First Citizens Bancshares, Inc. · NASDAQ:FCNCA
First Citizens Bancshares — Q2 2022 Earnings Presentation
55 slides from First Citizens Bancshares's earnings presentation, Jul 28, 2022
Slide 1: Second Quarter 2022 Earnings Conference Call
First Citizens BancShares, Inc. Second Quarter 2022 Earnings Conference Call July 28, 2022
Slide 2: Agenda
Agenda Page(s) Section I – Merger Integration Update 5–7 Section II – Commercial Bank Credit Update 8 – 11 Section III – Second Quarter 2022 Financial Results 12 – 32 Key Take-Aways 13 Financial Highlights 14 Earnings Highlights 15 – 16 Notable Items 17 Net interest income and margin 18 – 20 Noninte
Slide 3: Important Notices
Important Notices Forward Looking Statements This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the financial condition, results of operations, business plans and future performance of First Citizens BancShare
Slide 4: Merger Integration Update
Merger Integration Update Section I
Slide 5: Merger Integration is Substantially Complete
5 Merger Integration is Substantially Complete We are committed to successful execution of our integration plan to deliver a timely and smooth transition for our customers and associates. • We completed a number of key milestones including the recent OneWest Bank / Treasury Management Services syste
Slide 6: Focus on Achieving Cost Saves
6 Focus on Achieving Cost Saves On track to achieve estimated costs saves of ~$250 million Included in Run-Rate • Reduced personnel expense by $120 ~$170 MM million and project an additional $30 million reduction by the end of 2023. Run-rate in 2Q22 (68% of target) • Achieved over $60 million in non
Slide 7: Commercial Bank and Rail
7 Commercial Bank and Rail Focused on leveraging the combined company’s expertise and capabilities to serve our customers. • Talent retention and continuity of leadership in the businesses sets the team up for current and future growth. Commercial • Demand remains strong with pipelines well above 20
Slide 8: Commercial Bank Segment Credit Update
Commercial Bank Segment Credit Update Section II
Slide 9: Commercial Bank Credit Profile
9 Commercial Bank Credit Profile Prior to merger consummation in 1Q22, the portfolio was significantly de-risked – a process which began in 2007. Product Type by Exposure (1) Higher Risk Portfolios Sold or Reduced • Sold Alt-A/Sub-Prime Consumer Mortgages 2007: • Liquidated Mezzanine and Subordinate
Slide 10: Commercial Bank Portfolio Successfully Weathered the Pandemic
10 Commercial Bank Portfolio Successfully Weathered the Pandemic The strong risk culture and credit risk discipline established after 2007 enabled the credit portfolio to weather the stress introduced during the initial phase of the COVID-19 pandemic. Nonaccrual loans & net charge-offs (NCO) (1) Hig
Slide 11: Combined Credit Risk Appetite
11 Combined Credit Risk Appetite The company has a moderate credit risk appetite. Outstandings (1) Exposure (1) • Legacy First Citizens: 49% • Legacy First Citizens: 54% • Legacy CIT: 51% • Legacy CIT: 46% 76% High - Moderate 29% 47% 24% 21% 79% + 14% 33% 53% 86% Moderate - Low (1) Credit metrics ar
Slide 12: Second Quarter 2022 Financial Results
Second Quarter 2022 Financial Results Section III
Slide 13: Key Take-Aways - Second Quarter Financial Performance
13 Key Take-Aways - Second Quarter Financial Performance Share repurchase plan for repurchase of up Provision build during the quarter due to 1 to 1,500,000 shares approved by the Board on 5 changes in CECL macroeconomic forecasts July 26th. and loan growth. Strong growth in pre-provision net revenu
Slide 14: Financial Highlights
14 Financial Highlights Quarter-to-date Year-to-date Jun 22 Mar 22 Jun 21 Jun 22 Jun 21 Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted (Non-GAAP) (Non-GAAP) (Non-GAAP) (Non-GAAP) (Non-GAAP) EPS (1) $ 14.86 $ 16.86 $ 16.70 $ 18.95 $ 15.09 $ 13.63 $ 31.48 $ 3
Slide 15: Quarter-to-Date Earnings Highlights
15 Quarter-to-Date Earnings Highlights ($ in millions) Increase (decrease) Reported QTD 1Q22 2Q21 Highlights 2Q22 1Q22 2Q21 $ % $ % Net interest income $ 700 $ 649 $ 612 $ 51 7.9 % $ 88 14.4% • Note: The commentary below relates to the “Adjusted” Noninterest income 424 850 483 (426) (50.1) (59) (12.
