First Citizens Bancshares, Inc. · NASDAQ:FCNCA
First Citizens Bancshares — Q4 2023 Earnings Presentation
51 slides from First Citizens Bancshares's earnings presentation, Jan 26, 2024
Slide 1: Fourth Quarter 2023 Earnings Conference Call
First Citizens BancShares, Inc. Fourth Quarter 2023 Earnings Conference Call January 26, 2024
Slide 2: Agenda
2 Agenda Pages Section I – Fourth Quarter Overview & Strategic Priorities 4–7 Section II – Fourth Quarter 2023 Financial Results 8 – 29 Financial Highlights 9 – 10 Earnings Highlights 11 Net interest income, margin and betas 12 – 14 Noninterest income and expense 15 – 16 Balance Sheet Highlights 17
Slide 3: Important Notices
3 Important Notices Forward Looking Statements This presentation 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, asset quality, future performance and other stra
Slide 4: Fourth Quarter Overview & Strategic Priorities
Fourth Quarter Overview & Strategic Priorities Section I
Slide 5: Fourth Quarter 2023 Snapshot
5 Fourth Quarter 2023 Snapshot First Citizens continued to deliver strong performance demonstrating the benefits that increased scale and diversified offerings bring to the franchise. Key Accomplishments: Financial Highlights: Adjusted EPS (1) ■ Solid financial results driven by strong NIM and an ad
Slide 6: Strategic Priorities
6 Strategic Priorities First Citizens Strategic Priorities Risk Management Client-Focused Operational Regulatory Talent & Culture Business Model Efficiency Readiness • Maximize growth • Attract, retain and • Execute on SVB • Support regulatory opportunities in our develop associates integration to o
Slide 7: Continued Progress on SVB Integration Initiatives
7 Continued Progress on SVB Integration Initiatives Integration Priorities 1 Maintain & grow Continue 2 to build Retain key talent 3 Maintain sound risk market position as trust with client and optimize the management an important partner base & defend workforce to drive practices in the innovation
Slide 8: Fourth Quarter 2023 Financial Results
Fourth Quarter 2023 Financial Results Section II
Slide 9: 4Q23 Financial Results - Takeaways
9 4Q23 Financial Results - Takeaways Client outreach efforts continue to be Achieved solid adjusted EPS, ROE and ROA successful as SVB deposit balances remained 1 results in line with our forecast. 5 relatively stable and exceeded our expectations. While net interest margin declined during the Conti
Slide 10: Financial Highlights
10 Financial Highlights 4Q23 3Q23 4Q22 Reported Adjusted Reported Adjusted Reported Adjusted (Non-GAAP) (Non-GAAP) (Non-GAAP) EPS $ 34.33 $ 46.58 $ 50.67 $ 55.92 $ 16.67 $ 20.94 ROE 9.97 % 13.53 % 15.20 % 16.77 % 11.05 % 13.89 % ROTCE 10.32 14.00 15.76 17.39 11.70 14.71 ROA 0.95 1.28 1.41 1.55 0.93
Slide 11: Quarterly Earnings Highlights
11 Quarterly Earnings Highlights ($ in millions) Increase (decrease) Reported 4Q23 vs. 3Q23 4Q23 vs. 4Q22 4Q23 3Q23 4Q22 $ % $ % Net interest income $ 1,911 $ 1,990 $ 802 $ (79) (3.9)% $ 1,109 138.4 % Noninterest income 543 615 429 (72) (11.6) 114 26.7 Net revenue 2,454 2,605 1,231 (151) (5.8) 1,223
Slide 12: Net interest income and margin (NIM)
12 Net interest income and margin (NIM) ($ in millions) $(79) million & (-21 bps) $1,961 $1,990 $1,911 $802 $850 4.11% 4.07% 3.86% 3.39% 3.41% 4Q22 1Q23 2Q23 3Q23 4Q23 NII NIM Highlights 4Q23 vs 3Q23 4Q23 vs 4Q22 Net interest income decreased by $79 million due to a $86 million increase in interest
Slide 13: NIM Rollforward
13 NIM Rollforward 3Q23 to 4Q23 (-21 bps) 0.06% 0.02% 0.10% 4.07% (0.16)% 3.86% (0.13)% (0.06)% (0.04)% 3Q23 Loan yield Investment Debt volume Purchase Deposit rate Earning asset Deposit 4Q23 yield accounting mix volume 4Q22 to 4Q23 (+47 bps) 0.24% 0.22% 0.33% 1.06% 3.86% 3.39% (1.13)% (0.25)% 4Q22
Slide 14: Historical and Forecasted Cumulative Deposit Beta
