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First Citizens BancShares Reports Third Quarter 2023 Earnings

RALEIGH, N.C., Oct. 26, 2023 /PRNewswire/ -- First Citizens BancShares, Inc. ("BancShares") (Nasdaq: FCNCA) reported earnings for the third quarter ended September 30, 2023.

Chairman and CEO Frank B. Holding, Jr. said: "Our third quarter financial results were solid, marked by strong revenue growth and disciplined expense management. We continued to make great progress in our integration efforts with SVB. We continue to increase awareness that SVB is open for business and that we remain dedicated to supporting the innovation economy. We remain focused on managing credit risk prudently and our capital and liquidity positions remained solid due to strong earnings performance and our continued focus on core deposit gathering. We believe we are well-positioned to continue generating long-term tangible book value growth for our stockholders."

PURCHASE AND ASSUMPTION OF CERTAIN ASSETS AND LIABILITIES OF SILICON VALLEY BRIDGE BANK FROM THE FDIC

On March 27, 2023, BancShares announced that through its banking subsidiary, First-Citizens Bank & Trust Company, it assumed all customer deposits and certain other liabilities and acquired substantially all loans and certain other assets of Silicon Valley Bridge Bank, N.A. (the "Acquisition"), as successor to Silicon Valley Bank, from the Federal Deposit Insurance Corporation (the "FDIC"). In connection with the Acquisition, BancShares identified a new business segment (the "SVB segment") which includes the assets, liabilities and results of operations related to the Acquisition.

The Acquisition included total assets with estimated fair values of approximately $107.54 billion, total loans with estimated fair values of approximately $68.47 billion, including the Global Fund Banking, Private Bank and Technology & Life Science and Healthcare loan portfolios, and $35.31 billion in cash and interest-earning deposits at banks. BancShares also assumed approximately $56.01 billion in customer deposits and entered into a five-year note payable to the FDIC (the "Purchase Money Note") of approximately $36.07 billion, bearing an interest rate of 3.50%. The deposits were acquired without a premium and the assets were acquired at a discount of $16.45 billion.

FINANCIAL HIGHLIGHTS

Measures referenced as adjusted below are non-GAAP financial measures (refer to the supporting tables for a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure). Net income for the three months ended September 30, 2023 was $752 million compared to $682 million for the three months ended June 30, 2023. Net income available to common stockholders for the three months ended September 30, 2023 was $737 million, or $50.67 per diluted common share, a $70 million increase from $667 million, or $45.87 per diluted common share, in the second quarter of 2023.

For the third quarter, adjusted net income available to common stockholders was $813 million, or $55.92 per diluted common share, a $48 million increase from $765 million, or $52.60 per diluted common share, in the second quarter of 2023.

Third quarter 2023 results were impacted by the following notable items:

  • Acquisition-related expenses of $121 million,
     
  • Additional preliminary gain on acquisition of $12 million (net of tax),
     
  • Intangible asset amortization of $17 million,
     
  • Gain on sale of leasing equipment of $10 million, and
     
  • Realized loss on sales of investment securities available for sale of $12 million.

Financial highlights comparing significant components of net income and adjusted net income from the third quarter of 2023 to the second quarter of 2023 are summarized below:

  • Net interest income totaled $1.99 billion, up from $1.96 billion in the second quarter. The $29 million increase in net interest income was due to a $157 million increase in interest income, partially offset by a $128 million increase in interest expense.
     
  • The increase in interest income of $157 million was due to increases of $73 million for interest on loans, $60 million for interest on investment securities, and $24 million for interest on interest-earning deposits at banks. The increase in interest on loans was attributable to an increase in loan accretion of $32 million, primarily related to the Acquisition, a higher yield, and loan growth in both the General Bank and Commercial Bank. The increase in interest income on investment securities was a result of a higher average balance and a higher yield. The increase in interest income on interest-earning deposits at banks was due to a higher yield.
     
  • The $128 million increase in interest expense was due to a $194 million increase in interest expense on deposits from growth in the Direct Bank and a higher rate paid, partially offset by a $66 million decrease in borrowing costs from a lower average balance and rate paid.
     
