First Citizens Bancshares, Inc. · NASDAQ:FCNCA
First Citizens Bancshares — Q4 2022 Earnings Presentation
55 slides from First Citizens Bancshares's earnings presentation, Jan 26, 2023
Slide 1: Fourth Quarter 2022 Earnings Conference Call
First Citizens BancShares, Inc. Fourth Quarter 2022 Earnings Conference Call January 26, 2023
Slide 2: Agenda
2 Agenda Page(s) Section I – 2022 Accomplishments and 2023 Strategic Objectives 4–6 Section II – Fourth Quarter 2022 Financial Results 7 – 29 Financial Highlights 8 Earnings Highlights 9 – 11 Notable Items 12 Net interest income and margin 13 – 15 Deposit Betas 16 Noninterest income and expense 17 –
Slide 3: Important Notices
3 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 BancSha
Slide 4: 2022 Accomplishments and 2023 Strategic Objectives
2022 Accomplishments and 2023 Strategic Objectives Section I
Slide 5: First Citizens 2022 Accomplishments
5 First Citizens 2022 Accomplishments 2022 was a highly successful year driven by our complementary merger with CIT that positioned us well for continued growth given our diverse products, services and markets. • Merger integration is substantially complete. Integrated • Focused on capitalizing on o
Slide 6: First Citizens 2023 Strategic Objectives
6 First Citizens 2023 Strategic Objectives 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 facili
Slide 7: Fourth Quarter 2022 Financial Results
Fourth Quarter 2022 Financial Results Section II
Slide 8: Financial Highlights
8 Financial Highlights Quarter-to-date Year-to-date Dec 22 Sep 22 Dec 21 Dec 22 Dec 21 Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted Reported Adjusted (Non-GAAP) (Non-GAAP) (Non-GAAP) (Non-GAAP) (Non-GAAP) EPS (1) $ 16.67 $ 20.94 $ 19.25 $ 20.77 $ 12.09 $ 12.82 $ 67.40 $ 77
Slide 9: Quarter-to-Date Earnings Highlights
9 Quarter-to-Date Earnings Highlights ($ in millions) Increase (decrease) Reported QTD 3Q22 4Q21 Highlights 4Q22 3Q22 4Q21 $ % $ % Net interest income $ 802 $ 795 $ 619 $ 7 0.9 % $ 183 29.6 % Note: The commentary below relates to “Reported (GAAP)” Noninterest income 429 433 464 (4) (0.9) (35) (7.5)
Slide 10: Quarter-to-Date Earnings Highlights
10 Quarter-to-Date Earnings Highlights ($ in millions) Increase (decrease) Reported QTD 3Q22 4Q21 Highlights 4Q22 3Q22 4Q21 $ % $ % Net interest income $ 802 $ 795 $ 619 $ 7 0.9 % $ 183 29.6 % Note: The commentary below relates to “Adjusted (Non- Noninterest income 429 433 464 (4) (0.9) (35) (7.5) G
Slide 11: Year-to-Date Earnings Highlights
11 Year-to-Date Earnings Highlights ($ in millions) YTD Dec Increase (decrease) Highlights Reported 2022 2021 vs. YTD 21 $ % Note: The commentary below relates to “Reported (GAAP)” income statements. Net interest income $ 2,946 $ 2,441 $ 505 20.7 % Noninterest income 2,136 1,940 196 10.1 YTD 22 vs.
Slide 12: Notable Items
12 (1) Notable Items ($ in millions, except per share data) BancShares BancShares Combined BancShares Combined 4Q22 3Q22 4Q21 YTD 22 YTD 21 Rental income on operating lease equipment (2) $ (135) $ (139) $ (140) $ (534) $ (550) Realized gain on sale of investment securities available for sale, net —
Slide 13: Net interest income and margin (NIM)
13 Net interest income and margin (NIM) ill ion & 5 9 bps ($ in millions) $505 m $2,946 $7 million & (4 bps) $2,441 $795 $802 $700 $619 $649 3.40% 3.36% 3.04% 3.14% 2.73% 2.55% 2.56% 4Q21 1Q22 2Q22 3Q22 4Q22 YTD Dec 21 YTD Dec 22 Highlights 4Q22 vs 3Q22 4Q22 vs 4Q21 YTD December 2022 vs YTD December
Slide 14: NIM Rollforward
14 NIM Rollforward 3Q22 to 4Q22 (- 4 bps) (1) 0.10% 0.05% 0.02% 0.34% (1) 3.40% 3.36% (0.41)% (0.14)% 3Q22 Loan yield Yield on Loan volume Purchase Deposit rate / Debt rate / 4Q22 investments & accounting volume volume overnight 4Q21 to 4Q22 (+ 80 bps) 0.23% 0.07% 0.02% 0.31% 0.86% 3.36% (0.55)% (0.
