First Citizens Bancshares, Inc. · NASDAQ:FCNCA
First Citizens Bancshares — Q2 2023 Earnings Presentation
57 slides from First Citizens Bancshares's earnings presentation, Aug 3, 2023
Slide 1: Second Quarter 2023 Earnings Conference Call
First Citizens BancShares, Inc. Second Quarter 2023 Earnings Conference Call August 3, 2023
Slide 2: Agenda
2 Agenda Pages Section I – Second Quarter Overview & SVB Business Update 4 – 10 Section II – Second Quarter 2023 Financial Results 11 – 34 Financial Highlights 12 – 13 Earnings Highlights 14 Notable items 15 Net interest income, margin and interest rate sensitivity 16 – 19 Noninterest income and exp
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, and future performance and other
Slide 4: Second Quarter Overview & SVB Business Update
Second Quarter Overview & SVB Business Update Section I
Slide 5: Second Quarter 2023 Snapshot
5 Second Quarter 2023 Snapshot First Citizens continued to deliver strong performance. Key Accomplishments: Financial Highlights: ■ Continued to rebuild trust with clients and provide Adjusted EPS (1) support to the innovation economy, leveraging SVB's deep bench of 1,000+ bankers. $52.60 Adjusted R
Slide 6: Continued Progress on SVB Integration Initiatives
6 Continued Progress on SVB Integration Initiatives Integration Priorities 1 Maintain & grow Build trust 2 with our Retain key talent 3 Maintain sound risk market position as client base & defend and optimize the management an important partner against competition workforce to drive practices in the
Slide 7: Strategic Priorities
7 Strategic Priorities Grow Core Lines of Business • Allocate capital and investments to grow lines of business with the highest returns and opportunity. Optimize Capital & Core Funding • Continue to optimize core funding by growing lower cost deposits. • Use innovation to facilitate growth, expand
Slide 8: SVB Business Update
8 SVB Business Update The focus since acquisition has been on stabilization to limit disruption to our clients and associates while continuing to serve as a partner of the innovation economy. ◦ Remain committed to SVB's unique business model and to providing purpose-built products and services to ou
Slide 9: SVB Loan & Deposit Trends
9 SVB Loan & Deposit Trends Deposits have remained stable and loans are in line with our forecast. ($ in B) ~$7 B $70.0 $68.5 decl reductio Highlights ines n du in G loba e primar $66.2 l Fun il d Ba y to exp Loans nkin e $65.0 g ac cted • Loans declined ~$7.4 B in 2Q23 tivity $61.9 $61.5 Driven pri
Slide 10: SVB Client Funds Have Begun to Stabilize
10 SVB Client Funds Have Begun to Stabilize Unaudited SVB Financial Profile: 3/27/23 3/31/23 4/30/23 6/30/23 Total assets $107 B $99 B $91 B $92 B Loans & leases $69 B $66 B $62 B $59 B Deposits $56 B $49 B $42 B $41 B Off balance sheet client funds $88 B $84 B $79 B $70 B Private bank AUM $15 B $14
Slide 11: Second Quarter 2023 Financial Results
Second Quarter 2023 Financial Results Section II
Slide 12: 2Q23 Financial Results - Takeaways
12 2Q23 Financial Results - Takeaways Loan growth was strong in the General and 1 Solid EPS, ROE and ROA performance. 6 Commercial Bank segments. We achieved deposit growth overall, Strong net interest income growth and NIM 2 expansion due to SVB acquisition. 7 primarily concentrated in the Direct B
