First Citizens Bancshares, Inc. · NASDAQ:FCNCA
First Citizens Bancshares — Merger or Acquisition (March 2022)
43 slides from First Citizens Bancshares's merger presentation, Mar 24, 2022
Slide 1: First Citizens BancShares and CIT Merger Update Presentation
First Citizens BancShares and CIT Merger Update Presentation Date: March 24, 2022
Slide 2: Agenda
Stronger. Better. Together. 2 Agenda I Next Era of Growth 4 Frank Holding Chairman & CEO II Merger Integration Update 14 Frank Holding Chairman & CEO III Purchase Accounting Update 17 Craig Nix CFO IV Financial Outlook 25 Craig Nix CFO V Appendix 37
Slide 3: Important Notices
Stronger. Better. Together. 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 performan
Slide 4: Next Era of Growth
Next Era of Growth Section | A First Citizens BancShares
Slide 5: Next Era of Growth – Top US Bank
Stronger. Better. Together. 5 Next Era of Growth – Top 20 US Bank First Citizens and CIT are now one stronger and better bank. Our complementary strengths are positioned to give customers access to a broader range of products, services and expertise while generating higher returns. Standalone Assets
Slide 6: A Transformational Combination
Stronger. Better. Together. 6 A Transformational Combination Creates valuable scale, enhances profitability and bolsters national presence. Our operating strategy, which is long-term focused, has led to our success. 1 Combined company has diverse products, services and markets: ✓ Top 20 US Bank by a
Slide 7: Strategic Rationale Remains Powerful
Stronger. Better. Together. 7 Strategic Rationale Remains Powerful Creates value for all stakeholders. The combined company is uniquely positioned to provide services to our customers as this partnership brings together complementary strengths of both organizations, with First Citizens’ robust retai
Slide 8: First Citizens Bank 2022 Strategic Objectives
Stronger. Better. Together. 8 First Citizens Bank 2022 Strategic Objectives Talent Development, Retention & Culture Ensure we are attracting, retaining and developing associates. Merger Integration Focused on ensuring a smooth and timely merger integration process for our customers and associates to
Slide 9: First Citizens Business Segments
Stronger. Better. Together. 9 First Citizens Business Segments First Citizens business segments provide a broad set of products, services and expertise organized around the customer. Segment Commercial Banking General Banking Rail Business Segment Overview ▪ Comprehensive Middle Market Banking which
Slide 10: Business Segment 2022 Strategic Priorities
Stronger. Better. Together. 10 Business Segment 2022 Strategic Priorities Business line priorities align with First Citizens’ strategic objectives. Commercial Banking General Banking Rail Expand into new growth markets: ▪ Deliver banking services, products, industry and capital markets expertise to
Slide 11: Commercial Banking Segment
Stronger. Better. Together. 11 Commercial Banking Segment Focused on building stronger customer relationships and leveraging commercial expertise and capabilities. Commercial Banking (1) ($ in millions) Loans & Leases Deposits Commercial Finance $15,453 $3,377 Real Estate Finance 6,526 719 Business
Slide 12: General Banking Segment
Stronger. Better. Together. 12 General Banking Segment Expansive regional branch network with a robust suite of products and services, as well as a nationwide direct bank. General Banking ($ in millions) Loans & Leases Deposits Branch Network (1) $26,708 $62,146 Retail Services: Mortgage 7,911 23 Co
Slide 13: History of Driving Value Creation
Stronger. Better. Together. 13 History of Driving Value Creation We have continued to deliver shareholder value. ($MM, except per share amounts) For the year ended December 31, 6-year CAGR 2015 2016 2017 2018 2019 2020 2021 Total assets $31,476 $32,991 $34,528 $35,409 $39,824 $49,958 $53,308 11% Gro
Slide 14: Merger Integration Update
Merger Integration Update Section II
Slide 15: Merger Integration is on Track
Stronger. Better. Together. 15 Merger Integration is on Track We are committed to successful execution of our integration plan to deliver a timely and smooth transition for our customers and associates. Integration Framework 2022 Successes Next Steps ▪ Created an Integration Management Office (IMO)