  • Net interest margin was 4.07%, a decrease of 3 basis points compared to the second quarter. The yield on interest-earning assets was 6.36%, an increase of 18 basis points over the second quarter. The increase in yield on interest-earning assets was primarily due to a 22 basis points increase in the yield on loans. The increase was mostly related to variable rate loan resets and the previously discussed increase in accretion on acquired loans. The increase in the yield on interest-earning assets was partially offset by a 20 basis points increase in the rate paid on interest-bearing liabilities.
     
  • Noninterest income totaled $615 million compared to $658 million in the second quarter. The decrease was mainly related to a $43 million lower adjustment to the gain on acquisition as we further refined our estimates for the fair value of net assets acquired and liabilities assumed in the Acquisition. Additionally, the $12 million realized loss from the sale of the municipal bond portfolio acquired in the Acquisition was offset by increases of $10 million in rental income on operating lease equipment and $2 million in fee income and other service charges. Adjusted noninterest income totaled $468 million compared to $462 million in the second quarter, an increase of $6 million. The previously discussed increases from rental income on operating lease equipment and fee income and other service charges were partially offset by slight declines of $2 million in wealth management services, $2 million in merchant services, and $2 million in mortgage income.
     
  • Noninterest expense totaled $1.42 billion compared to $1.57 billion in the second quarter, a decrease of $156 million. The decline was largely related to a reduction of $84 million in acquisition-related expenses. Adjusted noninterest expense totaled $1.13 billion compared to $1.20 billion in the second quarter, a decrease of $70 million. The decreases in noninterest expense and adjusted noninterest expense were primarily due to declines of $48 million in salaries and benefits, $16 million in equipment expense, $16 million in marketing expense, and $9 million in professional fees. The declines were partially offset by an increase of $14 million in FDIC insurance expense.

BALANCE SHEET SUMMARY

  • Loans totaled $133.20 billion at September 30, 2023, an increase of $187 million compared to $133.02 billion as of June 30, 2023. The increases were mostly related to $1.10 billion of growth in the General Bank (9.7% annualized) and $1.05 billion of growth in the Commercial Bank (14.3% annualized). The growth in the Commercial Bank was broad-based given strong performance in many of our industry verticals. The increases were partially offset by a $1.94 billion decline in the SVB segment, mostly concentrated in Global Fund Banking.
     
  • Total investment securities were $26.82 billion at September 30, 2023, an increase of $4.65 billion compared to $22.17 billion as of June 30, 2023. The increase was primarily due to purchases of approximately $5.38 billion in short duration U.S. Treasury and U.S. agency mortgage-backed investment securities available for sale during the quarter.
     
  • Deposits totaled $146.23 billion at September 30, 2023, an increase of $5.07 billion, or 14.2% on an annualized basis, compared to $141.16 billion as of June 30, 2023. The increase was concentrated in Direct Bank deposits, which grew by $6.42 billion, partially offset by an $890 million decline in the SVB segment. Deposits in the SVB segment totaled $39.97 billion at September 30, 2023 compared to $40.86 billion as of June 30, 2023. Noninterest-bearing deposits represented 29.5% of total deposits as of September 30, 2023, compared to 31.6% of total deposits at June 30, 2023. The cost of average total deposits was 2.12% for the third quarter, up 44 basis points compared to the second quarter.
     
  • Total borrowings decreased $2.43 billion during the third quarter, reflecting the payoff of borrowings from the Federal Home Loan Bank.

PROVISION FOR CREDIT LOSSES AND CREDIT QUALITY

  • Provision for credit losses totaled $192 million for the third quarter compared to $151 million in the second quarter, an increase of $41 million. The third quarter total provision for credit losses of $192 million included a $212 million provision for loan and lease losses, partially offset by benefits for credit losses of $3 million for investment securities available for sale and $17 million for off-balance sheet credit exposure. The provision for loan and lease losses increased $43 million compared to the second quarter as a result of deterioration in macroeconomic factors, credit quality, and higher net charge-offs. The benefit for losses for off-balance sheet credit exposure was $17 million in the second and third quarters.
     
