First Citizens Bancshares, Inc. · NASDAQ:FCNCA
First Citizens Bancshares — Q3 2023 Earnings Presentation
56 slides from First Citizens Bancshares's earnings presentation, Oct 26, 2023
Slide 1: First Citizens BancShares Third Quarter 2023 Earnings Conference Call
First Citizens BancShares, Inc. Third Quarter 2023 Earnings Conference Call October 26, 2023
Slide 2: Agenda
2 Agenda Pages Section I – Third Quarter Overview & Business Update 4–9 Section II – Third Quarter 2023 Financial Results 10 – 32 Financial Highlights 11 – 12 Earnings Highlights 13 Net interest income, margin and interest rate sensitivity 14 – 17 Noninterest income and expense 18 – 20 Balance Sheet
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: Third Quarter Overview & Business Update
Third Quarter Overview & Business Update Section I
Slide 5: Third Quarter 2023 Snapshot
5 Third 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) ■ Achieved positive operating leverage driven by strong 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: First Citizens is Committed to SVB and the Innovation Economy
8 First Citizens is Committed to SVB and the Innovation Economy We remain fully committed to supporting our clients and the innovation economy and are well-positioned to help navigate these challenging market conditions. ▪ We launched a new nationwide advertising campaign ‘Yes, SVB’ intended to incr
Slide 9: Wealth Management Alignment & Synergies
9 Wealth Management Alignment & Synergies New leadership structure developed to align SVB Private in our Wealth Management organization to improve coordination and enhance our commitment to creating a premier private banking & wealth business. A complementary combination: New England • Synergies in
Slide 10: Third Quarter 2023 Financial Results
Third Quarter 2023 Financial Results Section II
Slide 11: 3Q23 Financial Results - Takeaways
11 3Q23 Financial Results - Takeaways Continued low levels of private equity/ venture capital activity remain a headwind 1 Strong EPS, ROE and ROA performance. 6 for loan and deposit growth in the SVB segment. Net charge-offs increased during the quarter Solid net interest income and NIM 2 performan
Slide 12: 3Q23 Financial Highlights
12 3Q23 Financial Highlights Quarter-to-date Sep 23 Jun 23 Sep 22 Reported Adjusted Reported Adjusted Reported Adjusted (Non-GAAP) (Non-GAAP) (Non-GAAP) EPS $ 50.67 $ 55.92 $ 45.87 $ 52.60 $ 19.25 $ 20.77 ROE 15.20 % 16.77 % 14.35 % 16.46 % 12.49 % 13.47 % ROTCE 15.76 17.39 14.91 17.10 13.17 14.20 R
Slide 13: Quarter-to-Date Earnings Highlights
13 Quarter-to-Date Earnings Highlights ($ in millions) Increase (decrease) Reported QTD 2Q23 3Q22 3Q23 2Q23 3Q22 $ % $ % Net interest income $ 1,990 $ 1,961 $ 795 $ 29 1.5 % $ 1,195 150.4 % Noninterest income 615 658 433 (43) (6.6) 182 42.2 Net revenue 2,605 2,619 1,228 (14) (0.5) 1,377 112.1 Nonint
Slide 14: Net interest income and margin (NIM)
14 Net interest income and margin (NIM) ($ in millions) bps) $29 million & (-3 $1,961 $1,990 $795 $802 $850 4.10% 4.07% 3.42% 3.39% 3.41% 3Q22 4Q22 1Q23 2Q23 3Q23 NII NIM Highlights 3Q23 vs 2Q23 3Q23 vs 3Q22 Net interest income increased by $29 million due to a $157 million increase in Net interest
Slide 15: NIM Rollforward
15 NIM Rollforward 2Q23 to 3Q23 (-3 bps) 0.05% 0.03% 0.10% 0.05% 0.11% 0.12% 4.10% (0.24)% 4.07% (0.13)% (0.12)% 2Q23 Yield on Debt Loan yield Purchase Debt rate Investments Deposit rate Deposit Loan 3Q23 investments volume accounting & FFS volume volume (1) & FFS volume 3Q22 to 3Q23 (+65 bps) 0.44%
Slide 16: Net interest income and margin rate sensitivity
16 Net interest income and margin rate sensitivity 3Q23 Interest Rate Sensitivity Highlights 25.0% 18.3% 20.0% ◦ Continued asset sensitive interest rate risk profile. The magnitude of asset sensitivity increased with the SVB 15.0% 9.2% acquisition primarily due to: 10.0% ◦ Higher cash balances to ma
Slide 17: Historical and Forecasted Cumulative Deposit Beta