14 Historical and Forecasted Cumulative Deposit Beta Actual Forecast Terminal beta 44% 42% 42% 40% 37% 30% 23% 2.35% 2.12% 1.68% 1.24% 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 Actual cumulative beta Expected cumulative beta Rate paid on deposits Highlights • We are forecasting our cumulative deposit beta
Slide 15: Noninterest income
15 Noninterest income ($ in millions) $10,259 $9,950 - $658 $196 - $615 $543 total $147 - $9,824 $55 total $12 notable total $141 notable $135 $171 $429 items notable items items $88 - $139 $126 total $462 $468 $455 notable $290 $309 items $(83) 4Q22 1Q23 2Q23 3Q23 4Q23 Adjusted (Non-GAAP) (1) Notab
Slide 16: Noninterest expense
16 Noninterest expense ($ in millions) $1,572 $1,492 $1,416 $370 $284 $357 $855 $760 $178 $170 $1,202 $1,132 $1,135 $590 $677 4Q22 1Q23 2Q23 3Q23 4Q23 (1) Adjusted (Non-GAAP) Notable items Highlights 4Q23 vs 3Q23 4Q23 vs 4Q22 Noninterest expense increased by $76 million. Noninterest expense increase
Slide 17: Balance Sheet Highlights
17 Balance Sheet Highlights ($ in millions, except per share data) Increase (decrease) 4Q23 vs 3Q23 (1) 4Q23 vs 4Q22 (1) SELECT PERIOD END BALANCES 4Q23 3Q23 4Q22 $ % $ % Interest-earning deposits at banks $ 33,609 $ 36,704 $ 5,025 $ (3,095) (33.5)% $ 28,584 568.9 % Investment securities 29,999 26,8
Slide 18: Loans and Leases
18 Loans and Leases ($ in millions, period end balances) $138,288 Highlights $133,015 $133,202 $133,302 $66,171 4Q23 vs 3Q23 $58,803 $56,864 $55,013 • Total loans increased $100 million driven primarily by a $1.3 billion (10.8% annualized) and $716 million (9.4% annualized) increase in the General B
Slide 19: 4Q23 Loans and Leases Composition
19 4Q23 Loans and Leases Composition ($ in billions, period end balances) Type Segment Commercial Banking: Commercial Finance ($16.9) Real Estate Finance ($6.1) Commercial mortgage ($33.3) Equipment Finance ($5.6) 4% 4% 7% 7% 13% 25% Commercial and industrial ($29.1) Commercial Services - Factoring
Slide 20: Deposits
20 Deposits ($ in millions, period end balances) Highlights $146,233 $145,854 $140,050 $141,164 4Q23 vs. 3Q23 $20,486 $18,235 • Total deposits decreased $379 million $38,477 $39,970 $21,376 (-1.0% annualized) driven by a $1.5 billion $40,860 $30,544 decline in the SVB segment due primarily $49,259 $
Slide 21: 4Q23 Deposit Composition
21 4Q23 Deposit Composition (period end balances, $ in billions, except average account size) Type Segment General Banking: Money market & savings ($65.9) Branch Network, Wealth & Other ($57.8) 11% Direct Bank ($37.7) 26% 16% Noninterest-bearing demand ($39.8) 45% 40% Community Association Banking (
Slide 22: Funding Mix
22 Funding Mix ($ in millions) Period End Balances Increase (decrease) 4Q23 vs. 4Q23 vs. 4Q23 3Q23 2Q23 1Q23 4Q22 3Q23 4Q22 Total deposits $ 145,854 79.5 % $ 146,233 79.5 % $ 141,164 77.9 % $ 140,050 75.2 % $ 89,408 93.1 % $ (379) $ 56,446 Securities sold under customer repurchase agreements 485 0.3
Slide 23: Credit Quality Trends and Allowance
23 Credit Quality Trends and Allowance ($ in millions) Net charge-offs (NCO) & NCO ratio Adjusted provision for credit losses (1) $176 $177 $249 $157 0.53% 0.53% $195 0.47% $152 0.27% 0.14% $50 $79 $63 $24 0.12% 0.27% 0.39% 0.45% 0.47% 4Q22 1Q23 2Q23 3Q23 4Q23 4Q22 1Q23 2Q23 3Q23 4Q23 NCO $ QTD NCO
Slide 24: Allowance for loan and lease losses (ALLL)
24 Allowance for loan and lease losses (ALLL) ($ in millions) 3Q23 to 4Q23 $18 $12 $1,747 $49 $1,673 $(5) 3Q23 Credit quality Change in specific Economic outlook Portfolio mix 4Q23 reserves Highlights ALLL Coverage 9.3x 4Q23 vs 3Q23 • ALLL increased $74 million compared to the linked quarter. • The
Slide 25: Loan Portfolios in Focus
25 Loan Portfolios in Focus ($ in billions, as of December 31, 2023) Commercial Real Estate (CRE) Portfolio Composition Balance % of total loans Total Loans Multi-Family $ 4.4 3.3 % Medical Office 3.5 2.6 General Office 2.9 2.2 General Bank 1.3 1.0 Commercial Bank 1.2 0.9 SVB 0.4 0.3 Industrial / Wa