  • Net charge-offs totaled $176 million, representing 0.53% of average loans, compared to $157 million, or 0.47% of average loans, during the second quarter. Net charge-offs in the SVB segment were $100 million, an increase of $3 million from the second quarter, and were primarily in early and growth stage investor dependent portfolios. Net charge-offs in the Commercial Bank were $58 million, an increase of $9 million from the second quarter. Consistent with prior quarters, Commercial Bank net charge-offs occurred primarily in the general office and small ticket equipment leasing portfolios.
     
  • Nonaccrual loans were $899 million, or 0.68% of average loans, at September 30, 2023, compared to $929 million, or 0.70% of average loans, at June 30, 2023.
     
  • The allowance for loan and lease losses totaled $1.67 billion, or 1.26% of total loans, at September 30, 2023, an increase of $36 million compared to the second quarter of 2023. The $36 million reserve build for the quarter was a result of deteriorating macroeconomic forecasts, specifically related to declining corporate profits and deterioration in the commercial real estate portfolio. These increases were partially offset by lower specific reserves and lower loan balances in the SVB segment.

CAPITAL AND LIQUIDITY

  • Capital position remains strong and capital ratios are well above regulatory requirements. The estimated total risk-based capital, Tier 1 risk-based capital, Common equity Tier 1 risk-based capital, and Tier 1 leverage ratios were 15.64%, 13.82% , 13.23% , and 9.72%, respectively, at September 30, 2023.
     
  • During the third quarter, a dividend of $0.75 per share of common stock was declared.
     
  • Liquidity position remains strong as liquid assets were $57.02 billion at September 30, 2023 compared to $53.42 billion at June 30, 2023.

EARNINGS CALL DETAILS

BancShares will host a conference call to discuss the company's financial results on Thursday, October 26, 2023, at 9:00 a.m. Eastern time.

To access this call, dial:

United States: 1-833-470-1428
Canada: 1-833-950-0062
All other locations: 1-929-526-1599
Access code: 979664

The third quarter 2023 earnings presentation and this news release are available on the company's website at ir.firstcitizens.com. After the event, a replay of the call will be available via webcast at ir.firstcitizens.com.

ABOUT FIRST CITIZENS BANCSHARES

First Citizens BancShares, Inc., a top 20 U.S. financial institution with more than $200 billion in assets, is the financial holding company for First-Citizens Bank & Trust Company ("First Citizens Bank"). Headquartered in Raleigh, N.C., and now celebrating the 125th anniversary of its founding, First Citizens Bank has built a unique legacy of strength, stability and long-term thinking that has spanned generations. First Citizens offers an array of general banking services including a network of more than 500 branches and offices in 30 states; commercial banking expertise delivering best-in-class lending, leasing and other financial services coast to coast; innovation banking serving businesses at every stage; and a nationwide direct bank. First Citizens Bank, Member FDIC. Discover more at firstcitizens.com.

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, asset quality, future performance, and other strategic goals of BancShares. Words such as "anticipates," "believes," "estimates," "expects," "predicts," "forecasts," "intends," "plans," "projects," "targets," "designed," "could," "may," "should," "will," "potential," "continue," "aims" or other similar words and expressions are intended to identify these forward-looking statements. These forward-looking statements are based on BancShares' current expectations and assumptions regarding BancShares' business, the economy, and other future conditions.