Slide 15: Net interest income and margin rate sensitivity
15 Net interest income and margin rate sensitivity 4Q22 Interest Rate Sensitivity Highlights 12.0% • BancShares continues to have an asset sensitive 9.0% 6.7% interest rate risk profile. 6.0% • The projected increase in net interest income over 3.4% the next 12 months is 3.4% for an immediate 100 3.
Slide 16: Deposit Betas
16 Deposit Betas Deposit Beta Performance and Estimates Highlights 4Q22 - 1Q23 - Actual Estimated Cumulative Fed Funds increase 425 bps 475 bps • Expect 1Q23 cumulative deposit beta to increase 8% over the current quarter. Fed Funds target range (quarter end) 4.25 to 4.50% 4.75 to 5.00% • We expect
Slide 17: Noninterest income
17 Noninterest income ($ in millions) $2,136 $850 $1,940 $995 $944 $570 $464 $424 $433 $429 $200 $141 $145 $139 $1,141 $996 $264 $280 $283 $288 $290 4Q21 1Q22 2Q22 3Q22 4Q22 YTD Dec 21 YTD Dec 22 Adjusted (Non-GAAP) (1) Notable items Highlights 4Q22 vs 3Q22 4Q22 vs 4Q21 YTD22 vs YTD21 Noninterest in
Slide 18: Noninterest expense
18 Noninterest expense ($ in millions) $3,075 $2,823 $770 $611 $810 $745 $760 $760 $709 $238 $183 $170 $157 $179 $2,212 $2,305 $552 $572 $566 $577 $590 4Q21 1Q22 2Q22 3Q22 4Q22 YTD Dec 21 YTD Dec 22 (1) Adjusted (Non-GAAP) Notable items Highlights 4Q22 vs 3Q22 4Q22 vs 4Q21 YTD22 vs YTD21 Noninterest
Slide 19: 4Q22 Noninterest income and expense composition
19 4Q22 Noninterest income and expense composition ($ in millions) Adjusted noninterest income (Non-GAAP) Adjusted noninterest expense (Non-GAAP) Adjusted rental income on operating lease equipment ($89) Personnel ($352) Fee income and other service charges ($45) 4% 4% 8% Wealth management services
Slide 20: Balance Sheet Highlights
20 Balance Sheet Highlights ($ in millions, except per share data) Increase (decrease) 4Q22 vs 3Q22 (4) 4Q22 vs 4Q21 (4) SELECT BALANCES (1) 4Q22 3Q22 4Q21 $ % $ % Interest-earning deposits at banks $ 5,025 $ 6,172 $ 11,989 $ (1,147) (73.8)% $ (6,964) (58.1)% Investment securities 19,369 18,841 19,7
Slide 21: Loans and Leases HFI
21 Loans and Leases HFI ($ in millions) $70,781 Highlights $69,790 $67,735 $65,211 $65,524 4Q22 vs 3Q22 • Loans grew $1.0 billion, or by 5.6% on an annualized $16,830 $17,326 basis. $16,258 $15,132 $15,423 • Growth was driven primarily by our branch network, Mortgage and Business Capital, partially
Slide 22: 4Q22 Loans and Leases HFI Composition
22 4Q22 Loans and Leases HFI Composition ($ in billions) Type Segment Commercial Banking: 3% 3% 2% 3% Commercial Finance ($16.5) 3% Commercial & industrial ($24.1) 4% 23% 13% Owner-occupied commercial mortgage ($14.5) Real Estate Finance ($6.0) 34% 14% Residential mortgage ($13.3) Business Capital (
Slide 23: Deposits
23 Deposits ($ in millions) Highlights 4Q22 vs. 3Q22 $90,777 $91,597 • Total deposits increased $1.9 billion, or by 8.4% on an $89,329 $89,408 $87,553 annualized basis. • Interest-bearing deposits increased $3.5 billion, primarily due to a $2.3 billion increase in time deposits and a $1.9 $24,689 $2
Slide 24: 4Q22 Deposit Composition
24 4Q22 Deposit Composition ($ in billions) Type Segment General Banking: 4% 2% 12% Money market & savings ($37.7) 8% Branch Network, Wealth & Other ($60.7) Direct Bank ($16.5) 18% 42% Noninterest-bearing demand ($24.9) 18% Community Association Banking ($7.2) Commercial Banking and Corporate: Check
