First Citizens Bancshares, Inc. · NASDAQ:FCNCA

First Citizens Bancshares — Q2 2020 Earnings Presentation

40 slides from First Citizens Bancshares's earnings presentation, Jul 29, 2020

  1. Slide 1: First Citizens BancShares Second Quarter 2020 Earnings

    First Citizens BancShares Second Quarter 2020 Earnings July 29, 2020

  2. Slide 2: Forward Looking Statements

    2 Forward Looking Statements  This presentation may contain forward-looking statements with respect to First Citizens BancShares, Inc.’s (the “Corporation”) financial condition, results of operations and business within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27

  3. Slide 3: A Top Tier U.S. Banking Institution

    3 A Top Tier U.S. Banking Institution A Customer-Focused Financial Institution Built on Strong Values Since 1898 $47.9 B Assets $32.4 B A nationwide franchise with: Total Loans & Leases Washington 569 branches $41.5 B Oregon HQ: Raleigh, NC Wisconsin 7,000+ Associates Deposits Tennessee California W

  4. Slide 4: Key Drivers of Long-Term Success

    4 Key Drivers of Long-Term Success 1 Over 122 years of successful operating history spanning various economic cycles 2 High quality balance sheet with an excellent liquidity position  Strong, low-cost core deposit base with a concentration in high-growth Southeast markets, supplemented with 3 ste

  5. Slide 5: We Operate in Some of the Best U.S. Markets

    5 We Operate in Some of the Best U.S. Markets Loans in Market Our Top 10 Markets are within our core Southeast footprint Deposits in Market In-Market Deposit Rank Raleigh, Charlotte, Columbia, Asheville, Atlanta, Greenville, Miami, Charleston, Wilmington, Greensboro, U.S.A NC NC SC NC GA SC FL SC NC

  6. Slide 6: Loan and Deposit Concentration by State

    6 Loan and Deposit Concentration by State As of June 30, 2020 % of Total % of Total State # Branches Total Deposits Total Loans Deposits Loans North Carolina NC 244 $ 20,701,825 49.9% $ 13,891,489 42.9% South Carolina SC 136 9,471,247 22.8% 7,069,376 21.8% Georgia GA 33 2,140,951 5.2% 1,636,123 5.0%

  7. Slide 7: Diversified Loan Portfolio with Strong Asset Quality

    7 Diversified Loan Portfolio with Strong Asset Quality Asset Quality Highlights Total Loans: $32.4B 0.94% 0.77% Yield: NPAs¹ / Loans + OREO NPAs¹ / Assets 4.10% 18% 9 bps 0.76% NCOs / Average Loans Reserves / Loans2 125% 32% $36.1 million CRE Loans/ TRBC C&D Loans / TRBC YTD reserve build to the ACL

  8. Slide 8: Historical Credit Quality Comparison

    8 Historical Credit Quality Comparison Maintaining Solid Risk Management and Consistent Profitability NCOs / Average Loans (bps) ROAA (bps) 98 77 78 61 58 81 83 68 56 66 93 92 63 78 57 68 70 94 115 123 57 136 Nonperforming Assets1 / Loans (%) Note: Financial data as of June 30, 2020; U.S. Banks refl

  9. Slide 9: Stable Low Cost Deposits

    9 Stable Low Cost Deposits Our Primary Funding Base is Well Positioned in Any Rate Environment 1 2015 2016 2017 2018 2019 2020 Note: Financial data as of June 30, 2020, peer data not yet available for 6/30/2020. Source: Company documents; S&P Global Market Intelligence 1) See appendix for select pee

  10. Slide 10: Consistent Sources of Fee Income

    10 Consistent Sources of Fee Income Insurance Other $14M $17M Other Service Charges2 Wealth Management Business Lines Highlights $31M $98M Merchant  14,000 active merchants Mortgage $27M Services  $4.6 billion in annual merchant volume 2Q20 LTM Merchant Fee Income: Services $23M $378M  Offering p

  11. Slide 11: Extensive and Diligent M&A Experience Helps Supplement Organic Growth

    11 Extensive and Diligent M&A Experience Helps Supplement Organic Growth A Proven History of Growth… …as an Experienced Acquiror… …with a Strong Regulatory Position Assets ($B) Growth (%) '19 $40 FDIC Target Deposits '18 $35 Date Name ST ($M) '17 $35 '16 $33 05/05/17 Guaranty Bank (MHC) WI $982.3 20

  12. Slide 12: Regulatory Capital Trends

    12 Regulatory Capital Trends Focus on Balancing Strong Capital Ratios with the Efficient Use of Capital Tier 1 Leverage Ratio (%) Common Equity Tier 1 Ratio (%) Estimated impact of SBA-PPP loans on 2Q20 Tier 1 leverage ratio was ~ 45 bps. Tier 1 Ratio (%) Total Risk-Based Capital Ratio (%) Source: C