Because forward-looking statements relate to future results and occurrences, they are subject to inherent risks, uncertainties, changes in circumstances and other risk factors that are difficult to predict. Many possible events or factors could affect BancShares' future financial results and performance and could cause the actual results, performance or achievements of BancShares to differ materially from any anticipated results expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, general competitive, economic, political, geopolitical events (including conflicts in Ukraine, Israel and the Gaza Strip) and market conditions, including changes in competitive pressures among financial institutions and the impacts related to or resulting from recent bank failures and other volatility, the financial success or changing conditions or strategies of BancShares' vendors or customers, including changes in demand for deposits, loans and other financial services, fluctuations in interest rates, changes in the quality or composition of BancShares' loan or investment portfolio, actions of government regulators, including the recent and projected interest rate hikes by the Board of Governors of the Federal Reserve Board (the "Federal Reserve"), changes to estimates of future costs and benefits of actions taken by BancShares, BancShares' ability to maintain adequate sources of funding and liquidity, the potential impact of decisions by the Federal Reserve on BancShares' capital plans, adverse developments with respect to U.S. or global economic conditions, including the significant turbulence in the capital or financial markets, the impact of the current inflationary environment, the impact of implementation and compliance with current or proposed laws, regulations and regulatory interpretations, including the interagency proposed rule on regulatory capital, along with the risk that such laws, regulations and regulatory interpretations may change, the availability of capital and personnel, and the failure to realize the anticipated benefits of BancShares' previous acquisition transactions, including the Acquisition and the previously completed transaction with CIT Group Inc. ("CIT"), which acquisition risks include (1) disruption from the transactions with customer, supplier or employee relationships, (2) the possibility that the amount of the costs, fees, expenses and charges related to the transactions may be greater than anticipated, including as a result of unexpected or unknown factors, events or liabilities or increased regulatory compliance obligations or oversight, (3) reputational risk and the reaction of the parties' customers to the transactions, (4) the risk that the cost savings and any revenue synergies from the transactions may not be realized or take longer than anticipated to be realized, (5) difficulties experienced in completing the integration of the businesses, (6) the ability to retain customers following the transactions and (7) adjustments to BancShares' estimated purchase accounting impacts of the Acquisition.

Except to the extent required by applicable laws or regulations, BancShares disclaims any obligation to update forward-looking statements or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments. Additional factors which could affect the forward-looking statements can be found in BancShares' Annual Report on Form 10-K for the fiscal year ended December 31, 2022, its Quarterly Reports on Form 10-Q for the periods ended March 31, 2023 and June 30, 2023, and its other filings with the Securities and Exchange Commission (the "SEC").

NON-GAAP MEASURES

Certain measures in this release and supporting tables, including those referenced as "Adjusted," are "non-GAAP", meaning they are not presented in accordance with generally accepted accounting principles in the U.S. and also are not codified in U.S. banking regulations currently applicable to BancShares. BancShares believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial information, can provide transparency about or an alternative means of assessing its operating results and financial position to its investors, analysts and management. Each non-GAAP measure is reconciled to the most comparable GAAP measure in the non-GAAP reconciliation table below and notable items are summarized in a separate table. 

 

Dollars in millions, except per share data
       

YTD

YTD

Summary Financial Data & Key Metrics

3Q23

2Q23

3Q22

9/30/23

9/30/22

Results of Operations:

          

Net interest income

$         1,990

$         1,961

$            795

$         4,801

$         2,144

Provision for credit losses

192

151

60

1,126

566

Net interest income after provision for credit losses

1,798

1,810

735

3,675

1,578

Noninterest income

615

658

433

11,532

1,707

Noninterest expense

1,416

1,572

760

3,843

2,315

Income before income taxes

997

896

408

11,364

970

Income tax expense

245

214

93

412

129

Net income

752

682

315

10,952

841

Preferred stock dividends

15

15

12

44

36

Net income available to common stockholders

$            737

$            667

$            303

$       10,908

$            805

Adjusted net income available to common stockholders(1)

$            813

$            765

$            326

$         1,870

$            895

Pre-tax, pre-provision net revenue (PPNR)(1)

$         1,189

$         1,047

$            468

$       12,490

$         1,536
           

Per Share Information:

          

Diluted earnings per common share (EPS)

$         50.67

$         45.87

$         19.25

$       750.19

$         50.70

Adjusted diluted earnings per common share (EPS)(1)

55.92

52.60

20.77

128.64

56.40

Book value per common share

1,343.52

1,300.93

597.75

    