Slide 13: 2Q23 Financial Highlights
13 2Q23 Financial Highlights Quarter-to-date Jun 23 Mar 23 Jun 22 Reported Adjusted Reported Adjusted Reported Adjusted (Non-GAAP) - (Non-GAAP) - (Non-GAAP) - EPS $ 45.87 $ 52.60 $ 653.64 $ 20.09 $ 14.86 $ 16.86 ROE 14.35 % 16.46 % 367.47 % 11.30 % 9.87 % 11.19 % ROTCE 14.91 % 17.10 % 386.69 % 11.89
Slide 14: Quarter-to-Date Earnings Highlights
14 Quarter-to-Date Earnings Highlights ($ in millions) Increase (decrease) Reported QTD 1Q23 2Q22 2Q23 1Q23 2Q22 $ % $ % Net interest income $ 1,961 $ 850 $ 700 $ 1,111 130.7 % $ 1,261 179.8 % Noninterest income 658 10,259 424 (9,601) (93.6) 234 55.0 Net revenue 2,619 11,109 1,124 (8,490) (76.4) 1,4
Slide 15: Notable Items
15 (1) Notable Items ($ in millions, except per share data) 2Q23 1Q23 2Q22 (2) Rental income on operating lease equipment $ (147) $ (145) $ (136) Realized gain on sale of investment securities available for sale, net — 14 — Fair value adjustment on marketable equity securities, net 10 9 6 Gain on sa
Slide 16: Net interest income and margin (NIM)
16 Net interest income and margin (NIM) ($ in millions) s bp $1,961 69 &+ on billi .1 $1 $795 $802 $850 4.10% $700 3.40% 3.36% 3.41% 3.04% 2Q22 3Q22 4Q22 1Q23 2Q23 NII NIM Highlights 2Q23 vs 1Q23 2Q23 vs 2Q22 Net interest income increased by $1.1 billion due to a $1.7 billion increase in interest Ne
Slide 17: NIM Rollforward
17 NIM Rollforward 1Q23 to 2Q23 (+69 bps) 0.37% 0.12% 0.59% 4.10% 3.41% (0.37)% (0.02)% 1Q23 Loan yield Purchase Yield on (1) Deposit rate Funding mix 2Q23 accounting investments & FFS 2Q22 to 2Q23 (+106 bps) 0.42% 0.93% 1.61% 4.10% (1.05)% 3.04% (0.48)% (0.37)% 2Q22 Loan yield Yield on Purchase Dep
Slide 18: Net interest income and margin rate sensitivity
18 Net interest income and margin rate sensitivity 2Q23 Interest Rate Sensitivity Highlights 25.0% 18.9% • BancShares continues to have an asset sensitive 20.0% interest rate risk profile. The magnitude of asset 15.0% sensitivity increased with the SVB acquisition primarily 9.5% due to: 10.0% • High
Slide 19: Historical and Forecasted Cumulative Deposit Beta
19 Historical and Forecasted Cumulative Deposit Beta Actual Forecast Terminal beta 38% 39% 36% 30% 23% 168 14% bps 124 6% 78 bps 35 bps bps 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 Actual cumulative beta Expected cumulative beta Rate paid on deposits Highlights • Expect cumulative deposit beta to increase
Slide 20: Noninterest income
20 Noninterest income ($ in millions) $10,259 $9,950 total $658 $9,824 $196 notable $55 total items $141 notable $424 $433 $429 items $141 $145 $139 $126 $462 $283 $288 $290 $309 2Q22 3Q22 4Q22 1Q23 2Q23 (1) (2) Adjusted (Non-GAAP) Notable items Gain on acquisition Highlights 2Q23 vs 1Q23 2Q23 vs 2Q
Slide 21: Noninterest expense
21 Noninterest expense ($ in millions) $1,572 $370 $855 $745 $760 $760 $178 $179 $183 $170 $1,202 $590 $677 $566 $577 2Q22 3Q22 4Q22 1Q23 2Q23 (1) Adjusted (Non-GAAP) Notable items Highlights 2Q23 vs 1Q23 2Q23 vs 2Q22 Noninterest expense increased $717 million. Noninterest expense increased $827 mil
Slide 22: 2Q23 Noninterest income and expense composition