  13. Slide 13: Strong and Experienced Management Team

    13 Strong and Experienced Management Team Executives with Long Tenure at First Citizens; Many Have Spent Entire Careers with First Citizens Frank B. Holding Jr. Mr. Frank Brown Holding, Jr. has been Chairman since February 2009 and Chief Executive Officer since January 2008. He Chairman & CEO Age: 5

  14. Slide 14: Our Financial True North = Forever First

    14 Our Financial True North = Forever First Long-term Focus Growing Tangible Book Value Through a Unified Organizational Effort Our People Our Customers Our Operations Retain, Recruit & Develop Grow Client Involvement and Purge Inefficiencies and Our Employees Enhance the Experience Drive Collaborat

  15. Slide 15: Our Operating Strategy Has Resulted in Our Market Success

    15 Our Operating Strategy Has Resulted in Our Market Success Historical Total Shareholder Return Key Drivers of Our Success NASDAQ S&P • Ability to View Returns Over a Period FCNC.A Bank 500 Long Term Timeline One (9.0%) (25.7%) 7.7% • Low-cost, Stable Deposit Base Year Three 12.7% (26.9%) 30.9% • S

  16. Slide 16: Second Quarter 2020 Financial Highlights

    Second Quarter 2020 Financial Highlights

  17. Slide 17: Second Quarter Earnings Highlights

    17 Second Quarter Earnings Highlights 1) The efficiency ratio is a non-GAAP measure. See appendix for GAAP to Non-GAAP reconciliation.

  18. Slide 18: Quarterly Net Interest Income and Margin Trends

    18 Quarterly Net Interest Income and Margin Trends ($ in 000s) (2) Current Quarter vs. Linked Quarter  Net interest income decreased $1.2 million, or by .36%.  Decrease primarily due to lower interest income on investment securities and overnight investments, partially offset by lower interest exp

  19. Slide 19: Net Interest Margin Rollforward- Drivers of Margin Compression

    19 Net Interest Margin Rollforward- Drivers of Margin Compression 1Q20 to 2Q20 Highlights 3.55% Current Quarter vs. Linked Quarter  41 bps decline comprised of:  ~ (35) bps related to loan yield. + 8 bps  ~ (6) bps related to lower investment yields. (6) bps + 1 bp 3.14%  ~ (4) bps related to lo

  20. Slide 20: Noninterest Income

    20 Noninterest Income Highlights ($ in millions) $165 Current Quarter vs. Linked Quarter Noninterest income increased by $101.4 million primarily due to:  $116.0 million increase in the fair market value Core: adjustment on marketable equity securities. $87 $107 $104  $4.6 million increase in mort

  21. Slide 21: Noninterest Expense

    21 Noninterest Expense Highlights ($ in millions) Current Quarter vs. Linked Quarter Noninterest expense decreased by $8.3 million primarily due to: $292 $300 $292  $6.8 million reduction in personnel expense, primarily driven by $273 seasonal benefit impacts and lower health insurance claims. $270

  22. Slide 22: Second Quarter Balance Sheet

    22 Second Quarter Balance Sheet Current Quarter vs. Linked Quarter  Loans increased by $3.2 billion, or 43.7% annualized, primarily due to $3.1 billion in SBA-PPP loans, $203 million in organic growth (2.8% annualized organic growth rate), partially offset by a $110 million decrease related to the

  23. Slide 23: Loans by Type

    23 Loans by Type Highlights Period-end Loan Balances Total Loans and Leases- Annualized and Year over Year Growth (in millions) Total Loans vs. Prior Quarter: 43.7% $32,418 Adjusted Loans1 vs. Prior Quarter: 2.8% 9.4% Total Loans vs. Same Quarter-Year Ago: 21.3 % $28,881 $29,241 Adjusted Loans1 vs Y

  24. Slide 24: SBA-PPP

    24 SBA-PPP SBA-PPP loans extended to over 23 thousand clients, with total loan proceeds of $ 3.2 billion(1) ― Average loan size of approximately $138 thousand. ― 92.3% of overall SBA-PPP loans and 48.1% of outstanding dollars extended to clients with a loan size of less than $350 thousand. ― Loans g

  25. Slide 25: Payment Extension Program

    25 Payment Extension Program As of July 24th, 2020, payment extensions were active on 5,781 accounts with $2.1 billion in outstanding balances (6.5% of total loans). From their peak, active accounts are down by 71% and active outstanding balances are down by 70%. ― Extensions were initially made to

  26. Slide 26: Allowance for Credit Losses (ACL)

    26 Allowance for Credit Losses (ACL) Portfolio metrics and net charge-offs remain stable, with further reserve build related to COVID-19 Non-PCD PCD Total Highlights ACL as of December 31, 2019 $ 217,605 $ 7,536 $ 225,141 Day 1 CECL implementation (56,925) 19,001 (37,924)  Forecasted economic condi

  27. Slide 27: Credit Quality Metrics

    Credit Quality Metrics 27 Portfolio metrics and net charge-offs remain stable, with further reserve build related to COVID-19 (1) Quarterly Provision Expense $5,198 $6,766 $7,727 $28,355 $20,552 $9,411 $7,390  Quarterly average net charge-offs declined from the previous quarter and were slightly be