Tangible book value per common share (TBV)(1)

1,297.00

1,253.20

564.97

    
           

Key Performance Metrics:

          

Return on average assets (ROA)

1.41 %

1.31 %

1.16 %

7.81 %

1.04 %

Adjusted ROA(1)

1.55

1.49

1.24

1.37

1.15

PPNR ROA(1)

2.23

2.00

1.72

8.91

1.89

Adjusted PPNR ROA(1)

2.48

2.34

1.86

2.16

1.58

Return on average common equity (ROE)

15.20

14.35

12.49

90.46

11.18

Adjusted ROE(1)

16.77

16.46

13.47

15.51

12.44

Return on average tangible common equity (ROTCE)(1)

15.76

14.91

13.17

94.17

11.80

Adjusted ROTCE(1)

17.39

17.10

14.20

16.15

13.13

Efficiency ratio

54.34

60.06

61.91

23.53

60.10

Adjusted efficiency ratio(1)

46.04

49.65

53.32

49.85

57.25

Net interest margin (NIM)(2)

4.07

4.10

3.42

3.94

3.08
           

Select Balance Sheet Items at Period End:

          

Total investment securities

$       26,818

$       22,171

$       18,841

    

Total loans and leases

133,202

133,015

69,790

    

Total operating lease equipment, net

8,661

8,531

7,984

    

Total deposits

146,233

141,164

87,553

    

Total borrowings

37,712

40,139

8,343

    

Loan to deposit ratio

91.09 %

94.23 %

79.71 %

    

Noninterest-bearing deposits to total deposits

29.50

31.56

30.37

    
           

Capital Ratios at Period End: (3)

          

Total risk-based capital ratio

15.64 %

15.84 %

13.46 %

    

Tier 1 risk-based capital ratio

13.82

14.00

11.36

    

Common equity Tier 1 ratio

13.23

13.38

10.37

    

Tier 1 leverage capital ratio

9.72

9.50

9.31

    
           

Asset Quality at Period End:

          

Nonaccrual loans to total loans and leases

0.68 %

0.70 %

0.65 %

    

Allowance for loan and lease losses (ALLL) to loans and leases

1.26

1.23

1.26

    

Net charge-off ratio

0.53

0.47

0.10

0.45

0.11
           

(1) Denotes a non-GAAP measure. Refer to the non-GAAP reconciliation subsequently included in these materials for a reconciliation to the most directly comparable GAAP measure. "Adjusted" items exclude the impact of Notable Items.

(2) Calculated net of credit balances of factoring clients and credit balances of factoring deposits.

          

(3) Capital ratios for the current quarter are preliminary pending completion of quarterly regulatory filings.

 

Dollars in millions, except share and per share data
       

YTD

YTD

Income Statement (unaudited)

3Q23

2Q23

3Q22

9/30/23

9/30/22

Interest income

          

Interest and fees on loans

$            2,426

$            2,353

$              785

$            5,796

$            2,061

Interest on investment securities

180

120

90

407

262

Interest on deposits at banks

504

480

31

1,071

50

Total interest income

3,110

2,953

906

7,274

2,373

Interest expense

          

Deposits

769

575

78

1,632

159

Borrowings

351

417

33

841

70

Total interest expense

1,120

992

111

2,473

229

Net interest income

1,990

1,961

795

4,801

2,144

Provision for credit losses

192

151

60

1,126

566

Net interest income after provision for credit losses

1,798

1,810

735

3,675

1,578

Noninterest income

          

Rental income on operating lease equipment

248

238

219

719

640

Fee income and other service charges

70

68

41

185

112

Client investment fees

52

52

—

106

—

Wealth management services

49

51

35

140

107

International fees

34

33

3

71

7

Service charges on deposit accounts

44

44

21

112

76

Factoring commissions

21

20

24

60

78

Cardholder services, net

41

41

25

103

76

Merchant services, net

12

14

8

36

27

Insurance commissions

13

14

11

40

34

Realized loss on sale of investment securities available for sale, net

(12)