17 Historical and Forecasted Cumulative Deposit Beta Actual Forecast Terminal beta 43% 42% 40% 37% 30% 23% 212 14% bps 168 bps 124 78 bps bps 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 Actual cumulative beta Expected cumulative beta Rate paid on deposits Highlights • Expect cumulative deposit beta to contin
Slide 18: Noninterest income
18 Noninterest income ($ in millions) $10,259 $9,950 $658 $9,824 total $196 $615 $147 $55 total $12 total notable $141 notable $135 notable $433 $429 items items items $145 $139 $126 $462 $468 $288 $290 $309 3Q22 4Q22 1Q23 2Q23 3Q23 Adjusted (Non-GAAP) (1) Notable items (2) Gain on acquisition Highl
Slide 19: Noninterest expense
19 Noninterest expense ($ in millions) $1,572 $1,416 $370 $284 $855 $760 $760 $178 $183 $170 $1,202 $1,132 $590 $677 $577 3Q22 4Q22 1Q23 2Q23 3Q23 (1) Adjusted (Non-GAAP) Notable items Highlights 3Q23 vs 2Q23 3Q23 vs 3Q22 Noninterest expense decreased by $156 million. Noninterest expense increased b
Slide 20: 3Q23 Noninterest income and expense composition
20 3Q23 Noninterest income and expense composition ($ in millions) Adjusted noninterest income (Non-GAAP) Adjusted noninterest expense (Non-GAAP) Adjusted rental income on operating lease equipment ($102) Fee income and other service charges ($70) Personnel ($727) 3% Cardholder and merchant 5% servi
Slide 21: Balance Sheet Highlights
21 Balance Sheet Highlights ($ in millions, except per share data) Increase (decrease) 3Q23 vs 2Q23 (1) 3Q23 vs 3Q22 (1) SELECT PERIOD END BALANCES 3Q23 2Q23 3Q22 $ % $ % Interest-earning deposits at banks $ 36,704 $ 37,846 $ 6,172 $ (1,142) (12.0)% $ 30,532 494.6 % Investment securities 26,818 22,1
Slide 22: Loans and Leases
22 Loans and Leases ($ in millions) Highlights $138,288 $133,015 $133,202 $66,171 3Q23 vs 2Q23 $58,803 $56,864 • Total loans increased $187 million driven primarily by a $1.1 billion increase in the General Bank segment and a $1.0 billion increase in the Commercial Bank segment, partially offset by
Slide 23: 3Q23 Loans and Leases Composition
23 3Q23 Loans and Leases Composition ($ in millions) Type Segment Commercial Banking: Commercial Finance ($15.9) Real Estate Finance ($6.0) Commercial mortgage ($32.2) Equipment Finance ($5.6) 4% 4% 7% 7% 12% 24% Commercial and industrial ($28.5) Commercial Services - Factoring ($2.7) 5% 11% 11% Gen
Slide 24: Deposits
24 Deposits ($ in millions) Highlights $146,233 $140,050 $141,164 3Q23 vs. 2Q23 $20,486 • Total deposits grew $5.1 billion (14.2% $39,970 $21,376 annualized) driven primarily by a $6.4 $40,860 $30,544 billion increase in the Direct Bank, partially $49,259 offset by a $890 million decline in deposits
Slide 25: 3Q23 Deposit Composition
25 3Q23 Deposit Composition ($ in billions, except average account size) Type Segment General Banking: Money market & savings ($62.6) Branch Network, Wealth & Other ($58.2) 12% Direct Bank ($35.6) Noninterest-bearing demand ($43.1) 28% 16% 43% 40% Community Association Banking ($7.2) Checking with i
Slide 26: Funding Mix
26 Funding Mix ($ in millions) QTD - Period End Balances Change Linked Prior Year 3Q23 2Q23 1Q23 4Q22 3Q22 Quarter Quarter Total deposits $ 146,233 79.5 % $ 141,164 77.9 % $ 140,050 75.2 % $ 89,408 93.1 % $ 87,553 91.3 % $ 5,069 $ 58,680 Securities sold under customer repurchase agreements 453 0.2 4
Slide 27: Allowance and Credit Quality Trends
27 Allowance and Credit Quality Trends ($ in millions) Net charge-offs (NCO) & NCO ratio Adjusted provision for credit losses (1) $195 $176 $157 $152 0.53% 0.47% 0.27% $79 0.14% $60 $63 0.10% $50 $18 $24 3Q22 4Q22 1Q23 2Q23 3Q23 3Q22 4Q22 1Q23 2Q23 3Q23 NCO $ NCO ratio Provision for credit losses No
Slide 28: Allowance for loan and lease losses (ALLL)
28 Allowance for loan and lease losses (ALLL) ($ in millions) 2Q23 to 3Q23 $30 $2 $1,673 $30 $1,637 $(1) $(25) 2Q23 Economic Credit quality Volume Portfolio mix Change in 3Q23 outlook specific reserves Highlights ALLL Coverage 12.6x 3Q23 vs 2Q23 • ALLL increased $36 million compared to the linked qu
Slide 29: Loan Portfolios in Focus
