Florida-based Biscayne Bancshares and its bank subsidiary, Biscayne Bank. Under the terms of the agreement, cash consideration of $25.05 will be paid to the shareholders of Biscayne Bancshares for each share of common stock totaling approximately $118.7 million. The transaction is expected to close during the second quarter of 2019, subject to the receipt of regulatory approvals. As of December 31, 2018, Biscayne Bancshares reported $1.01 billion in consolidated assets, $850.3 million in loans and $746.4 million in deposits.
On November 1, 2018, FCB completed the merger of Pawleys Island, South Carolina-based Palmetto Heritage Bancshares, Inc. (Palmetto Heritage) and its subsidiary, Palmetto Heritage Bank & Trust, into FCB. Under the terms of the agreement, cash consideration of $135.00 per share was paid to the shareholders of Palmetto Heritage for each share of Palmetto Heritage's common stock with total consideration paid of $30.4 million. FCB acquired $162.2 million in assets, $135.1 million in loans and $124.9 million in deposits.
On October 2, 2018, FCB completed the merger of Milwaukee, Wisconsin-based Capital Commerce Bancorp, Inc. (Capital Commerce) and its subsidiary, Securant Bank & Trust, into FCB. Under the terms of the agreement, cash consideration of $4.75 per share was paid to the shareholders of Capital Commerce for each share of Capital Commerce's common stock with total consideration paid of $28.1 million. FCB acquired $221.9 million in assets, $184.1 million in loans and $172.4 million in deposits.
On May 1, 2018, FCB completed the merger of Tampa, Florida-based HomeBancorp, Inc. (HomeBancorp) and its subsidiary, HomeBanc, into FCB. Under the terms of the agreement, cash consideration of $15.03 per share was paid to the shareholders of HomeBancorp for each share of HomeBancorp's common stock with total consideration paid of $112.7 million. FCB acquired $842.7 million in assets, $566.2 million in loans and $619.6 million in deposits.
LOANS AND DEPOSITS
Loans at December 31, 2018, were $25.52 billion, a net increase of $636.9 million compared to September 30, 2018, representing growth of 10.2 percent on an annualized basis. The increase was driven by $374.3 million of organic growth in our commercial and residential mortgage portfolios, offset by pay downs on equity lines. Quarter end balances also included $294.0 million of non-PCI loans acquired in the Capital Commerce and Palmetto Heritage acquisitions. The growth in the non-PCI portfolio was partially offset by a net decline in the purchase credit impaired (PCI) portfolio of $31.4 million.
Loan balances increased by a net $1.93 billion, or 8.2 percent, since December 31, 2017. The increase was driven by $1.31 billion of originated loan growth in our commercial and residential mortgage portfolios, offset by pay downs of equity lines. Year end balances also included $770.2 million non-PCI loans acquired in the HomeBancorp, Capital Commerce and Palmetto Heritage acquisitions. The growth in the non-PCI portfolio was partially offset by a net decline in the PCI portfolio of $156.4 million.
At December 31, 2018, deposits were $30.67 billion, an increase of $508.9 million, or 1.7 percent, from September 30, 2018. The increase was due to organic growth of $223.7 million primarily in money market and time deposits accounts. In addition to organic growth, year end balances also included $164.5 million and $120.7 million in deposits related to the Capital Commerce and Palmetto Heritage acquisitions, respectively.
Deposits increased by $1.41 billion, or 4.8 percent, since December 31, 2017, due to organic growth of $675.7 million primarily in noninterest bearing demand deposit accounts. The remaining increase was due to deposit balances acquired from HomeBancorp, Capital Commerce and Palmetto Heritage.
ALLOWANCE AND PROVISION FOR LOAN AND LEASE LOSSES
The allowance for loan and lease losses was $223.7 million at December 31, 2018, an increase of $4.5 million from September 30, 2018 and $1.8 million from December 31, 2017. The allowance as a percentage of total loans at December 31, 2018, and September 30, 2018, was 0.88 percent, compared to 0.94 percent at December 31, 2017.