—

—

(26)

—

Fair value adjustment on marketable equity securities, net

(1)

(10)

(2)

(20)

(5)

Bank-owned life insurance

1

2

8

8

25

Gain on sale of leasing equipment, net

10

4

2

18

13

Gain on acquisition

12

55

—

9,891

431

Gain on extinguishment of debt

—

—

1

—

7

Other noninterest income 

21

32

37

89

79

Total noninterest income

615

658

433

11,532

1,707

Noninterest expense

          

Depreciation on operating lease equipment

95

91

87

275

257

Maintenance and other operating lease expenses

51

56

52

163

142

Salaries and benefits

727

775

353

1,922

1,054

Net occupancy expense

65

64

47

179

143

Equipment expense

117

133

55

308

161

Professional fees

12

21

11

44

34

Third-party processing fees

54

54

27

138

77

FDIC insurance expense

36

22

5

76

26

Marketing expense

25

41

15

81

32

Acquisition-related expenses

121

205

33

354

202

Intangible asset amortization

17

18

5

40

17

Other noninterest expense

96

92

70

263

170

Total noninterest expense

1,416

1,572

760

3,843

2,315

Income before income taxes

997

896

408

11,364

970

Income tax expense

245

214

93

412

129

Net income

$              752

$              682

$              315

$          10,952

$              841

Preferred stock dividends

15

15

12

44

36

Net income available to common stockholders

$              737

$              667

$              303

$          10,908

$              805
           

Basic earnings per common share

$            50.71

$            45.90

$            19.27

$          750.79

$            50.76

Diluted earnings per common share

$            50.67

$            45.87

$            19.25

$          750.19

$            50.70

Weighted average common shares outstanding (basic)

14,528,310

14,528,134

15,711,976

14,527,718

15,849,219

Weighted average common shares outstanding (diluted)

14,539,133

14,537,938

15,727,993

14,539,383

15,867,314

 

Dollars in millions
       

Balance Sheet (unaudited)

September 30, 2023

June 30, 2023

September 30, 2022

Assets

      

Cash and due from banks

$                           791

$                      917

$                           481

Interest-earning deposits at banks

36,704

37,846

6,172

Securities purchased under agreements to resell

549

298

—

Investment in marketable equity securities

75

76

92

Investment securities available for sale

16,661

11,894

9,088

Investment securities held to maturity

10,082

10,201

9,661

Assets held for sale

58

117

21

Loans and leases

133,202

133,015

69,790

Allowance for loan and lease losses

(1,673)

(1,637)

(882)

Loans and leases, net of allowance for loan and lease losses

131,529

131,378

68,908

Operating lease equipment, net

8,661

8,531

7,984

Premises and equipment, net

1,768

1,782

1,410

Goodwill

346

346

346

Other intangible assets

329

347

145

Other assets

6,212

5,769

5,002

Total assets

$                    213,765

$               209,502

$                    109,310
       

Liabilities

      

Deposits:

      

Noninterest-bearing

$                      43,141

$                 44,547

$                      26,587

Interest-bearing

103,092

96,617

60,966

Total deposits

146,233

141,164

87,553

Credit balances of factoring clients

1,282

1,067

1,147

Borrowings:

      

Short-term borrowings

453

454

3,128

Long-term borrowings

37,259

39,685

5,215

Total borrowings

37,712

40,139

8,343

Other liabilities

8,149

7,361

2,434

Total liabilities

$                    193,376

$               189,731

$                      99,477
       

Stockholders' equity

      

Preferred stock

881

881

881

Common stock:

      

Class A - $1 par value

14

14

14

Class B - $1 par value

1

1

1

Additional paid in capital

4,106

4,106

4,506

Retained earnings

16,267

15,541

5,160

Accumulated other comprehensive loss

(880)

(772)

(729)

Total stockholders' equity

20,389

19,771

9,833

Total liabilities and stockholders' equity

$                    213,765

$               209,502

$                    109,310
       

 

Dollars in millions, except share per share data

Notable Items (1)

      

