North Carolina Banker to Sell New Preferred Issue

Regional banker First Citizens Bancshares (FCNCA) has announced a new issuance of preferred stock.

This banker has $39 billion in assets and recently they did a roadshow with an investor presentation in support of their recently sold Subordinated Notes and for this issuance of preferred stock. You can see the presentation here.

It looks like this issue will come as low investment grade with a Baa3 from Moodys.

Dividends will be non cumulative and qualified.

The preliminary prospectus can be read here.

Thanks to EarlyBird for staying in tune with a slow new issue market.

22 thoughts on “North Carolina Banker to Sell New Preferred Issue”

  1. Institution trades are circa $25.25. That may indicate higher coupon than we expected. Not seeing any pricing on Edgar, though it must be priced if it’s trading.

        1. I believe underwriters have started to sell to institutions. I spotted three trades after the grey market symbol came out.
          The grey market symbol is FCIZP.
          Chuck, you can look up new grey market symbols here:
          https://otce.finra.org/otce/dailyList?viewType=Additions
          You may want to bookmark this link.
          The trades can be found here:
          https://quotes.freerealtime.com/quotes/FCIZP/Time%26Sales
          Have a good night sir and best regards,
          No. 12
          (but No.4 to make GB happy, not green and gold GB but brilliant red and black)

        2. They have only one 10y 3.375% sub notes issue with a last trade price at 102.2.
          The cusip for it is 31946MAA1.
          It’s not a 144a issue so it’s available for retail investors.

  2. I am confused about the symbol. Both FCNCA and FCNCB are already established symbols and traded. I am sure I am missing something and would appreciate clarification. Thanks, howard

  3. If this issue hits with a 5 Handle it will run to 26$ or 26.50 within a couple weeks..Any 5 year notes from a quality company like this have been running Hot from day one the OTC the past year…But the trend with rates tanking leads me to believe that this will come out at 4.75% or 4.70%…It might actually be the first 4.6 handle we have seen in many years….Hopefully not..

  4. Here is an opportunity for those relatively new to investing (and maybe some veterans) to learn a bit about corporate capital structure and the rules that govern bond and preferred stock issuances.

    Read the recent 8-K filing for ECNCA. You should want to understand every single word in Item 1.01 of the 8-K (it’s short):

    https://www.sec.gov/ix?doc=/Archives/edgar/data/798941/000114036120004788/nt10008890x7_8k.htm

    For you eager beavers, if you really want to do a deep dive into the legal aspects of bonds, read the indenture. An indenture is common law trust agreement between the issuer and a third party (usually a bank or trust company) acting as trustee. The indenture acts to the benefit of the de-facto trust beneficiaries, that being you, the buyers of the issue. It obligates the trustee to act on your behalf if the terms of the indenture are violated:

    https://www.sec.gov/Archives/edgar/data/798941/000114036120004788/nt10008890x7_ex4-1.htm

    1. Bob – Are you saying this as a generalized academic exercise for those who don’t normally read these things or for some specific implication potential buyers of the new preferreds ought to be aware of? If the latter, then 101 needs to be read in conjunction with what’s stated in the Risk Factors of the preferred’s prospectus, yes??? “The shares of Series A preferred stock will be equity interests and will not constitute indebtedness of our company. This means that the depositary shares, which represent fractional interests in shares of Series A preferred stock, will rank junior to all of our existing and future indebtedness and our other non-equity claims with respect to assets available to satisfy claims against us, including claims in the event of our liquidation. On March 4, 2020, we completed the offering of the Notes described in “Prospectus Supplement Summary—Offering of Subordinated Notes.” The Series A preferred stock and depositary shares will rank junior to the Notes. ” Either way, I hope your suggestions have motivated many to read the links you’ve provided and always be familiar with the guts of the prospectus on what they buy.

    1. Why does the stock price matter? Having a high stock px is inconsequential without knowing how many shares are outstanding.

      1. Market Cap is $4.8 Billion and they have over 500 branches. If you look thru the propaganda they have been on a big buying spree over the last 10 to 15 years buying up many small banks all over the place. Like I said earlier I would bet this issue will be a very LOW coupon. From what I can tell the company looks solid and the insiders own 31% of the stock which is always a good sign.

    1. The more I read thru all those press releases and read about the company I’ll take a bet that the coupon will be quite LOW.

  5. I didn’t read the entire prospectus as it makes me “Dizzy” to do so but I did notice they have been in business since 1898 and are located in 19 states. Yes, they have $39 Billion in assets and I think it read $34 Billion in liabilities. Iam no banker so maybe thats completely normal. Anyone care to guess what the coupon will be???

    1. With banks, what you want to see is a low equity part of their balance sheet. Remember, that a bank’s balance sheet is backwards (your liability is their asset!)
      Equity to Assets is a good measure to look at
      $5bil/$39bil = 12.82% which is above the average US bank’s ratio (see link at bottom). The higher the better when looking at a bank’s balance sheet. Just looking at this metric by itself would suggest a well capitalized bank, and not over extended by any means. (Another way to put it would be this bank is 7.8x levered, which is less than the 8.5x in the US)

      The Chinese banking system is said to have $40bil in assets for every $1bil in equity (2.5% E/A) which puts it at 40x levered. In 2008, US banks were about 10x levered.

      https://www.statista.com/statistics/210961/equity-to-assets-ratio-for-all-us-banks/

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