Slide 26: General Office CRE Portfolio
26 General Office CRE Portfolio (as of December 31, 2023) Geographic Diversification General Office Other CA Top 5 MSAs ($ in millions) Portfolio Metrics 24% 22% Los Angeles $ 408 % of total loans 2.2 % Total Phoenix $ 201 WA General Boston $ 136 % of CRE loans 13.8 % 4% Office VA $2.9 B NC / SC San
Slide 27: SVB Investor Dependent (ID) Portfolio
27 SVB Investor Dependent (ID) Portfolio (as of December 31, 2023) Portfolio Characteristics Portfolio Metrics • Early Stage - Loans to development-stage innovation companies Early Stage Growth Stage with $0-5 million in revenues. Historically SVB’s highest risk portfolio which experienced an averag
Slide 28: Capital
28 Capital Risk-based capital ratios Capital ratio rollforward Risk-Based Capital Tier 1 15.84% 15.64% 15.74% Total Tier 1 CET1 Leverage 14.86% 14.00% 13.83% 13.94% December 31, 2022 13.18% 11.06% 10.08% 8.99% 13.18% 13.13% 11.06% SVB acquisition - net 1.59% 1.88% 2.25% 0.03% Net income 1.65% 1.65%
Slide 29: First Citizens Remains Well Positioned for Regulatory Proposals
29 First Citizens Remains Well Positioned for Regulatory Proposals Strong Capital Position Long Term Debt (LTD) Needs are Manageable 13.4% • First Citizens' binding constraint is expected to 11.8% be LTD as a percentage of Risk-Weighted (1.2)% (0.4)% Assets (RWA). Impact of RWA • Under terms of the
Slide 30: Financial Outlook
Financial Outlook Section III
Slide 31: Key Earnings Estimate Assumptions
31 Key Earnings Estimate Assumptions Metric 4Q23 1Q24 - Projected FY24 - Projected Loans and leases - EOP $133.3 billion $133 billion - $135 billion $139 billion - $143 billion Deposits - EOP $145.9 billion $146 billion - $148 billion $152 billion - $156 billion Six interest rate cuts in 2024; with
Slide 32: Appendix
A First Citizens BancShares’ Appendix Section IV
Slide 33: BancShares Balance Sheets (unaudited)
33 BancShares Balance Sheets (unaudited) ($ in millions) Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 ASSETS Cash and due from banks $ 908 $ 791 $ 917 $ 1,598 $ 518 Interest-earning deposits at banks 33,609 36,704 37,846 38,522 5,025 Securities purchased under agreements to resel
Slide 34: BancShares Income Statements (unaudited)
34 BancShares Income Statements (unaudited) ($ in millions) 4Q23 3Q23 2Q23 1Q23 4Q22 INTEREST INCOME Interest and fees on loans $ 2,391 $ 2,426 $ 2,353 $ 1,017 $ 892 Interest on investment securities 241 180 120 107 92 Interest on deposits at banks 485 504 480 87 56 Total interest income 3,117 3,110
Slide 35: Noninterest income
35 Noninterest income ($ in millions) 4Q23 Change vs 3Q23 4Q23 3Q23 2Q23 1Q23 4Q22 $ % Rental income on operating lease equipment $ 252 $ 248 $ 238 $ 233 $ 224 $ 4 2.0 % Fee income and other service charges 80 71 70 47 43 9 10.3 Client investment fees 51 52 52 2 — (1) (1.8) Wealth management service
Slide 36: Noninterest expense
36 Noninterest expense ($ in millions) 4Q23 Change vs 3Q23 $ % 4Q23 3Q23 2Q23 1Q23 4Q22 Depreciation on operating lease equipment $ 96 $ 95 $ 91 $ 89 $ 88 $ 1 1.6 % Maintenance and other operating lease expenses 59 51 56 56 47 8 15.5 Salaries and benefits 714 727 775 420 354 (13) (1.6) Net occupancy
Slide 37: Estimated Liquidity Available for Uninsured Deposits
37 Estimated Liquidity Available for Uninsured Deposits ($ in millions) December 31, 2023 September 30, 2023 Liquid assets: Available cash 32,693 $ 35,896 High quality liquid securities 24,591 $ 21,123 Total liquid assets (a) 57,284 $ 57,019 Contingent liquidity: FDIC credit facility (1) $ 15,107 $
Slide 38: Debt Securities Overview
38 Debt Securities Overview ($ in millions, period end balances) (1) 4Q23 (1) Duration in Carrying value (2) % of Portfolio Yield (3) years AFS Portfolio U.S. Treasury $ 10,508 35 % 4.40 % 0.9 Government agency 117 1 5.89 0.4 Commercial mortgage-backed securities 2,131 7 4.11 2.4 Residential mortgag
Slide 39: Average Balances and Yields