Slide 16: Year-to-Date Earnings Highlights
16 Year-to-Date Earnings Highlights ($ in millions) YTD Increase (decrease) Highlights Reported 2022 2021 YTD 21 - YTD 22 $ % • Note: The commentary below relates to the “Adjusted” income statement. Net interest income $ 1,349 $ 1,218 $ 131 10.8% Noninterest income 1,274 1,045 229 21.9 YTD 22 vs. YT
Slide 17: Notable Items
17 Notable Items ($ in millions) 2Q22 1Q22 2Q21 YTD 22 YTD 21 Rental income on operating leases, net $ (136) $ (124) $ (137) $ (260) $ (274) Realized gain on sales of investment securities available for sale, net — — (19) — (133) Fair value adjustment on marketable equity securities, net 6 (3) (12)
Slide 18: Net interest income and margin (NIM)
18 Net interest income and margin (NIM) s ($ in millions) illion & 31 bp $131 m $1,349 $1,218 s lion & 31 bp $51 mil $700 $612 $604 $619 $649 3.04% 2.89% 2.73% 2.56% 2.53% 2.56% 2.58% 2Q21 3Q21 4Q21 1Q22 2Q22 YTD Jun 21 YTD Jun 22 NII NIM Highlights 2Q22 vs 1Q22 2Q22 vs 2Q21 YTD June 2022 vs YTD Jun
Slide 19: NIM Rollforward
19 NIM Rollforward 1Q22 to 2Q22 (+ 31 bps) 0.04% 0.03% 3.04% 0.08% 0.09% (0.01)% 0.10% (0.02)% 2.73% 1Q22 Loan yield Loan growth Debt Yield on Yield on Deposit rate SBA-PPP 2Q22 redemption overnight investments investments 2Q21 to 2Q22 (+ 48 bps) 0.05% 0.04% 0.05% 0.09% 0.16% 3.04% (0.10)% (0.05)% 0
Slide 20: Net interest income and margin rate sensitivity
20 Net interest income and margin rate sensitivity 2Q22 Interest Rate Sensitivity Highlights 12.0% 10.2% • BancShares continues to have an asset sensitive 9.0% interest rate risk profile. 5.2% 6.0% • The projected increase in net interest income over the next 12 months is 5.2% for an immediate 100 3
Slide 21: Noninterest income
21 Noninterest income ($ in millions) $1,014 ase 6% incre Core: 1 $771 $726 $451 Core: $281 15% increase $446 $346 $325 $288 $318 $295 $101 $59 $5 $563 $54 $490 $245 $241 $266 $280 $283 2Q21 3Q21 4Q21 1Q22 2Q22 YTD Jun 21 YTD Jun 22 Core (non-GAAP) (1) Non-core Highlights 2Q22 vs 1Q22 2Q22 vs 2Q21 Y
Slide 22: Noninterest expense
22 Noninterest expense $1,295 ($ in millions) $1,125 $157 $28 $686 $609 $1,097 $1,138 $554 $530 $580 $567 $114 $17 $18 $43 $555 $563 $549 $572 $566 64.73% 66.58% 62.51% 61.57% 64.17% 59.50% 57.55% $(1) 2Q21 3Q21 4Q21 1Q22 2Q22 YTD Jun 21 YTD Jun 22 Core (non-GAAP) (1) Non-core Efficiency Ratio (non-
Slide 23: 2Q22 Noninterest income and expense composition
23 2Q22 Noninterest income and expense composition ($ in millions) Core noninterest income (non-GAAP) Core noninterest expense (non-GAAP) Rental income on operating leases, net ($77) Personnel ($341) Fee income and other service charges ($39) 4% 5% 10% Wealth management services ($37) 17% 27% Occupa
Slide 24: Balance Sheet Highlights