22 2Q23 Noninterest income and expense composition ($ in millions) Adjusted noninterest income (Non-GAAP) Adjusted noninterest expense (Non-GAAP) Adjusted rental income on operating lease equipment ($91) Fee income and other service charges ($69) Personnel ($775) 3% Cardholder and merchant 5% 4% ser
Slide 23: Balance Sheet Highlights
23 Balance Sheet Highlights ($ in millions, except per share data) Increase (decrease) 2Q23 vs 1Q23 (1) 2Q23 vs 2Q22 (1) SELECT BALANCES 2Q23 1Q23 2Q22 $ % $ % Interest-earning deposits at banks $ 37,846 $ 38,522 $ 6,476 $ (676) (7.0)% $ 31,370 484.4 % Investment securities 22,171 19,527 19,136 2,64
Slide 24: Loans and Leases
24 Loans and Leases ($ in millions) Highlights $138,288 $133,015 $66,171 2Q23 vs 1Q23 $58,799 • Total loans declined $5.3 billion driven primarily by a $7.4 billion decline in the SVB segment related to Global Fund Banking. • The SVB decline was partially offset by $1.4 billion of growth (12.6% annu
Slide 25: 2Q23 Loans and Leases Composition
25 2Q23 Loans and Leases Composition ($ in millions) Type Segment Commercial Banking: Commercial Finance ($15.3) SVB Commercial ($44.1) Real Estate Finance ($6.3) Commercial and industrial ($25.4) 1% 1% 1% Equipment Finance ($5.5) 2% Owner occupied commercial mortgage ($14.7) 2% 2%2% Commercial Serv
Slide 26: Deposits
26 Deposits ($ in millions) Highlights $140,050 $141,164 2Q23 vs. 1Q23 $21,376 • Total deposits grew $1.1 billion (3.2% annualized) primarily driven by an $30,544 $40,860 $49,259 increase of $10.4 billion in the Direct Bank, partially offset by an $8.4 billion $19,484 decline in deposits in the SVB
Slide 27: 2Q23 Deposit Composition
27 2Q23 Deposit Composition ($ in billions, except average account size) Type Segment General Banking: Money market & savings ($55.6) Branch Network, Wealth & Other ($58.6) 11% Direct Bank ($29.2) 39% Noninterest-bearing demand ($44.5) 29% 18% 42% Community Association Banking ($7.5) Checking with i
Slide 28: Funding Mix
28 Funding Mix ($ in millions) QTD Change Linked Prior Year 2Q23 1Q23 4Q22 3Q22 2Q22 Quarter Quarter Total deposits $ 141,164 77.9 % $ 140,050 75.2 % $ 89,408 93.1 % $ 87,553 91.3 % $ 89,329 95.2 % $ 1,114 $ 51,835 Securities sold under customer repurchase agreements 454 0.3 509 0.3 436 0.5 578 0.6
Slide 29: ACL and Credit Quality Trends
29 ACL and Credit Quality Trends ($ in millions) Net charge-offs (NCO) & NCO ratio Provision for credit losses $157 $152 0.47% 0.27% $79 0.13% 0.14% $60 $63 0.10% $50 $42 $22 $24 $18 (1) (2) 2Q22 3Q22 4Q22 1Q23 2Q23 2Q22 3Q22 4Q22 1Q23 2Q23 NCO $ NCO ratio Provision for credit losses Nonaccrual loan
Slide 30: Allowance for credit losses (ACL)
30 Allowance for credit losses (ACL) ($ in millions) 1Q23 to 2Q23 $10 $4 $68 $10 $1,637 $1,605 $(39) $(21) 1Q23 Economic Portfolio mix Credit quality Change in Volume Acquisition- 2Q23 outlook specific related reserves adjustments Highlights ACL Coverage 12.6x 2Q23 vs 1Q23 • Total ACL increased $32
Slide 31: Commercial Real Estate (CRE) Portfolio
31 Commercial Real Estate (CRE) Portfolio ($ in billions, as of June 30, 2023) Total Loans CRE Portfolio Composition % of Total Balance Loans Multi-Family $ 4.2 3.1 % General Office $ 2.8 2.1 % Total Loans Medical Office $ 2.8 2.1 % CRE $133.0 B $17.1 B Industrial / Warehouse $ 2.3 1.7 % Retail $ 1.