39 Average Balances and Yields ($ in millions) Change vs. 4Q23 3Q23 4Q22 3Q23 4Q22 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 40: Commercial Banking Segment
40 Commercial Banking Segment ($ in millions) Highlights 4Q23 3Q23 4Q22 • The Commercial Banking segment achieved strong Income Statement loan growth, 9.4% annualized over the linked quarter, largely driven by record origination volume in Net interest income $ 271 $ 249 $ 243 Commercial Finance, par
Slide 41: General Banking Segment
41 General Banking Segment ($ in millions) Highlights 4Q23 3Q23 4Q22 • The General Banking segment achieved 10.8% Income Statement annualized loan growth over the linked quarter, driven primarily by business/commercial loan production. Net interest income $ 643 $ 625 $ 547 Noninterest income 128 125
Slide 42: Silicon Valley Banking Segment
42 Silicon Valley Banking Segment ($ in millions) Highlights 4Q23 3Q23 • Silicon Valley Banking segment loans decreased $1.9 Income Statement billion, or 12.9% annualized, compared to the linked quarter driven primarily by paydowns and payoffs in Net interest income $ 611 $ 635 the Global Fund Banki
Slide 43: Rail Segment
43 Rail Segment ($ in millions) Highlights 4Q23 3Q23 4Q22 • The fleet is effectively fully utilized, with utilization Income Statement remaining flat to the prior quarter at 98.7%. Rental income on operating lease equipment $ 195 $ 190 $ 168 • Favorable renewal repricing trends continued for the Dep
Slide 44: Purchase accounting marks
44 Purchase accounting marks ($ in millions) December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Loans and leases (including off balance sheet exposure) (1) Beginning balance - unamortized fair value mark $ (2,378) $ (2,731) $ (2,944) $ (137) $ (151) Additions - Acqui
Slide 45: Glossary of Abbreviations and Acronyms
45 Glossary of Abbreviations and Acronyms The following is a list of certain abbreviations and acronyms used throughout this document. AFS – Available for Sale HQLS – High Quality Liquid Securities ALLL – Allowance for Loan and Lease Losses HTM – Held to Maturity AOCI – Accumulated Other Comprehensi
Slide 46: Non-GAAP Reconciliations
Non-GAAP Reconciliations Section V
Slide 47: Notable Items
47 Notable Items (1) ($ in millions, except per share data) 4Q23 3Q23 4Q22 (2) Rental income on operating lease equipment $ (155) $ (146) $ (135) Realized loss on sale of investment securities available for sale, net — 12 — Fair value adjustment on marketable equity securities, net (9) 1 (2) Gain on
Slide 48: Non-GAAP Reconciliations
48 Non-GAAP Reconciliations ($ in millions, except share and per share data) Non-GAAP Reconciliations 4Q23 3Q23 4Q22 Net income and EPS Net income (GAAP) a $ 514 752 257 Preferred stock dividends 15 15 14 Net income available to common stockholders (GAAP) b 499 737 243 Total notable items, after inc
Slide 49: Non-GAAP Reconciliations
49 Non-GAAP Reconciliations ($ in millions) Non-GAAP Reconciliations 4Q23 3Q23 4Q22 PPNR Net income (GAAP) a $ 514 752 257 Plus: Provision for credit losses 249 192 79 Income tax expense 199 245 135 PPNR (non-GAAP) l $ 962 1,189 471 Impact of notable items (1) 269 137 31 Adjusted PPNR (non-GAAP) m $
Slide 50: Non-GAAP Reconciliations
50 Non-GAAP Reconciliations ($ in millions) Non-GAAP Reconciliations 4Q23 3Q23 4Q22 ROE and ROTCE Annualized net income available to common stockholders s = b annualized $ 1,980 2,923 966 Annualized adjusted net income available to common stockholders t = e annualized $ 2,687 3,225 1,216 Average sto
Slide 51: Non-GAAP Reconciliations
51 Non-GAAP Reconciliations ($ in millions, except share and per share data) Non-GAAP Reconciliations 4Q23 3Q23 4Q22 Book value and tangible book value per common share Common shares outstanding at period end bb 14,520,118 14,520,103 14,506,202 Book value per share x/bb $ 1,403.12 1,343.52 605.36 Ta
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