FIRST CITIZENS BANCSHARES INC /DE/ 10-Q

Item 1A. Risk Factors The following paragraphs describe changes in the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2019. An outbreak of COVID-19 has adversely affected BancShares' business, financial condition and results of operations. A novel strain of coronavirus (“COVID-19”) has spread across most of the world, including the United States beginning in the first quarter of 2020. It has caused severe disruptions to the US economy, regional quarantines, business shutdowns, high unemployment, disruptions to supply chains, and overall economic instability that has adversely impacted the operations, activities and business of BancShares and its customers. Effects have generally been felt across all industries; however, the industries that have been the most negatively impacted to date include hospitality, travel and tourism, retail, medical and dental, and financial services. In response to the national public health crisis, Federal, State and Local governments continue to impose an array of restrictions on the way all businesses conduct their operations and on our customers, business partners, vendors and employees. These restrictions, along with other economic factors including inflation risks, oil price volatility, and changes in interest rates have and may continue to destabilize financial markets and negatively impact our customers’ business activities and operations, making it difficult for them to satisfy existing debt obligations. They also have led to increasing unemployment and slower consumer spending which in turn will increase our collection risk as deteriorating economic conditions correlate with lower credit quality metrics and higher customer defaults on loans. Economic pressures and uncertainty has and may continue to change consumer and business behaviors, which, in the short and long term, could affect borrowers’ creditworthiness and the demand for loans and other products and services we offer. BancShares is actively monitoring the loan portfolio to identify changes in credit risk within a specific geography, loan class, or within a particular industry concentration. Therefore, provision expense could increase as we incorporate these changes into our estimate on the allowance for credit losses. Additionally, our operations have experienced disruptions as we transitioned to a remote working environment for most corporate employees and we adjusted branch operations and corporate processes. While we have begun a phased return to work plan based on outbreak severity within impact areas, there may be increased absenteeism, and lost productivity as a result of the remote workforce. We may see an increased incidence of cybersecurity threats or fraud as cyber-criminals look to profit from the disruption and potential strain on information technology and the fear of the general public. There may be disruption in critical third party services as they adjust to the new operating environment. BancShares has a comprehensive business continuity and data security plan in place but may not be able to mitigate all of the issues identified above. Market volatility and general uncertainty in the capital markets may also impact our business. Our access to capital and liquidity could be limited by market disruptions which could be exacerbated by delays in customer payments or significant withdrawals from customer deposit accounts. In addition, the fair value of our assets and liabilities will be impacted by the changing market environment. This could also increase liquidity and capital adequacy risks, as well as long-lived asset impairment risk. As the government and its regulatory bodies respond to the crisis, it increases the burden on our associates to quickly respond to changing regulatory guidance. This could increase the risk of noncompliance. 66 Table of Contents The impacts laid out above and others will be felt across all of the following categories of risk identified by BancShares in our Annual Report on Form 10-K: • Operational Risk • Credit Risk • Market Risk • Liquidity Risk • Capital Adequacy Risk • Compliance Risk • Strategic Risk • Financial Reporting Risk The effects of the COVID-19 pandemic will heighten specific risk factors and could impact substantially all risk factors described in our Annual Report on Form 10-K under the risk categories listed above. Those effects will adversely affect our business operations and results at least until the outbreak has subsided, and the negative effects on the economy, our customers and our business and results likely will continue to be felt for some time afterwards. The full extent of the impact will depend on future developments that are highly uncertain including the duration and spread of the outbreak, its severity, governmental actions to contain the virus, and the long term economic impact, both globally, as well as in our banking markets, which includes a potential recession. As a result, we currently cannot fully assess the risk and adverse impact of the COVID-19 pandemic, but the effects may have a material impact on our business and financial results and heighten many of the individual risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2019.