Slide 32: General Office CRE Portfolio
32 General Office CRE Portfolio (as of June 30, 2023) Geographic Diversification General Office Other Top 5 MSAs ($ in millions) Portfolio Metrics VA 32% 4% Los Angeles $ 330 MA % of total loans 2.1 % 5% Total Total Phoenix $ 204 NY 6% General General San Francisco $ 200 % of CRE loans 16.4 % Office
Slide 33: Capital
33 Capital Risk-based capital ratios Capital ratio rollforward Risk-Based Capital Tier 1 15.84% Total Tier 1 CET1 Leverage 14.46% 14.86% 13.46% 14.00% December 31, 2022 13.18% 11.06% 10.08% 8.99% 13.18% 13.13% 12.37% 11.36% 11.06% SVB acquisition - net 1.63% 1.91% 2.28% -0.14% Net income 0.74% 0.74%
Slide 34: Maintained a Strong Balance Sheet Position
34 Maintained a Strong Balance Sheet Position Strong Capital Position Strong Liquidity Position Ratio Target Range 2Q23 Liquid assets 2Q23 CET1 RBC 9% - 10% 13.38% Available cash $ 37,152 $139 B High quality liquid securities (HQLS) 16,269 Total on-balance sheet liquidity $ 53,421 Total Tier 1 RBC 1
Slide 35: Financial Outlook
Financial Outlook Section III
Slide 36: Key Earnings Estimate Assumptions
36 Key Earnings Estimate Assumptions Metric 2Q23 3Q23 - Projected FY23 - Projected Loans and leases - EOP $133.0 billion $131 billion - $134 billion $131 billion - $134 billion Deposits - EOP $141.2 billion $137 billion - $141 billion $137 billion - $141 billion No target FFR changes in 4Q; Interest
Slide 37: Appendix
A First Citizens BancShares’ Appendix Section IV
Slide 38: BancShares Balance Sheets (unaudited)
38 BancShares Balance Sheets (unaudited) ($ in millions) 2Q23 1Q23 4Q22 3Q22 2Q22 ASSETS Cash and due from banks $ 917 $ 1,598 $ 518 $ 481 $ 583 Interest-earning deposits at banks 37,846 38,522 5,025 6,172 6,476 Securities purchased under agreements to resell 298 — — — — Investment in marketable equ
Slide 39: BancShares Income Statements (unaudited)
39 BancShares Income Statements (unaudited) ($ in millions) 2Q23 1Q23 4Q22 3Q22 2Q22 INTEREST INCOME Interest and fees on loans $ 2,353 $ 1,017 $ 892 $ 785 $ 655 Interest on investment securities 120 107 92 90 89 Interest on deposits at banks 480 87 56 31 13 Total interest income 2,953 1,211 1,040 9
Slide 40: Noninterest income
40 Noninterest income ($ in millions) 2Q23 Change vs Quarter-to-date 1Q23 2Q23 1Q23 4Q22 3Q22 2Q22 $ % Rental income on operating lease equipment $ 238 $ 233 $ 224 $ 219 $ 213 $ 5 2.2 % Fee income and other service charges 69 47 43 41 37 22 48.3 Client investment fees 52 2 — — — 50 2921.0 Wealth man
Slide 41: Noninterest expense
41 Noninterest expense ($ in millions) 2Q23 Change vs Quarter-to-date 1Q23 $ % 2Q23 1Q23 4Q22 3Q22 2Q22 Depreciation on operating lease equipment $ 91 $ 89 $ 88 $ 87 $ 89 $ 2 2.0 % Maintenance and other operating lease expenses 56 56 47 52 47 — 1.6 Salaries and benefits 775 420 354 353 345 355 84.3
Slide 42: Balanced Deposit Portfolio
42 Balanced Deposit Portfolio Total deposits as of June 30, 2023 Legacy FCB Legacy SVB General Bank SVB Branch Network & Wealth, CAB and Other Total deposits $ 40.9 B Total deposits $ 66.1 B NIB % 62 % # of accounts 129,981 $40.9 B NIB % 33 % # of accounts 1,977,607 Average balance $ 314,350 Average
Slide 43: Estimated Liquidity Available for Uninsured Deposits
43 Estimated Liquidity Available for Uninsured Deposits ($ in millions) June 30, 2023 March 31, 2023 Total deposits $ 141,164 $ 140,050 Less: insured and/or collaterized deposits 88,274 74,081 Total deposits - uninsured $ 52,890 $ 65,969 Estimated liquidity available for uninsured deposits: Availabl
Slide 44: Debt Securities Overview
44 Debt Securities Overview (1) 2Q23 (1) Duration Carrying Value (2) % of Portfolio Yield (3) (Years) ($ in millions) AFS Portfolio U.S. Treasury $ 4,634 21 % 1.84 % 1.0 Government agency 141 1 6.02 0.4 Commercial mortgage-backed securities 1,577 7 3.56 2.3 Residential mortgage-backed securities 4,8
Slide 45: Average Balances and Yields