Slide 16: Combined Company Risk Appetite
Stronger. Better. Together. 16 Combined Company Risk Appetite First Citizens is committed to a strong risk culture. Legacy FCB Legacy CIT NEW HighLow Risk Appetite Moderate Our integration process includes marrying First Citizens’ moderate risk appetite with legacy CIT’s moderate-to-high risk appeti
Slide 17: Purchase Accounting Update
Purchase Accounting Update Section III
Slide 18: Valuation Overview
Stronger. Better. Together. Valuation Overview Business Partners Valuation led by leading firm with extensive banking valuation experience Valuation Approach ▪ Business leaders engaged throughout valuation ▪ Key data being validated ▪ CIT’s existing credit models are being validated ▪ Consideration
Slide 19: Preliminary Merger Consideration and Bargain Purchase Gain
Stronger. Better. Together. 19 Preliminary Merger Consideration and Bargain Purchase Gain Positive marks, excluding the establishment of intangibles, are accretive to TBV and negative marks (shown in brackets) are dilutive to TBV. Note - totals may not foot due to rounding. (1) Fair value mark added
Slide 20: Purchase Price and Preliminary Tangible Common Equity Created
Stronger. Better. Together. ($ in millions) Current Estimate At Announcement Difference Common stock $5,279 $2,059 $3,220 Preferred stock 541 525 16 Equity awards & other 132 - 132 Total purchase price $5,952 $2,584 $3,368 Net fair value marks, after tax 50 (507) 557 Purchase price, net of fair valu
Slide 21: Estimated Purchase Accounting Impacts – Loans
Stronger. Better. Together. 21 Estimated Purchase Accounting Impacts – Loans Estimated Purchase Accounting Impacts – Legacy CIT Loans ($ in millions) Principal Balance % of Total Fair Value Adjustments PCD Gross-Up Discount Reversal Book Value Non-PCD loans $ 29,653 90.3% $ (86) -- -- $ 29,567 PCD l
Slide 22: Estimated Purchase Accounting Impacts
Stronger. Better. Together. 22 Estimated Purchase Accounting Impacts First Citizens estimated impact of fair value marks. ($ in millions, expect per share amounts) Estimated Fair Value Adjustment Estimated Life (years) 2022 estimated impact on: 2023 estimated impact on: EPS NIM Net int. income Nonin
Slide 23: Pro Forma Tangible Book Value Per Share
Stronger. Better. Together. 23 Pro Forma Tangible Book Value Per Share (TBV) (1) Includes full impact of remaining one-time merger expenses. First Citizens standalone TBV NG at 3Q’20 Growth since Q4’20 deal announcement Equity issuance and impact of merger purchase accounting Pro forma TBV sub-total
Slide 24: Summary TBV Accretion and Capital Impact
Stronger. Better. Together. 24 Summary TBV Accretion and Capital Impact ▪ Announcement estimates were provided on October 16, 2020 and assumed a closing date of April 1, 2021. Current capital estimates are as of Day 1. ▪ On the deal announcement date, First Citizens standalone TBV NG was $341.21. ▪
Slide 25: Financial Outlook – Changes Since the Merger Announcement
Financial Outlook Section IV – Part 1 – Changes Since the Merger Announcement
Slide 26: Changes Since the Merger Announcement
Stronger. Better. Together. 26 Changes Since the Merger Announcement Changes Description Impacts Macroeconomic conditions have improved, but uncertainty remains ▪ Unemployment rate declined from 7.9% in September 2020 to 3.9% in December 2021. ▪ GDP grew by 5.7% in 2021 compared to a contraction of
Slide 27: Changes Since the Merger Announcement (continued)
Stronger. Better. Together. Changes Description Impacts Achieved funding synergies ▪ CIT independently took a number of actions to optimize the funding structure resulting in a strong liquidity position and improved ongoing core net interest margin. ▪ Funding mix has improved as core deposits contin
Slide 28: Financial Outlook – Financial Synergies
Financial Outlook Section IV – Part 2 – Financial Synergies
Slide 29: Focus on Achieving Medium-Term Financial Goals
Stronger. Better. Together. 29 Focus on Achieving Medium-Term Financial Goals Expect positive operating leverage as a result of the merger. On track to achieve estimated costs saves of ~$250 million ~$100 MM Run-rate in Q4’21 (40% of target) Included in Run-Rate ~$200 MM Run-rate by Q4’22 (80% of ta
Slide 30: Progress Has Been Made on Funding Synergies