YTD

YTD

3Q23

2Q23

3Q22

9/30/23

9/30/22

Noninterest income

          

Rental income on operating lease equipment (2)

$             (146)

$             (147)

$             (139)

$             (438)

$             (399)

Realized loss on sale of investment securities available for sale, net

12

—

—

26

—

Fair value adjustment on marketable equity securities, net

1

10

2

20

5

Gain on sale of leasing equipment, net

(10)

(4)

(2)

(18)

(13)

Gain on acquisition

(12)

(55)

—

(9,891)

(431)

Gain on extinguishment of debt

—

—

(1)

—

(7)

Other noninterest income (3)

8

—

(5)

8

(11)

Impact of notable items on adjusted noninterest income

$             (147)

$             (196)

$             (145)

$        (10,293)

$             (856)

Noninterest expense

          

Depreciation on operating lease equipment (2)

(95)

(91)

(87)

(275)

(257)

Maintenance and other operating lease equipment expense (2)

(51)

(56)

(52)

(163)

(142)

Acquisition-related expenses

(121)

(205)

(33)

(354)

(202)

Intangible asset amortization

(17)

(18)

(5)

(40)

(17)

Other noninterest expense (4)

—

—

(6)

—

18

Impact of notable items on adjusted noninterest expense

$             (284)

$             (370)

$             (183)

$             (832)

$             (600)

Day 2 provision for loan and lease losses and off-balance sheet exposure

$                —

$                —

$                —

$             (716)

$             (513)

Benefit for credit losses on investment securities available for sale

3

1

—

—

—

Impact of notable items on adjusted provision for credit losses

$                  3

$                  1

$                —

$             (716)

$             (513)

Impact of notable items on adjusted pre-tax income

$              134

$              173

$                38

$          (8,745)

$              257

Income tax impact (5)

58

75

15

293

167

Impact of notable items on adjusted net income

$                76

$                98

$                23

$          (9,038)

$                90

Impact of notable items on adjusted diluted EPS

$             5.25

$             6.73

$             1.52

$        (621.55)

$             5.70
           
   

(1)

Notable items include income and expense for infrequent transactions and certain recurring items (typically noncash) that Management believes should be excluded from adjusted measures (Non-GAAP) to enhance understanding of operations and comparability to historical periods. Management utilizes both GAAP and adjusted measures (Non-GAAP) to analyze the Company's performance. Refer to subsequent pages of this earnings release for a reconciliation of Non-GAAP measures to the most directly comparable GAAP measures.

(2)

Depreciation and maintenance and other operating lease expenses are reclassified from noninterest expense to a reduction of rental income on operating lease equipment. There is no net impact to earnings for this notable item as adjusted noninterest income and expense are reduced by the same amount. Adjusted rental income on operating lease equipment (Non-GAAP) is net of depreciation and maintenance expense for operating lease equipment. Management believes this measure enhances comparability to banking peers, primarily due to the extent of our rail and other equipment rental activities. Refer to subsequent pages of this earnings release for a reconciliation of Non-GAAP measures to the most directly comparable GAAP measure.

(3)

Notable items included in other noninterest income consist of a measurement period adjustment related to FX translation in 3Q23 and YTD23 and a railcar lease settlement in 3Q22 in addition to the gain on sale of the corporate jet in YTD22.

(4)

Notable items included in other noninterest expense consist of an impairment on corporate real estate in 3Q22 in addition to the termination of legacy CIT post-retirement plans in YTD22.

(5)

For the periods presented the income tax impact may include tax discrete items and changes in the estimated annualized effective tax rate.