24 Balance Sheet Highlights ($ in millions, expect per share data) Increase (decrease) 2Q22 vs 1Q22 2Q22 vs 2Q21 Select balances (1) 2Q22 1Q22 2Q21 $ % $ % Interest-earning deposits at banks $ 6,476 $ 9,285 $ 13,006 $ (2,809) (30.3)% $ (6,530) (50.2)% Investment securities 19,136 19,469 16,129 (333)
Slide 25: Loans and Leases HFI
25 Loans and Leases HFI ($ in millions) Highlights $67,735 $66,401 $65,977 $65,524 $65,211 2Q22 vs 1Q22 • Loans increased $2.2 billion from $65.5 billion to $67.7 billion or by 13.5% on an annualized basis. Excluding SBA-PPP loans, loans increased by 14.3% on an annualized basis. • The increase was
Slide 26: 2Q22 Loans and Leases HFI Composition
26 2Q22 Loans and Leases HFI Composition ($ in billions) Type Segment 3% 3% 2% 4% Commercial Banking: 3% Commercial & industrial ($23.5 B) Commercial Finance ($16.3 B) 4% 13% 24% Owner-occupied Real Estate Finance ($6.0 B) 35% commercial mortgage ($13.8 B) 14% Business Capital ($4.9 B) Residential m
Slide 27: Deposits
27 Deposits ($ in millions) Highlights 2Q22 vs. 1Q22 $90,320 $90,777 $91,597 • Total deposits were $89.3 billion, a decrease of $2.3 billion $89,696 $89,329 or 9.9% on an annualized basis. • Noninterest-bearing deposits increased $747 million. • Interest-bearing deposits decreased $3.0 billion, prim
Slide 28: 2Q22 Deposit Composition
28 2Q22 Deposit Composition ($ in billions) Type Segment General Banking: 5% 1% 9% Branch Network, Wealth & Other ($62.6 B) Money market & savings ($38.0 B) 9% Direct Bank ($13.3 B) 18% Noninterest-bearing demand ($26.6 B) 43% 15% Community Association Banking ($7.6 B) Commercial Banking and Corpora
Slide 29: Funding Mix
29 Funding Mix ($ in millions) QTD Change Linked Prior Year 2Q22 1Q22 4Q21 3Q21 2Q21 Quarter Quarter Total deposits $ 89,329 95.2 % $ 91,597 96.5 % $ 90,777 93.8 % $ 90,320 93.6 % $ 89,696 93.6 % $ (2,268) $ (367) Securities sold under customer repurchase agreements 646 0.7 616 0.6 589 0.6 664 0.7 6
Slide 30: ACL and Credit Quality Trends
30 ACL and Credit Quality Trends ($ in millions) Net charge-offs (NCO) & NCO ratio Provision (benefit) for credit losses $30 $100 $26 $25 $50 $42 $22 $20 $15 $0 $15 0.16% $(50) $10 0.13% $(49) $7 $7 0.09% $(71) $(77) $5 $(100) 0.04% 0.04% $(94) $0 (1) 2Q21 3Q21 4Q21 1Q22 2Q22 2Q21 3Q21 4Q21 1Q22 2Q2
Slide 31: Allowance for credit losses (ACL)
31 Allowance for credit losses (ACL) ($ in millions) 1Q22 to 2Q22 $848 $34 $850 $26 $(22) $(19) $(17) 1Q22 Net charge-offs Credit quality Portfolio mix Economic Loan growth 2Q22 scenario Highlights ACL / Net charge-offs 35.1x 2Q22 vs 1Q22 32.4x • Total ACL increased $2 million compared to the linked
Slide 32: Capital
32 Capital Risk-based capital ratios Capital ratio rollforward Risk-Based Capital Tier 1 Total Tier 1 CET1 Leverage 14.30% 14.35% 14.47% 14.46% December 31, 2021 14.35% 12.47% 11.50% 7.59% 14.15% 12.32% 12.47% 12.39% 12.37% CIT acquisition - net (0.04)% (0.26)% (0.36)% 1.50% 12.13% 11.34% 11.50% 11.