Stronger. Better. Together. 30 Progress Has Been Made on Funding Synergies Annual interest expense is down significantly since merger announcement. ($ in millions) September 30, 2020 December 31, 2021 (1) January 3, 2022 (1) Change vs. Balance Rate Annual IE Balance Rate Annual IE Balance Rate Annua
Slide 31: Opportunity to Redeploy Excess Cash – Combined
Stronger. Better. Together. 2019 2020 2021 Overnight Investments 86.0% 79.7% 71.9% -200% -100% 0% 100% 0 10 20 30 40 50 60 70 80 4.3% 8.1% 11.5% -200% -100% 0% 100% 0 10 20 30 40 50 60 70 80 31 Opportunity to Redeploy Excess Cash – Combined Excess liquidity remains after $3 billion debt redemption i
Slide 32: Revenue Synergy Opportunities
Stronger. Better. Together. 32 Revenue Synergy Opportunities Leveraging expertise and capabilities to expand and deepen relationships. Middle Market Banking ▪ Expansion of our Middle Market business to deliver full banking services to clients in the $75 million – $750 million revenue range. ▪ Focus
Slide 33: Financial Forecast with Purchase Accounting Impacts
Financial Outlook Section IV – Part 3 – Financial Forecast with Purchase Accounting Impacts
Slide 34: Key Earnings Estimate Assumptions
Stronger. Better. Together. 34 Key Earnings Estimate Assumptions (1) Non-interest income (core) includes net rental income on operating lease assets (net of depreciation and maintenance) and excludes fair value adjustments on marketable equity securities, realized gains(losses) on AFS securities, re
Slide 35: Estimated 2023 Earnings Per Share
Stronger. Better. Together. 35 Estimated 2023 Earnings Per Share Pro forma values exclude merger costs and assumed cost savings are fully phased-in. FCB ‘21 actual Impact of base combination Purchase accounting Intangible amortization FCB ’23 ECost Synergies (2) After-tax in millions $529 $1,195 - $
Slide 36: Comparison of Acquisition Metrics
Stronger. Better. Together. 36 Comparison of Acquisition Metrics Metric Current Estimate At Announcement Difference + Tangible common equity created $5,670 $4,648 $1,022 Tangible book value per share accretion: + Initial 48% 42% 6% + After Day 2 CECL 42% 37% 5% + After merger costs 38% 30% 8% + CIT
Slide 37: Appendix
Appendix Section V A First Citizens BancShares
Slide 38: Pro Forma Balance Sheet
Stronger. Better. Together. 38 Pro Forma Balance Sheet September 30, 2020 (unaudited) January 3, 2022 (unaudited) BancShares CIT Combined Pre-PAA (1) PAA Combined with PAA BancShares CIT Combined Pre-PAA PAA Combined with PAA ($ in millions) Assets Cash and overnight investments $ 3,490 $ 6,706 $ 10
Slide 39: Key Takeaways - Ratings Progression
Stronger. Better. Together. 39 Key Takeaways - Ratings Progression Rating Agency Focus Continued Focus on Maintaining Strong Ratings ✓ Successful execution of CIT merger, reducing integration and execution risks. ✓ Recognized sustained improvement to the profitability and combined funding profile al
Slide 40: Synergies by Expense Category
Stronger. Better. Together. 40 Synergies by Expense Category Summary of Cost Synergies Total Cost Synergies: ~$250 MM 65% 17% 5% Occupancy Personnel Other Professional fees & contracting 13% ▪ Elimination of redundancies and duplication will enhance operating leverage on a go-forward basis. ▪ 65% of
Slide 41: Pro Forma Interest Rate Sensitivity
Stronger. Better. Together. Pro Forma Interest Rate Sensitivity (1) 41 Net Interest Income Rate Sensitivity -7.0% -4.0% -1.0% 2.0% 5.0% 8.0% 11.0% 14.0% Down 25 Up 25 Up 100 Up 200 1/31/22 Static Parallel -1.7% 1.7% 6.9% 13.9% (1) Analysis based on pro forma balance sheet with preliminary purchase a
Slide 42: Reconciliation of GAAP to Non-GAAP Measures
Stronger. Better. Together. 42 Reconciliation of GAAP to Non-GAAP Measures Calculation of tangible common equity and tangible book value per share. ($ in millions, expect per share amounts) For the Year Ended December 31: As of / for the Quarter Ended: 2015 2016 2017 2018 2019 2020 2021 Sep. 30, 20
Slide 43: Reconciliation of GAAP to Non-GAAP Measures
Stronger. Better. Together. 43 Reconciliation of GAAP to Non-GAAP Measures Calculation of pre-provision net revenue. ($ in millions) For the Year Ended December 31: 2015 2016 2017 2018 2019 2020 2021 Net income (GAAP measure) $210 $225 $324 $400 $457 $492 $548 Provision for income taxes 122 126 220
First Citizens Bancshares — Merger or Acquisition (March 2022) on 6ix