Slide 25: Funding Mix
25 Funding Mix ($ in millions) QTD Change Linked Prior Year 4Q22 3Q22 2Q22 1Q22 4Q21 Quarter Quarter Total deposits $ 89,408 93.1 % $ 87,553 91.3 % $ 89,329 95.2 % $ 91,597 96.5 % $ 90,777 93.8 % $ 1,855 $ (1,369) Securities sold under customer repurchase agreements 436 0.5 578 0.6 646 0.7 616 0.6 5
Slide 26: ACL and Credit Quality Trends
26 ACL and Credit Quality Trends ($ in millions) Net charge-offs (NCO) & NCO ratio Provision (benefit) for credit losses $30 $100 $79 $60 $25 $24 $22 $50 $42 $20 $18 $15 $0 $15 $10 $7 0.13% 0.14% $(50) 0.09% 0.10% $(49) $5 0.04% $(78) $(100) (1) $0 4Q21 1Q22 2Q22 3Q22 4Q22 4Q21 1Q22 2Q22 3Q22 4Q22 N
Slide 27: Allowance for credit losses (ACL)
27 Allowance for credit losses (ACL) ($ in millions) 3Q22 to 4Q22 $12 $29 $922 $882 $7 $(8) 3Q22 Portfolio mix Economic outlook Loan growth Change in specific 4Q22 reserves Highlights ACL / Net charge-offs 32.4x 4Q22 vs 3Q22 • Total ACL increased $40 million compared to the linked quarter. • Factors
Slide 28: Capital
28 Capital Risk-based capital ratios Capital ratio rollforward Risk-Based Capital Tier 1 Total Tier 1 CET1 Leverage December 31, 2021 14.35% 12.47% 11.50% 7.59% 14.35% 14.47% 14.46% 13.46% 13.18% CIT acquisition - net (0.04)% (0.26)% (0.36)% 1.50% 12.47% 12.39% 12.37% Pro forma combined - January 3,
Slide 29: BOLI Early Surrender
29 BOLI Early Surrender Summary • Liquidity feature of BOLI provides option to early surrender the policies back to the insurance carrier • Surrendering the policies triggers a taxable event ($55 million charge)(1) Benefits • Material benefit to balance sheet liquidity on day one • Capital accretive
Slide 30: Financial Outlook
Financial Outlook Section III
Slide 31: Key Earnings Estimate Assumptions
31 Key Earnings Estimate Assumptions Metric 4Q22 1Q23 - Projected FY23 - Projected Flat to low-single digit % annualized Mid-single digit % annualized Loans and leases $70.8 billion growth growth High-single digit % annualized Mid-single digit % annualized Deposits $89.4 billion growth growth 50 bps
Slide 32: Appendix
Appendix Section IV we First Citizens BancShares
Slide 33: BancShares Balance Sheets (unaudited)
33 BancShares Balance Sheets (unaudited) ($ in millions) 4Q22 3Q22 2Q22 1Q22 4Q21 BancShares BancShares BancShares BancShares BancShares ASSETS Cash and due from banks $ 518 $ 481 $ 583 $ 523 $ 338 Interest-earning deposits at banks 5,025 6,172 6,476 9,285 9,115 Investment in marketable equity secur
Slide 34: BancShares Income Statements (unaudited)
34 BancShares Income Statements (unaudited) ($ in millions) 4Q22 3Q22 2Q22 1Q22 4Q21 YTD22 YTD21 BancShares BancShares BancShares BancShares BancShares BancShares BancShares INTEREST INCOME Interest and fees on loans $ 892 $ 785 $ 655 $ 621 $ 328 $ 2,953 $ 1,295 Interest on investment securities 92
Slide 35: BancShares Financial Ratios (unaudited)
35 (1) BancShares Financial Ratios (unaudited) 4Q21 YTD21 BancShares BancShares ROA 0.84 % 1.00 % PPNR ROA 1.01 % 1.21 % NIM 2.58 % 2.66 % Net charge-off ratio (0.01)% 0.03 % Efficiency ratio 66.31 % 65.11 % Tangible capital to tangible assets (2) 6.96 % 6.96 % Loan to deposits ratio (2) 62.97 % 62.