29 Loan Portfolios in Focus ($ in billions, as of September 30, 2023) Commercial Real Estate (CRE) Portfolio Composition % of Total Balance Loans Total Loans Multi-Family $ 4.4 3.3 % Medical Office 3.3 2.5 General Office 2.9 2.2 General Bank 1.3 1.0 Commercial Bank 1.1 0.8 SVB 0.5 0.4 Industrial / W
Slide 30: General Office CRE Portfolio
30 General Office CRE Portfolio (as of September 30, 2023) Geographic Diversification General Office Other Top 5 MSAs ($ in millions) Portfolio Metrics VA 32% 4% Los Angeles $ 373 MA % of total loans 2.2 % 5% Total Phoenix $ 209 NY 6% General New York City $ 169 % of CRE loans 14.5 % Office AZ $2.9
Slide 31: SVB Investor Dependent (ID) Portfolio
31 SVB Investor Dependent (ID) Portfolio (as of September 30, 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 avera
Slide 32: Capital
32 Capital Risk-based capital ratios Capital ratio rollforward Risk-Based Capital Tier 1 15.84% 15.64% Total Tier 1 CET1 Leverage 14.86% 13.46% 14.00% 13.82% December 31, 2022 13.18% 11.06% 10.08% 8.99% 13.18% 13.13% 11.36% 11.06% SVB acquisition - net 1.63% 1.91% 2.28% 0.05% Net income 1.28% 1.28%
Slide 33: Financial Outlook
Financial Outlook Section III
Slide 34: Key Earnings Estimate Assumptions
34 Key Earnings Estimate Assumptions Metric 3Q23 4Q23 - Projected FY23 - Projected Loans and leases - EOP $133.2 billion $132 billion - $134 billion $132 billion - $134 billion Deposits - EOP $146.2 billion $140 billion - $143 billion $140 billion - $143 billion One remaining hike; One remaining hik
Slide 35: Appendix
A First Citizens BancShares’ Appendix Section IV
Slide 36: BancShares Balance Sheets (unaudited)
36 BancShares Balance Sheets (unaudited) ($ in millions) Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 ASSETS Cash and due from banks $ 791 $ 917 $ 1,598 $ 518 $ 481 Interest-earning deposits at banks 36,704 37,846 38,522 5,025 6,172 Securities purchased under agreements to resell
Slide 37: BancShares Income Statements (unaudited)
37 BancShares Income Statements (unaudited) ($ in millions) 3Q23 2Q23 1Q23 4Q22 3Q22 INTEREST INCOME Interest and fees on loans $ 2,426 $ 2,353 $ 1,017 $ 892 $ 785 Interest on investment securities 180 117 107 92 90 Interest on deposits at banks 504 480 87 56 31 Total interest income 3,110 2,953 1,2
Slide 38: Noninterest income
38 Noninterest income ($ in millions) 3Q23 Change vs Quarter-to-date 2Q23 3Q23 2Q23 1Q23 4Q22 3Q22 $ % Rental income on operating lease equipment $ 248 $ 238 $ 233 $ 224 $ 219 $ 10 4.1 % Fee income and other service charges 70 68 47 43 41 2 2.5 Client investment fees 52 52 2 — — — (0.9) Wealth manag
Slide 39: Noninterest expense
39 Noninterest expense ($ in millions) 3Q23 Change vs Quarter-to-date 2Q23 $ % 3Q23 2Q23 1Q23 4Q22 3Q22 Depreciation on operating lease equipment $ 95 $ 91 $ 89 $ 88 $ 87 $ 4 3.4 % Maintenance and other operating lease expenses 51 56 56 47 52 (5) (9.5) Salaries and benefits 727 775 420 354 353 (48)
Slide 40: Estimated Liquidity Available for Uninsured Deposits
40 Estimated Liquidity Available for Uninsured Deposits ($ in millions) September 30, 2023 June 30, 2023 Total deposits $ 146,233 $ 141,164 Less: insured and/or collaterized deposits 93,657 88,274 Total deposits - uninsured $ 52,576 $ 52,890 Estimated liquidity available for uninsured deposits: Avai
Slide 41: Debt Securities Overview
41 Debt Securities Overview (1) 3Q23 (1) Duration Carrying Value (2) % of Portfolio Yield (3) (Years) ($ in millions) AFS Portfolio U.S. Treasury $ 8,647 32 % 4.05 % 0.9 Government agency 130 — 5.82 0.3 Commercial mortgage-backed securities 1,797 7 3.68 2.2 Residential mortgage-backed securities 5,6
Slide 42: Average Balances and Yields
42 Average Balances and Yields ($ in millions) Change vs. 3Q23 2Q23 3Q22 2Q23 3Q22 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 43: Commercial Banking Segment
43 Commercial Banking Segment Highlights (Actual balances; $ in millions) 3Q23 2Q23 3Q22 • The Commercial Banking segment achieved strong Income Statement loan growth, 14.3% annualized over the linked quarter, largely driven by strong origination volume and lower Net interest income $ 249 $ 257 $ 23