  28. Slide 28: Deposits by Type

    28 Deposits by Type Period-end Deposit Balances Highlights (in millions) Total Deposits- Annualized and Year over Year Growth $41,479 Total Deposits vs. Prior Quarter: 69.8 % 7.9% Adjusted Deposits1 vs. Prior Quarter: 31.9% $35,347 Total Deposits vs. Same Quarter-Year Ago 26.8% $34,431 $32,720 $32,7

  29. Slide 29: Funding Mix

    29 Funding Mix Highlights (in millions) Current Quarter vs. Linked Quarter  Deposits represented 95.4% of our funding mix, up from 94.8%, led by demand deposit growth.  Cost of interest bearing liabilities decreased 12 bps driven by:  Decrease in the cost of interest bearing deposits of 13 bps an

  30. Slide 30: Capital Ratios

    30 Capital Ratios Net income impact offset by return of capital to shareholders through dividends and repurchases Total Tier 1 Common Risk- Risk- Tier 1  Year to date net income of $211 Equity million contributed to a 68 bps in the Based Based Leverage Tier 1 total risk-based capital ratio. Capital

  31. Slide 31: Looking Ahead- Outlook for the Remainder of 2020

    31 Looking Ahead- Outlook for the Remainder of 2020 Highlights Commentary  Decline in net interest margin mostly behind us.  Deposit costs expected to continue to decline offsetting some of the low interest rate Net interest income and margin headwind.  Net Interest income- flat to slight increas

  32. Slide 32: Appendix

    Appendix # FirstCitizens BancShares

  33. Slide 33: Reconciliation of Quarterly GAAP to Non-GAAP Measures, Five Quarter Trend

    33 Reconciliation of Quarterly GAAP to Non-GAAP Measures, Five Quarter Trend June 30, March 31, December 31, September 30, June 30, 2020 2020 2019 2019 2019 Income statement data In thousands Pre-provision net revenue Income before income taxes $ 190,565 74,085 131,528 160,164 155,628 Provision for

  34. Slide 34: Reconciliation of Quarterly GAAP to Non-GAAP Measures, Five Quarter Trend

    34 Reconciliation of Quarterly GAAP to Non-GAAP Measures, Five Quarter Trend June 30, March 31, December 31, September 30, June 30, 2020 2020 2019 2019 2019 Balance sheet data In millions Total assets Total assets $ 47,866 41,594 39,824 37,748 37,655 Goodwill (350) (350) (349) (297) (297) Core depos

  35. Slide 35: Reconciliation of Quarterly GAAP to Non-GAAP Measures, Five Quarter Trend

    35 Reconciliation of Quarterly GAAP to Non-GAAP Measures, Five Quarter Trend Balance sheet data June 30, In thousands 2020 Adjusted loans prior quarter comparison Total loans - June 30, 2020 $ 32,418,425 Total loans - March 31, 2020 (denominator) 29,240,959 Change 3,177,466 Impact of acquisitions 11

  36. Slide 36: Consolidated Financial Highlights- Earnings

    36 Consolidated Financial Highlights- Earnings Three months ended Six months ended June 30 (Dollars in thousands, except share data; unaudited) June 30, 2020 March 31, 2020 June 30, 2019 2020 2019 SUMMARY OF OPERATIONS Interest income $ 363,257 $ 369,559 $ 350,721 $ 732,816 $ 687,645 Interest expens

  37. Slide 37: Consolidated Financial Highlights- Balance Sheet and Selected Ratios

    37 Consolidated Financial Highlights- Balance Sheet and Selected Ratios Three months ended Six months ended June 30 (Dollars in thousands, except share data; unaudited) June 30, 2020 March 31, 2020 June 30, 2019 2020 2019 CONDENSED BALANCE SHEET Cash and due from banks $ 389,233 $ 454,220 $ 284,147

  38. Slide 38: Allowance for Credit Losses and Asset Quality Disclosures

    38 Allowance for Credit Losses and Asset Quality Disclosures Three months ended Six months ended June 30 (Dollars in thousands, unaudited) June 30, 2020 March 31, 2020 June 30, 2019 2020 2019 ALLOWANCE FOR CREDIT LOSSES (1) ACL at beginning of period $ 209,259 $ 225,141 $ 228,775 $ 225,141 $ 223,712

  39. Slide 39: Average Balance and Net Interest Margin Summary

    39 Average Balance and Net Interest Margin Summary Three months ended June 30, 2020 March 31, 2020 June 30, 2019 Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands, unaudited) Balance Expense Rate (2) Balance Expense Rate (2) Balance Expense Rate (2) INTERES T

  40. Slide 40: Select Peer Group

    40 Select Peer Group Peer Banks City State Ticker # of Offices Assets Associated Banc-Corp Green Bay WI ASB 258 $ 33,908,056 BOK Financial Corporation Tulsa OK BOKF 128 47,185,157 Commerce Bancshares, Inc. Kansas City MO CBSH 161 26,812,474 Cullen/Frost Bankers, Inc. San Antonio TX CFR 160 34,256,80

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