Slide 36: Noninterest income
36 Noninterest income ($ in millions) 4Q22 Change vs Quarter-to-date 3Q22 4Q22 3Q22 2Q22 1Q22 $ % BancShares BancShares BancShares BancShares Rental income on operating lease equipment $ 224 $ 219 $ 213 $ 208 $ 5 2.4 % Fee income and other service charges 45 44 39 35 1 4.6 Wealth management services
Slide 37: Noninterest expense
37 Noninterest expense ($ in millions) 4Q22 Change vs Quarter-to-date 3Q22 4Q22 3Q22 2Q22 1Q22 $ % BancShares BancShares BancShares BancShares Depreciation on operating lease equipment $ 88 $ 87 $ 89 $ 81 $ 1 1.3 % Maintenance and other operating lease expenses 47 52 47 43 (5) (8.7) Salaries and ben
Slide 38: Debt Securities Overview
38 Debt Securities Overview (1) 4Q22 (1) Duration Carrying Value (2) % of Portfolio Yield (3) (Years) ($ in millions) AFS Portfolio U.S. Treasury $ 1,898 10 % 1.08 % 2.0 Government agency 162 1 3.51 0.4 Commerical mortgage-backed securities 1,604 8 2.92 2.3 Residential mortgage-backed securities 4,7
Slide 39: Average Balances and Yields
39 Average Balances and Yields ($ in millions) Change vs. 4Q22 3Q22 4Q21 3Q22 4Q21 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 Highlights (Actual balances; $ in millions) 4Q22 3Q22 • The Commercial Banking segment saw a slight Income Statement decline in loan balances as Commercial Services (factoring) balances declined $448 million compared Net interest income $ 244 $ 230 to the linked quarter
Slide 41: General Banking Segment
41 General Banking Segment Highlights (Actual balances; $ in millions) 4Q22 3Q22 Income Statement • The General Banking segment had strong loan growth over the prior quarter (15% annualized) driven Net interest income $ 546 $ 495 primarily by business & commercial loan growth in Noninterest income 1
Slide 42: Rail Segment
42 Rail Segment Highlights (Actual balances ; $ in millions) 4Q22 3Q22 Income Statement • Fleet utilization increased to 97.7% in the fourth quarter from 96.2% in the linked quarter. Utilization Rental income on operating lease equipment $ 168 $ 165 represents the highest level since 4Q18. Depreciat
Slide 43: Purchase accounting marks
43 Purchase accounting marks ($ in millions) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Loans and leases (1) Beginning balance - unamortized fair value mark $ (131) $ (146) $ (145) $ (40) $ (65) Additions - Merger with CIT Group Inc. — — — (388) — PCD “gross
Slide 44: Credit Ratings
44 Credit Ratings S&P Moody’s Rating agency focus First Citizens • Solid business profile, strong franchise and diversified BBB Baa2 business model. BancShares, Inc. • Historically conservative risk appetite with low credit losses over time. First-Citizens Bank & BBB+ Baa2 Trust Company • Solid bala
Slide 45: Non-GAAP Reconciliations
Non-GAAP Reconciliations Section V
Slide 46: Combined Balance Sheets (unaudited)
46 Combined Balance Sheets (unaudited) ($ in millions) 4Q21 BancShares Combined (GAAP) CIT (Non-GAAP) Assets Cash and due from banks $ 338 $ 141 $ 479 Interest-earning deposits at banks 9,115 $ 2,874 11,989 Securities purchased under agreements to resell — $ — — Investment in marketable equity secur
Slide 47: Combined Income Statements (unaudited)