Slide 44: General Banking Segment
44 General Banking Segment Highlights (Actual balances; $ in millions) 3Q23 2Q23 3Q22 • The General Banking segment achieved 9.7% Income Statement annualized loan growth over the linked quarter, driven primarily by business/commercial loan production. Net interest income $ 625 $ 603 $ 495 Noninteres
Slide 45: Silicon Valley Banking Segment
45 Silicon Valley Banking Segment Highlights (Actual balances; $ in millions) 3Q23 2Q23 • Silicon Valley Banking segment loans decreased $1.9 Income Statement billion, or 13.1% annualized, compared to the linked quarter driven by paydowns and payoffs in the Global Net interest income $ 635 $ 635 Fun
Slide 46: SVB Loan & Deposit Trends
46 SVB Loan & Deposit Trends Loans are in line with our forecast and deposits have remained stable. ~$7 B ($ in B) expe reduct cted io decl n due p $70.0 $68.5 Ban ines in G rimarily Highlights king t activ lobal Fu o ity nd $66.2 SVB Loans $65.0 • Balances declined ~$1.9 B compared to a $61.9 ~$7.4
Slide 47: SVB Client Funds Have Largely Stabilized
47 SVB Client Funds Have Largely Stabilized Unaudited SVB Segment Profile: 3/27/23 3/31/23 4/30/23 6/30/23 9/30/23 Total assets $107 B $99 B $91 B $92 B $92 B Loans & leases $69 B $66 B $62 B $59 B $57 B Deposits $56 B $49 B $42 B $41 B $40 B Off balance sheet client funds $88 B $84 B $79 B $70 B $6
Slide 48: Rail Segment
48 Rail Segment Highlights (Actual balances ; $ in millions) 3Q23 2Q23 3Q22 • Fleet utilization increased to 98.7% in the second Income Statement quarter from 98.3% in the linked quarter. The fleet is effectively fully utilized. Rental income on operating lease equipment $ 190 $ 180 $ 165 Depreciati
Slide 49: Purchase accounting marks
49 Purchase accounting marks ($ in millions) September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Loans and leases (1) Beginning balance - unamortized fair value mark $ (2,478) $ (2,674) $ (117) $ (131) $ (146) Additions - Acquisition of SVB — (61) (2,773) — — PCD “gr
Slide 50: Credit Ratings
50 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 No rating Issuer BBB + Baa2 Senior unsecured No rating Baa2 Senior unsecured BBB + Baa2 Subordinated No rating Baa2 Subordinate
Slide 51: Non-GAAP Reconciliations
Non-GAAP Reconciliations Section V
Slide 52: Notable Items
52 (1) Notable Items ($ in millions, except per share data) 3Q23 2Q23 3Q22 (2) Rental income on operating lease equipment $ (146) $ (147) $ (139) Realized loss on sale of investment securities available for sale, net 12 — — Fair value adjustment on marketable equity securities, net 1 10 2 Gain on sa
Slide 53: Non-GAAP Reconciliations
53 Non-GAAP Reconciliations ($ in millions, except share and per share data) Non-GAAP Reconciliations 3Q23 2Q23 3Q22 Net income and EPS Net income (GAAP) a $ 752 682 315 Preferred stock dividends 15 15 12 Net income available to common stockholders (GAAP) b 737 667 303 Total notable items, after inc
Slide 54: Non-GAAP Reconciliations
54 Non-GAAP Reconciliations ($ in millions, except share and per share data) Non-GAAP Reconciliations 3Q23 2Q23 3Q22 PPNR Net income (GAAP) a $ 752 682 315 Plus: Provision for credit losses 192 151 60 Income tax expense 245 214 93 PPNR (non-GAAP) l $ 1,189 1,047 468 Impact of notable items (1) 137 1
Slide 55: Non-GAAP Reconciliations
55 Non-GAAP Reconciliations ($ in millions, except share and per share data) Non-GAAP Reconciliations 3Q23 2Q23 3Q22 ROE and ROTCE Annualized net income available to common stockholders s = b annualized $ 2,923 2,675 1,202 Annualized adjusted net income available to common stockholders t = e annuali
Slide 56: Non-GAAP Reconciliations
56 Non-GAAP Reconciliations ($ in millions, except share and per share data) Non-GAAP Reconciliations 3Q23 2Q23 3Q22 Book value and tangible book value per common share Common shares outstanding at period end bb 14,520,103 14,520,034 14,976,129 Book value per share x/bb $ 1,343.52 1,300.93 597.75 Ta
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