Slide 33: Financial Outlook
Financial Outlook Section IV
Slide 34: Key Earnings Estimate Assumptions
34 Key Earnings Estimate Assumptions 2Q22 - adjusted FY21 - adjusted Metric 3Q22 FY22 baseline baseline Mid- to high-single digit Loans $67.7 billion Mid-single digit % growth $65.2 billion % growth Slightly negative % Negative low to mid- Deposits $89.3 billion $90.8 billion decline single digit %
Slide 35: Appendix
Appendix Section V we First Citizens BancShares
Slide 36: Consolidated Balance Sheets (unaudited)
36 Consolidated Balance Sheets (unaudited) ($ in millions) 2Q22 1Q22 4Q21 3Q21 2Q21 ASSETS Cash and due from banks $ 583 $ 523 $ 338 $ 337 $ 395 Interest-earning deposits at banks 6,476 9,285 9,115 9,875 7,871 Securities purchased under agreements to resell — — — — — Investment securities 19,136 19,
Slide 37: Consolidated Income Statements (unaudited)
37 Consolidated Income Statements (unaudited) ($ in millions) 2Q22 1Q22 4Q21 3Q21 2Q21 YTD22 YTD21 INTEREST INCOME Interest and fees on loans $ 655 $ 621 $ 328 $ 320 $ 324 $ 1,276 $ 647 Interest on investment securities 89 83 39 40 36 172 66 Interest on deposits at banks 13 6 4 3 2 19 4 Total intere
Slide 38: Legacy BancShares Consolidated Financial Ratios (unaudited)
38 (1) Legacy BancShares Consolidated Financial Ratios (unaudited) 4Q21 3Q21 2Q21 YTD21 NIM 2.58 % 2.61 % 2.67 % 2.73 % Net charge-off ratio (0.01)% 0.06 % 0.02 % 0.03 % Efficiency ratio 66.31 % 66.09 % 64.61 % 63.98 % Tangible capital to tangible assets (2) N 6.86 % Loan to deposits ratio (2) N 67.
Slide 39: Consolidated and Combining Balance Sheets (unaudited)
39 Consolidated and Combining Balance Sheets (unaudited) ($ in millions) 2Q22 1Q22 2Q21 FCB/CIT Reported Reported FCB GAAP CIT GAAP Combined ASSETS Cash and due from banks $ 583 $ 523 $ 395 $ 147 $ 542 Interest-earning deposits at banks 6,476 9,285 7,871 5,135 13,006 Securities purchased under agree
Slide 40: Consolidated and Combining Balance Sheets (unaudited)
40 Consolidated and Combining Balance Sheets (unaudited) ($ in millions) 2Q22 4Q21 3Q21 FCB/CIT FCB/CIT Reported FCB GAAP CIT GAAP Combined FCB GAAP CIT GAAP Combined ASSETS Cash and due from banks $ 583 $ 338 $ 141 $ 479 $ 337 $ 170 $ 507 Interest-earning deposits at banks 6,476 9,115 2,874 11,989
Slide 41: Consolidated and Combining Income Statements (unaudited)
41 Consolidated and Combining Income Statements (unaudited) ($ in millions) 2Q22 1Q22 2Q21 Reported Reported FCB GAAP CIT GAAP FCB/CIT INTEREST INCOME Interest and fees on loans $ 655 $ 621 $ 324 $ 356 $ 680 Interest on investment securities 89 83 36 15 51 Interest on deposits at banks 13 6 2 — 2 To
Slide 42: Consolidated and Combining Income Statements (unaudited)
42 Consolidated and Combining Income Statements (unaudited) ($ in millions) 2Q22 4Q21 3Q21 Reported FCB GAAP CIT GAAP FCB/CIT FCB GAAP CIT GAAP FCB/CIT INTEREST INCOME Interest and fees on loans $ 655 $ 328 $ 340 $ 668 $ 320 $ 342 $ 662 Interest on investment securities 89 39 21 60 40 14 54 Interest
Slide 43: Consolidated and Combining Income Statements (unaudited)
43 Consolidated and Combining Income Statements (unaudited) ($ in millions) YTD 22 YTD 21 Reported FCB GAAP CIT GAAP FCB/CIT INTEREST INCOME Interest and fees on loans $ 1,276 $ 647 $ 720 $ 1,367 Interest on investment securities 172 66 36 102 Interest on deposits at banks 19 4 2 6 Total interest in
Slide 44: Noninterest income
44 Noninterest income ($ in millions) 2Q22 Change vs Quarter-to-date 1Q22 2Q21 2Q22 1Q22 4Q21 3Q21 2Q21 $ % $ % Rental income on operating leases $ 213 $ 208 $ 204 $ 186 $ 188 $ 5 2.4 % $ 25 13.3 % Fee income and other service charges 39 35 39 37 39 4 11.4 % — —% Wealth management services 37 35 33
