On January 26, 2024, First Citizens BancShares Inc (FCNCA, Financial) released its 8-K filing, detailing the financial results for the fourth quarter ended December 31, 2023. The report comes at a significant time as the company celebrates its 125th anniversary and concludes a year marked by strategic integrations and expansions, including the completion of its integration with CIT and the stabilization of SVB.
First Citizens BancShares Inc, the holding company for First Citizens Bank & Trust Company, has a storied history beginning as the Bank of Smithfield in North Carolina. With a footprint that now extends across nearly half of the continental United States, the bank has grown through de novo branching and acquisitions. The Holding family has historically played a significant role in the company, holding executive and director positions and controlling a substantial portion of the outstanding stock. First Citizens Bank offers a comprehensive suite of retail and commercial banking services, including lending, deposit-taking, trust, and wealth management, with net interest income being its primary revenue source.
Financial Performance and Challenges
FCNCA reported a net income of $514 million for the fourth quarter, a decrease from the $752 million reported in the previous quarter. Earnings per diluted common share also fell to $34.33 from $50.67 in Q3. Adjusted net income available to common stockholders was $678 million, or $46.58 per diluted common share, a decrease from the $813 million, or $55.92 per diluted common share, reported in the third quarter. The company's performance reflects several challenges, including acquisition-related expenses, a decrease in the preliminary gain on acquisition, an FDIC insurance special assessment, intangible asset amortization, and a fair value adjustment on marketable equity securities.
The importance of these financial results lies in the company's ability to navigate a complex banking environment while maintaining a solid capital and liquidity position. The challenges faced, such as the increase in interest expense and the decrease in net interest income, could potentially impact FCNCA's profitability and growth prospects if not managed effectively.
Income Statement and Balance Sheet Highlights
FCNCA's net interest income saw a decrease due to a rise in interest expense, partially offset by a slight increase in interest income. The net interest margin also decreased by 21 basis points compared to the third quarter. Noninterest income saw a decrease, mainly due to a reduction in the gain on acquisition. Loans and leases experienced a modest increase, while total investment securities grew by $3.18 billion. Deposits slightly decreased, and the cost of average total deposits rose by 23 basis points, although the pace of increase has decelerated.
From a balance sheet perspective, the company's loans and leases edged up to $133.30 billion, while deposits experienced a slight decrease to $145.85 billion. The capital and liquidity positions of FCNCA remain robust, with capital ratios well above regulatory requirements and liquid assets totaling $57.28 billion.
Provision for Credit Losses and Credit Quality
The provision for credit losses increased by $57 million in the fourth quarter, including a net reserve build driven by specific reserves on individually evaluated loans. Net charge-offs remained relatively flat compared to the previous quarter. Nonaccrual loans increased to $969 million, or 0.73% of loans. The allowance for loan and lease losses rose to $1.75 billion, or 1.31% of total loans, reflecting mild credit quality deterioration in commercial portfolios.
Capital and Liquidity
FCNCA's capital position remains strong, with capital ratios well above regulatory requirements. The estimated total risk-based capital, Tier 1 risk-based capital, Common equity Tier 1 risk-based capital, and Tier 1 leverage ratios were all reported to be healthy. A dividend of $1.64 per share of common stock was declared during the fourth quarter, and the company's liquidity position remains strong with liquid assets increasing slightly from the previous quarter.
Overall, First Citizens BancShares Inc's fourth quarter earnings report reflects a company that is navigating through a period of strategic growth and integration, while maintaining a strong capital and liquidity position. The company's ability to manage the challenges it faces will be crucial for its continued success and stability.
For more detailed information, investors and interested parties can access the earnings release, investor presentation, and financial supplement on the company's investor relations website or on the SEC website.
Explore the complete 8-K earnings release (here) from First Citizens BancShares Inc for further details.