BancShares recorded net provision expense of $11.6 million during the fourth quarter of 2018, compared to net provision expense of $840 thousand for the third quarter of 2018 and net provision credit of $2.8 million for the fourth quarter of 2017. The $10.7 million and $14.4 million increases, respectively, were largely driven by prior period provision decreases due to loan loss factor reductions as well as current quarter loan growth within higher reserve loan segments and increased net charge-offs.
BancShares’ nonperforming assets, including nonaccrual loans and other real estate owned (OREO), were $133.9 million at December 31, 2018, up from $130.6 million at September 30, 2018, and down from $144.3 million at December 31, 2017. The increase from September 30, 2018, was primarily due to an increase in OREO, whereas the decrease from December 31, 2017, was primarily due to a decrease in nonaccrual commercial loans.
NET INTEREST INCOME
Net interest income for the fourth quarter of 2018 increased $13.5 million to $320.9 million, or by 4.4 percent, compared to the third quarter of 2018. The taxable equivalent net interest margin was 3.82 percent in the fourth quarter of 2018, an increase of 9 basis points from the prior quarter.
The increase was primarily due to:
Net interest income for the fourth quarter of 2018 increased $46.1 million, or by 16.8 percent, compared to the fourth quarter of 2017. The taxable-equivalent net interest margin was 3.82 percent in the fourth quarter of 2018, an increase of 48 basis points from the same quarter in the prior year.
Net interest income for the year ended 2018 increased $149.0 million, or by 14.1 percent, compared to the year ended 2017. The taxable-equivalent net interest margin was 3.69 percent for the year ended 2018, an increase of 39 basis points from the year ended 2017.
The increase was primarily due to:
Noninterest income for the fourth quarter of 2018 was $82.0 million, a decrease of $12.5 million from the third quarter of 2018. The decrease was primarily the result of a $20.7 million decline in the fair value adjustment to marketable equity securities due to market volatility, partially offset by an increase of $6.6 million in cardholder and merchant income resulting from higher sales volume and increased vendor incentives.
Noninterest income decreased $26.6 million from the fourth quarter of 2017, primarily driven by a $16.9 million decline in the fair value adjustment to marketable equity securities and a $12.4 million decrease in gains on extinguishment of debt. These decreases were partially offset by an increase of $6.8 million in cardholder and merchant income driven primarily by higher sales volume and increased vendor incentives.
Noninterest expense increased by $7.8 million to $275.4 million compared to the third quarter of 2018. The increase was primarily the result of higher operational expenses driven by repairs for hurricane damage, acquisition related expenses and other miscellaneous expense items.
Noninterest expense increased by $12.3 million from the same quarter last year largely due to an increase in personnel expenses, primarily related to payroll incentives and annual merit increases, as well as increased headcount from the HomeBancorp, Capital Commerce and Palmetto Heritage acquisitions. These increases were partially offset by a reduction in FDIC assessment fees.
Quarterly income tax expense and effective tax rates are shown below:
|For the Quarter ended:|
|Income tax expense (millions)||$26.5||$16.2||$68.7|
|Effective tax rate||22.8||%||12.1||%||55.8||%|
The Tax Cuts and Jobs Act of 2017 (Tax Act), enacted on December 22, 2017, reduced the federal corporate income tax rate from 35 percent to 21 percent effective January 1, 2018.
During the fourth quarter of 2017, as a result of the reduction in the tax rate, income tax expense was increased by $25.8 million to re-measure our deferred tax asset. Excluding the effects of the Tax Act adjustment, the effective tax rate for the fourth quarter of 2017 would have been 34.9 percent.
During the third quarter of 2018, income tax expense was reduced by $15.7 million to record a tax benefit related to the effects of the Tax Act. The benefit recorded represents an update of the original Tax Act adjustment recorded during the fourth quarter of 2017. Excluding the effects of the Tax Act, the effective tax rate for the third quarter of 2018 would have been 23.9 percent.
The accounting for the effects of the Tax Act was initiated in the fourth quarter of 2017 and was completed in the fourth quarter of 2018 with no additional material adjustments to income tax expense during the fourth quarter.