Slide 45: Noninterest expense
45 Noninterest expense ($ in millions) 2Q22 Change vs Quarter-to-date 1Q22 2Q21 2Q22 1Q22 4Q21 3Q21 2Q21 $ % $ % Depreciation on operating lease equipment $ 89 $ 81 $ 88 $ 85 $ 83 $ 8 9.9 % $ 6 7.2 % Maintenance and other operating lease expense 47 43 52 51 54 4 9.3 % (7) (13.0)% Salaries and benefi
Slide 46: Debt Securities Overview
46 Debt Securities Overview (1) 2Q22(1) Duration Carrying Value(2) % of Portfolio Yield(3) (Years) ($ in millions) AFS Portfolio U.S. Treasury $ 1,903 10 % 1.01 % 2.6 Government agency 190 1 3.47 3.1 Commerical mortgage-backed securities 1,527 8 2.65 4.8 Residential mortgage-backed securities 5,019
Slide 47: Average Balances and Yields
47 Average Balances and Yields ($ in millions) Change vs. 2Q22 1Q22 2Q21 1Q22 2Q21 Avg. Income / Yield / Avg. Income / Yield / Avg. Income / Yield / Avg. Income / Yield / Avg. Income / Yield / Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate Lo
Slide 48: Commercial Banking Segment
48 Commercial Banking Segment Highlights (Actual balances; $ in millions) 2Q22 1Q22 • The Commercial Banking segment had a strong Income Statement quarter of loan growth, as robust growth in Net interest income $ 203 $ 207 Commercial Finance (22% annualized) and Business Noninterest income 129 112 C
Slide 49: General Banking Segment
49 General Banking Segment Highlights (Actual balances; $ in millions) 2Q22 1Q22 Income Statement • The General Banking segment had strong loan Net interest income $ 467 $ 437 growth on both a quarterly and year-to-date basis, with the primary drivers being growth in our branch Noninterest income 12
Slide 50: Rail Segment
50 Rail Segment Highlights (Actual balances ; $ in millions) 2Q22 1Q22 Income Statement • Fleet utilization increased to 96.2% in 2Q22, which Rental income on operating leases $ 160 $ 159 was up 0.72% compared to the linked quarter, and up Depreciation on operating lease equipment 47 41 6.20% from t
Slide 51: Preliminary purchase accounting marks
51 Preliminary purchase accounting marks ($ in millions) June 30, 2022 March 31, 2022 December 31, 2021 Loans and leases (1) Beginning balance - unamortized fair value $ (145) $ (40) $ (65) Additions - Merger with CIT Group Inc. — (388) — PCD “gross up” — 284 — Accretion (1) (1) 25 Ending balance $
Slide 52: Credit Ratings
52 Credit Ratings S&P Moody’s Fitch Rating agency focus • Solid business profile, strong franchise and diversified First Citizens business model. BBB Baa2 BBB BancShares, Inc. • Historically conservative risk appetite with low credit losses over time. First-Citizens Bank BBB+ Baa1 BBB & Trust Compan
Slide 53: Non-GAAP Reconciliations
53 Non-GAAP Reconciliations ($ in millions, except per share data) YTD21(2 Non-GAAP Reconciliations 2Q22 1Q22 2Q21(2) YTD22 ) Reconciliations from GAAP to Adjusted (1) Net income available to common stockholders (GAAP) $ 238 264 363 502 806 Tax-effected notable items 32 35 (77) 67 (192) Adjusted net
Slide 54: Non-GAAP Reconciliations
54 Non-GAAP Reconciliations ($ in millions, except per share data) Non-GAAP Reconciliations 2Q22 1Q22 2Q21(1) YTD22 YTD21(1) Pre-tax, pre-provision net revenue Net income (GAAP) $ 255 271 380 526 830 Provision (benefit) for credit losses 42 464 (94) 506 (224) Income tax expense (benefit) 82 (46) 118
Slide 55: Non-GAAP Reconciliations
55 Non-GAAP Reconciliations ($ in millions) Non-GAAP Reconciliations 2Q22 1Q22 2Q21(2) YTD22 YTD21(2) Tangible Capital to Tangible Assets (at period end) Stockholders' equity (GAAP) $ 10,642 10,570 10,513 10,642 10,513 Less: preferred stock 881 881 865 881 865 Less: Goodwill and intangible assets 49
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