47 Combined Income Statements (unaudited) ($ in millions) 4Q21 YTD 12/31/21 BancShares Combined BancShares Combined (GAAP) CIT (Non-GAAP) (GAAP) CIT (Non-GAAP) Interest income 371 362 733 1,451 1,479 2,930 Interest expense 14 100 114 61 428 489 Net interest income 357 262 619 1,390 1,051 2,441 Provi
Slide 48: Notable Items
48 (1) Notable Items ($ in millions, except per share data) BancShares BancShares Combined BancShares Combined 4Q22 3Q22 4Q21 YTD 22 YTD 21 Rental income on operating lease equipment (2) $ (135) $ (139) $ (140) $ (534) $ (550) Realized gain on sale of investment securities available for sale, net —
Slide 49: Non-GAAP Reconciliations (BancShares Metrics)
49 Non-GAAP Reconciliations (BancShares Metrics) ($ in millions, except share and per share data) BancShares BancShares BancShares BancShares BancShares BancShares BancShares QTD QTD QTD QTD QTD YTD YTD Non-GAAP Reconciliations 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 12/31/2022 12/31/202
Slide 50: Non-GAAP Reconciliations (BancShares Metrics)
50 Non-GAAP Reconciliations (BancShares Metrics) ($ in millions, except share and per share data) BancShares BancShares BancShares BancShares BancShares BancShares BancShares QTD QTD QTD QTD QTD YTD YTD Non-GAAP Reconciliations 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 12/31/2022 12/31/202
Slide 51: Non-GAAP Reconciliations (BancShares Metrics)
51 Non-GAAP Reconciliations (BancShares Metrics) ($ in millions, except share and per share data) BancShares BancShares BancShares BancShares BancShares BancShares BancShares QTD QTD QTD QTD QTD YTD YTD Non-GAAP Reconciliations 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 12/31/2022 12/31/202
Slide 52: Non-GAAP Reconciliations (BancShares Metrics)
52 Non-GAAP Reconciliations (BancShares Metrics) ($ in millions, except share and per share data) BancShares BancShares BancShares BancShares BancShares BancShares BancShares QTD QTD QTD QTD QTD YTD YTD Non-GAAP Reconciliations 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 12/31/2022 12/31/202
Slide 53: Non-GAAP Reconciliations (Combined Metrics)
53 Non-GAAP Reconciliations (Combined Metrics) ($ in millions) Combined Combined QTD YTD Non-GAAP Reconciliations 12/31/2021 12/31/2021 Net income Net income (GAAP) a $ 339 1,470 Preferred stock dividends 16 48 Net income available to common stockholders (GAAP) b 323 1,422 Total notable items, after
Slide 54: Non-GAAP Reconciliations (Combined Metrics)
54 Non-GAAP Reconciliations (Combined Metrics) ($ in millions, except share and per share data) Combined Combined QTD YTD Non-GAAP Reconciliations 12/31/2021 12/31/2021 PPNR Net income (GAAP) a $ 339 1,470 Plus: Provision (benefit) for credit losses (78) (373) Income tax expense (benefit) 113 461 PP
Slide 55: Non-GAAP Reconciliations (Combined Metrics)
55 Non-GAAP Reconciliations (Combined Metrics) ($ in millions, except share and per share data) Combined Combined QTD YTD Non-GAAP Reconciliations 12/31/2021 12/31/2021 Efficiency ratio Net interest income cc $ 619 2,441 Efficiency ratio (GAAP) j / (h + cc) 65.40 % 64.43 % Adjusted efficiency ratio
First Citizens BancShares — Q4 2022 Earnings Presentation on 6ix