First Citizens BancShares Inc. (FCNCA) is a well-established financial holding company that has weathered numerous economic cycles and emerged as a diversified banking powerhouse. With a rich history spanning over a century, the company has strategically navigated through various challenges, solidifying its position as a trusted financial institution in the Southeastern, Mid-Atlantic, Midwest, and Western regions of the United States.
Business Overview: First Citizens BancShares traces its roots back to 1898 when it was founded as First National Bank of Durham. In 1923, the bank merged with Citizens National Bank to form First-Citizens Bank & Trust Company. The company has since grown through a combination of organic expansion and strategic acquisitions. A significant milestone in the company's history occurred in 2014 when it acquired the deposits and certain assets of Charleston, South Carolina-based CIT Bank, N.A., which substantially expanded its presence in the Carolinas and enhanced its commercial banking capabilities.
In 2023, First Citizens made a transformative acquisition by taking over substantially all assets and liabilities of Silicon Valley Bridge Bank, N.A. (SVBB) from the FDIC. This move not only expanded the company's footprint in key innovation markets but also added valuable capabilities in private banking and wealth management for venture capital and private equity clients.
Throughout its history, First Citizens has demonstrated resilience in the face of economic challenges. The company successfully navigated the financial crisis of the late 2000s, emerging in a relatively strong position compared to many of its peers. More recently, the bank has had to adapt to the economic disruptions caused by the COVID-19 pandemic and increased regulatory scrutiny for large financial institutions.
Today, First Citizens BancShares operates a network of branches and offices, providing a wide range of financial services to individuals, businesses, and professionals. The company's product portfolio includes retail and mortgage banking, wealth management, small and middle-market banking, factoring, and leasing services. Additionally, the company owns a fleet of railcars and locomotives that are leased to railroads and shippers, diversifying its revenue streams.
Financial Performance and Ratios: As of September 30, 2024, First Citizens BancShares reported total assets of $220.57 billion, a significant increase from the $213.76 billion reported as of December 31, 2023. The company's net income for the nine months ended September 30, 2024, was $2.08 billion, a decline from the $10.95 billion recorded in the same period of the prior year, primarily due to the substantial gain on the SVBB acquisition recognized in 2023.
For the most recent quarter (Q3 2024), FCNCA reported revenue of $2,441 million and net income of $639 million. The company experienced a decline in net income of 15.1% compared to the prior year quarter, primarily due to a 10.4% increase in noninterest expense, which offset a 5.7% increase in noninterest income. Net interest income declined 9.5% due to higher interest expense.
The company's financial ratios demonstrate its financial strength and resilience. As of September 30, 2024, the company's return on assets (ROA) was 1.27%, and its return on equity (ROE) was 11.72%. The company's Common Equity Tier 1 (CET1) capital ratio stood at 13.24%, well above the regulatory minimum, providing ample cushion for growth and unexpected challenges.
Segment Performance: First Citizens BancShares operates through four primary segments: General Bank, Commercial Bank, SVB Commercial, and Rail.
The General Bank segment delivers a full suite of banking products and services to consumers and businesses through an extensive branch network and various digital channels. This includes retail and mortgage banking, wealth management, private banking, cash management, payment services, and treasury services. The segment offers conforming and jumbo residential mortgage loans, deposit products, and a range of lending and advisory services to individuals and businesses. It also includes a community association bank channel that supports deposit, cash management and lending to homeowner associations and property management companies. The General Bank segment contributed $718 million in net income for the nine-month period ended September 30, 2024, up from $666 million in the same period of the prior year.
The Commercial Bank segment provides a variety of lending, leasing, capital markets, asset management, and other financial and advisory services primarily to small and middle market companies across various industries. Loan products include senior secured loans collateralized by accounts receivable, inventory, machinery and equipment, transportation equipment, and intangibles. The segment also offers factoring, receivable management and secured financing services to businesses in industries such as apparel, textile, furniture, home furnishings, and consumer electronics. This segment generated $355 million in net income, a significant increase from the $141 million recorded in the prior-year period.
The SVB Commercial segment offers products and services to commercial clients and investors across the innovation ecosystem, as well as private equity and venture capital firms. Loan products consist of capital call lines of credit, investor dependent loans, cash flow dependent loans, and innovation commercial and industrial loans made primarily to technology, life science and healthcare companies. The segment also provides deposit products and banking services. This segment reported $632 million in net income, up from $370 million in the same period of the previous year.