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 December 31, 2018, BancShares had total assets of $35.4 billion.
For more information, visit First Citizens’ website at firstcitizens.com. First Citizens Bank. Forever First®.
|CONSOLIDATED FINANCIAL HIGHLIGHTS|
|Three months ended||Year ended December 31|
|(Dollars in thousands, except share data; unaudited)||
|SUMMARY OF OPERATIONS|
|Net interest income||320,882||307,362||274,769||1,208,900||1,059,896|
|(Credit) provision for loan and lease losses||11,585||840||(2,809||)||28,468||25,692|
|Net interest income after provision for loan and lease losses||309,297||306,522||277,578||1,180,432||1,034,204|
|Gain on acquisitions||—||—||—||—||134,745|
|Noninterest income excluding gain on acquisitions||82,007||94,531||108,613||400,149||387,218|
|Income before income taxes||115,926||133,516||123,111||503,610||543,698|
|Taxable-equivalent net interest income||$||321,804||$||308,207||$||276,002||$||1,212,280||$||1,064,415|
|PER SHARE DATA|
|Book value at period-end||300.04||294.40||277.60||300.04||277.60|
|CONDENSED BALANCE SHEET|
|Cash and due from banks||$||327,440||$||262,525||$||336,150||$||327,440||$||336,150|
|Loans and leases||25,523,276||24,886,347||23,596,825||25,523,276||23,596,825|
|Less allowance for loan and lease losses||(223,712||)||(219,197||)||(221,893||)||(223,712||)||(221,893||)|
|Total liabilities and shareholders' equity||$||35,408,629||$||34,954,659||$||34,527,512||$||35,408,629||$||34,527,512|
|SELECTED PERIOD AVERAGE BALANCES|
|Loans and leases||25,343,813||24,698,799||23,360,235||24,483,719||22,725,665|
|Annualized return on average assets||1.00||%||1.33||%||0.62||%||1.15||%||0.94||%|
|Annualized return on average equity||10.17||13.41||6.48||11.69||10.10|
|Taxable-equivalent net interest margin||3.82||3.73||3.34||3.69||3.30|
|Efficiency ratio (1)||65.66||67.33||70.86||67.74||70.78|
|Tier 1 risk-based capital ratio||12.67||13.23||12.88||12.67||12.88|
|Common equity Tier 1 ratio||12.67||13.23||12.88||12.67||12.88|
|Total risk-based capital ratio||13.99||14.57||14.21||13.99||14.21|
|Leverage capital ratio||9.77||10.11||9.47||9.77||9.47|
|(1) The efficiency ratio is a non-GAAP financial measure which measures productivity and is generally calculated as noninterest expense divided by total revenue (net interest income and noninterest income). The efficiency ratio removes the impact of BancShares' securities gains, acquisition gains, one-time gains on extinguishment of debt, fair market value adjustment on marketable equity securities and FDIC shared-loss termination from the calculation. Management uses this ratio to monitor performance and believes this measure provides meaningful information to investors.|
|ALLOWANCE FOR LOAN AND LEASE LOSSES AND ASSET QUALITY DISCLOSURES|
|Three months ended||Year ended December 31|
|(Dollars in thousands, unaudited)||
|ALLOWANCE FOR LOAN AND LEASE LOSSES (ALLL)|
|ALLL at beginning of period||$||219,197||$||224,865||$||231,842||$||221,893||$||218,795|
|(Credit) provision for loan and lease losses:|
|PCI loans (1)||(1,765||)||(1,514||)||(2,637||)||(765||)||(3,447||)|
|Non-PCI loans (1)||13,350||2,354||(172||)||29,232||29,139|
|Net charge-offs of loans and leases:|
|Net charge-offs of loans and leases||(7,070||)||(6,508||)||(7,140||)||(26,648||)||(22,594||)|
|ALLL at end of period||$||223,712||$||219,197||$||221,893||$||223,712||$||221,893|
|ALLL at end of period allocated to loans and leases:|
|ALLL at end of period||$||223,712||$||219,197||$||221,893||$||223,712||$||221,893|
|Reserve for unfunded commitments||$||1,107||$||1,089||$||1,032||$||1,107||$||1,032|
|SELECTED LOAN DATA|
|Average loans and leases:|