45 Average Balances and Yields ($ in millions) Change vs. 2Q23 1Q23 2Q22 1Q23 2Q22 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 46: Commercial Banking Segment
46 Commercial Banking Segment Highlights (Actual balances; $ in millions) 2Q23 1Q23 2Q22 • The Commercial Banking segment achieved strong Income Statement loan growth, 10.5% annualized over the linked quarter, largely driven by strong origination volume in Net interest income $ 258 $ 240 $ 204 Comme
Slide 47: General Banking Segment
47 General Banking Segment Highlights (Actual balances; $ in millions) 2Q23 1Q23 2Q22 Income Statement • The General Banking segment achieved 12.6% annualized loan growth over the linked quarter, with Net interest income $ 603 $ 560 $ 467 the primary driver being business/commercial loan Noninterest
Slide 48: Silicon Valley Banking Segment
48 Silicon Valley Banking Segment Highlights (Actual balances; $ in millions) 2Q23 1Q23 Income Statement • Silicon Valley Banking Segment results reflect a full quarter for the 2Q23 reporting period, and only 5 Net interest income $ 635 $ 65 days of financial results for the 1Q23 reporting period, N
Slide 49: Rail Segment
49 Rail Segment Highlights (Actual balances ; $ in millions) 2Q23 1Q23 2Q22 Income Statement • Fleet utilization increased to 98.3% in the second quarter from 97.9% in the linked quarter. Rental income on operating lease equipment $ 180 $ 176 $ 160 • Favorable renewal repricing trends continued for
Slide 50: Purchase accounting marks
50 Purchase accounting marks ($ in millions) June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 Loans and leases (1) Beginning balance - unamortized fair value mark $ (2,674) $ (117) $ (131) $ (146) $ (145) Additions - Acquisition of SVB (61) (2,773) — — — PCD “gross up”
Slide 51: Credit Ratings
51 Credit Ratings First Citizens BancShares, Inc. First-Citizens Bank & Trust Company S&P Moody’s S&P Moody’s Outlook Negative Negative Outlook Negative Negative Issuer BBB Baa2 Issuer BBB + Baa2 Senior unsecured No rating Baa2 Senior unsecured BBB + Baa2 Subordinated No rating Baa2 Subordinated BBB
Slide 52: Non-GAAP Reconciliations
Non-GAAP Reconciliations Section V
Slide 53: Notable Items
53 (1) Notable Items ($ in millions, except per share data) 2Q23 1Q23 2Q22 (2) Rental income on operating lease equipment $ (147) $ (145) $ (136) Realized gain on sale of investment securities available for sale, net — 14 — Fair value adjustment on marketable equity securities, net 10 9 6 Gain on sa
Slide 54: Non-GAAP Reconciliations
54 Non-GAAP Reconciliations ($ in millions, except share and per share data) QTD QTD QTD Non-GAAP Reconciliations 6/30/2023 3/31/2023 6/30/2022 Net income and EPS Net income (GAAP) a $ 682 9,518 255 Preferred stock dividends 15 14 17 Net income available to common stockholders (GAAP) b 667 9,504 238
Slide 55: Non-GAAP Reconciliations
55 Non-GAAP Reconciliations ($ in millions, except share and per share data) QTD QTD QTD Non-GAAP Reconciliations 6/30/2023 3/31/2023 6/30/2022 PPNR Net income (GAAP) a $ 682 9,518 255 Plus: Provision (benefit) for credit losses 151 783 42 Income tax expense (benefit) 214 (47) 82 PPNR (non-GAAP) l $
Slide 56: Non-GAAP Reconciliations
56 Non-GAAP Reconciliations ($ in millions, except share and per share data) QTD QTD QTD Non-GAAP Reconciliations 6/30/2023 3/31/2023 6/30/2022 ROE and ROTCE Annualized net income available to common stockholders s = b annualized $ 2,675 38,543 955 Annualized adjusted net income available to common
Slide 57: Non-GAAP Reconciliations
57 Non-GAAP Reconciliations ($ in millions, except share and per share data) QTD QTD QTD Non-GAAP Reconciliations 6/30/2023 3/31/2023 6/30/2022 Book value and tangible book value per common share Common shares outstanding at period end bb 14,520,034 14,519,993 16,002,385 Book value per share x/bb $
First Citizens BancShares — Q2 2023 Earnings Presentation on 6ix