The Rail segment offers customized leasing and financing solutions on a fleet of railcars and locomotives to railroads and shippers throughout North America. The segment's revenue is primarily generated from rental income on the operating lease equipment. It contributed $75 million in net income, a slight increase from the $68 million reported in the prior-year period.
Liquidity: First Citizens BancShares maintains a strong liquidity position to meet its financial obligations and support its operations. The company's liquidity management strategies include maintaining a diverse funding base, holding high-quality liquid assets, and maintaining access to various funding sources. As of December 31, 2023, the company had $908 million in cash and due from banks, providing a substantial buffer against potential liquidity needs.
The company's debt-to-equity ratio stood at 1.61 as of December 31, 2023, calculated as total debt of $37.65 billion divided by total equity of $21.25 billion. FCNCA had a current ratio and quick ratio of 1.57, indicating a strong ability to meet short-term obligations.
FCNCA maintains significant borrowing capacity, with $13.62 billion available from the Federal Home Loan Bank (FHLB) out of a total capacity of $15.07 billion, and $5.12 billion available from the Federal Reserve Bank (FRB) as of December 31, 2023. Additionally, the company has access to up to $70 billion in total advances through the FDIC Advance Facility Agreement, with $15.11 billion available as of December 31, 2023.
Navigating Challenges and Expanding Capabilities: Throughout its history, First Citizens BancShares has demonstrated its ability to navigate challenging economic environments. The company's diversified business model and prudent risk management practices have been critical in weathering various economic storms, including the recent volatility in the banking industry.
In response to the evolving regulatory landscape, the company has been proactively investing in enhancing its risk management capabilities and infrastructure to meet the requirements for larger financial institutions. These investments, while impacting short-term profitability, are aimed at positioning the company for long-term sustainable growth and regulatory compliance.
Furthermore, the company has been actively enhancing its digital capabilities and expanding its product offerings to better serve its clients. The integration of the SVBB acquisition has broadened the company's reach in the innovation and technology sectors, allowing it to leverage its expertise and provide tailored solutions to this vibrant and dynamic client base.
Outlook and Guidance: For the full year 2024, First Citizens BancShares expects its net interest income to be in the range of $7.1 billion to $7.2 billion, slightly down from their previous guidance of $7.2 billion to $7.3 billion. The company's net interest margin, excluding purchase accounting accretion, is expected to be in the low to mid-3.30% range. In the third quarter of 2024, FCNCA reported an adjusted earnings per share of $45.87, with a net interest margin of 3.53% and a net interest margin excluding accretion of 3.33%.
The company's adjusted noninterest income is forecasted to be between $1.89 billion and $1.91 billion for the full year 2024, with the fourth quarter expected to be in line to down low single digits percentage points from the third quarter. Adjusted noninterest expense is expected to be in the range of $4.76 billion to $4.79 billion for the full year 2024, with the fourth quarter expected to be flat compared to the third quarter.
The company's credit quality is expected to remain stable, with net charge-offs projected to be in the 35 to 40 basis points range for the full year 2024. In the third quarter, the net charge-off ratio was 42 basis points, up slightly from the sequential quarter but aligned with their guidance range. The company expects fourth quarter 2024 net charge-offs to be near or slightly above the level experienced in the third quarter.
For the fourth quarter of 2024, FCNCA expects a low to mid-single digits percentage point decline in headline net interest income as lower accretion and slightly lower loan and investment yields are only partially offset by declining deposit costs.
The company's capital position remains strong, with a CET1 capital ratio target of 10.5% to 11% by the end of 2025, which the company plans to achieve through ongoing share repurchases.
Conclusion: First Citizens BancShares has established itself as a diversified financial powerhouse with a rich history and a proven track record of navigating through challenging economic environments. The company's strategic acquisitions, such as the SVBB acquisition, have expanded its capabilities and strengthened its position in key growth areas. With total loans and leases of $138.69 billion and total deposits of $151.57 billion as of September 30, 2024, FCNCA demonstrates significant scale across its various business lines. As the company continues to invest in enhancing its risk management and digital infrastructure, it is well-positioned to capitalize on emerging opportunities and deliver long-term value to its shareholders.