|Loans and leases at period-end:|
|Nonaccrual loans and leases||$||85,822||$||86,949||$||93,158||$||85,822||$||93,158|
|Other real estate||48,030||43,601||51,097||48,030||51,097|
|Total nonperforming assets||$||133,852||$||130,550||$||144,255||$||133,852||$||144,255|
|Accruing loans and leases 90 days or more past due||$||39,908||$||40,713||$||61,718||$||39,908||$||61,718|
|Net charge-offs (annualized) to average loans and leases||0.11||0.10||0.12||0.11||0.10|
|ALLL to total loans and leases:|
|Ratio of total nonperforming assets to total loans, leases and other real estate owned||0.52||0.52||0.61||0.52||0.61|
|(1) Loans and leases are evaluated at acquisition and where a discount is noted at least in part due to credit quality, the loans are accounted for under the guidance in ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Loans for which it is probable at acquisition that all required payments will not be collected in accordance with the contractual terms are considered purchased credit-impaired (PCI) loans. PCI loans and leases are recorded at fair value at the date of acquisition. No allowance for loan and lease losses is recorded on the acquisition date as the fair value of the acquired assets incorporates assumptions regarding credit risk. An allowance is recorded if there is additional credit deterioration after the acquisition date. Non-PCI loans include originated and purchased non-impaired loans.|
|AVERAGE BALANCE AND NET INTEREST MARGIN SUMMARY|
|Three months ended|
|December 31, 2018||September 30, 2018||December 31, 2017|
|(Dollars in thousands, unaudited)||Balance||Interest||Rate (2)||Balance||Interest||Rate (2)||Balance||Interest||Rate (2)|
|Loans and leases (1)||$||25,343,813||$||288,484||4.52||%||$||24,698,799||$||272,868||4.39||%||$||23,360,235||$||248,151||4.22||%|
|U. S. Treasury||1,454,889||7,261||1.98||1,504,594||7,104||1.87||1,627,968||4,784||1.17|
|Corporate bonds and other||135,962||1,810||5.32||121,855||1,609||5.28||63,911||991||6.20|
|State, county and municipal||78||3||17.14||—||—||—||—||—||—|
|Marketable equity securities||105,641||323||1.22||106,724||249||0.93||109,703||246||0.89|
|Total investment securities||7,025,889||39,946||2.27||7,129,089||38,962||2.18||7,044,534||31,441||1.78|
|Total interest-earning assets||$||33,500,732||$||334,495||3.97||%||$||32,886,276||$||316,551||3.83||%||$||32,874,233||$||287,191||3.47||%|
|Checking with interest||$||5,254,677||$||332||0.03||%||$||5,177,349||$||319||0.02||%||$||5,028,978||$||262||0.02||%|
|Money market accounts||7,971,726||4,335||0.22||7,878,484||2,455||0.12||8,047,691||1,732||0.09|
|Total interest-bearing deposits||18,337,345||9,059||0.20||17,930,234||5,147||0.11||17,836,411||3,789||0.08|
|Other short-term borrowings||53,552||298||2.21||43,720||287||2.57||107,551||1,031||3.77|
|Total interest-bearing liabilities||$||19,282,749||$||12,691||0.26||%||$||18,783,160||$||8,344||0.18||%||$||19,425,404||$||11,189||0.23||%|
|Interest rate spread||3.71||%||3.65||%||3.24||%|
|Net interest income and net yield on interest-earning assets||$||321,804||3.82||%||$||308,207||3.73||%||$||276,002||3.34||%|
|(1) Loans and leases include PCI loans and non-PCI 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 percent, 21.0 percent and 35.0 percent as well as state income tax rates of 3.4 percent, 3.4 percent and 3.1 percent for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017, respectively. The taxable-equivalent adjustment was $922, $845 and $1,233 for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017, respectively. The rate/volume variance is allocated equally between the changes in volume and rate.|
|First Citizens BancShares|