 

Dollars in millions, except share and per share data

Condensed Income Statements (unaudited) - Adjusted for Notable Items (1)

      

YTD

YTD

3Q23

2Q23

3Q22

9/30/23

9/30/22

Interest income

$           3,110

$           2,953

$              906

$           7,274

$           2,373

Interest expense

1,120

992

111

2,473

229

Net interest income

1,990

1,961

795

4,801

2,144

Provision for credit losses

195

152

60

410

53

Net interest income after provision for credit losses

1,795

1,809

735

4,391

2,091

Noninterest income

468

462

288

1,239

851

Noninterest expense

1,132

1,202

577

3,011

1,715

Income before income taxes

1,131

1,069

446

2,619

1,227

Income tax expense

303

289

108

705

296

Net income

$              828

$              780

$              338

$           1,914

$              931

Preferred stock dividends

15

15

12

44

36

Net income available to common stockholders

$              813

$              765

$              326

$           1,870

$              895
           

Basic earnings per common share

$           55.96

$           52.64

$           20.79

$         128.74

$           56.46

Diluted earnings per common share

55.92

52.60

20.77

128.64

56.40

Weighted average common shares outstanding (basic)

14,528,310

14,528,134

15,711,976

14,527,718

15,849,219

Weighted average common shares outstanding (diluted)

14,539,133

14,537,938

15,727,993

14,539,383

15,867,314
 

(1) The GAAP income statements and notable items are included previously in this communication. The condensed adjusted income statements above (Non-GAAP) exclude the impacts of notable items. Refer to the Non-GAAP reconciliation table(s) at the end of this earnings release for a reconciliation of Non-GAAP measures to the most directly comparable GAAP measure.

 

Dollars in millions
       

Loans and Leases by Class (end of period)

September 30,
2023

June 30, 2023

September 30,
2022

Loans and Leases by Class

      

Commercial

      

Commercial construction

$                3,382

$                3,182

$                2,752

Owner-occupied commercial mortgages

15,230

14,748

14,053

Non-owner-occupied commercial mortgages

10,941

10,733

9,683

Commercial and industrial

26,389

25,376

24,288

Leases

2,108

2,130

2,184

Total commercial

$              58,050

$              56,169

$              52,960
       

Consumer

      

Residential mortgage

$              14,287

$              14,065

$              12,910

Revolving mortgage

1,909

1,900

1,923

Consumer auto

1,411

1,425

1,385

Consumer other

681

657

612

Total consumer

$              18,288

$              18,047

$              16,830
       

SVB

      

Global fund banking

$              27,516

$              29,333

$                     —

Investor dependent - early stage

1,718

1,840

—

Investor dependent - growth stage

3,948

4,052

—

Innovation C&I and cash flow dependent

8,724

8,905

—

Private Bank

9,648

9,580

—

CRE

2,629

2,530

—

Other

2,681

2,559

—

Total SVB

$              56,864

$              58,799

$                     —

Total loans and leases

$            133,202

$            133,015

$              69,790

Less: allowance for loan and lease losses

(1,673)

(1,637)

(882)

Total loans and leases, net of allowance for loan and lease losses

$            131,529

$            131,378

$              68,908
       
 
       

Deposits by Type (end of period)

September 30,
2023

June 30, 2023

September 30,
2022

Demand

$              43,141

$              44,547

$              26,587

Checking with interest

23,461

24,809

16,118

Money market

30,082

29,149

21,818

Savings

32,513

26,389

14,722

Time

17,036

16,270

8,308

Total deposits

$            146,233

$            141,164

$              87,553
       

 

Dollars in millions
       

YTD

YTD

Credit Quality and  Allowance for Loan and Lease Losses

3Q23

2Q23

3Q22

9/30/23

9/30/22

Nonaccrual loans

$          899

$          929

$          454

    

Ratio of nonaccrual loans to total loans

0.68 %

0.70 %

0.65 %

    
           

Charge-offs

$        (199)

$        (176)

$          (33)

$        (437)

$        (107)

Recoveries

23

19

15

54

52

Net charge-offs

$        (176)

$        (157)

$          (18)

$        (383)

$          (55)

Net charge-off ratio

0.53 %

0.47 %

0.10 %

0.45 %

0.11 %
           

Allowance for loan and lease losses to loans ratio

1.26 %

1.23 %

1.26 %

    
           

Allowance for loan and lease losses - beginning

$       1,637

$       1,605

$          850

$          922

$          178

Initial PCD ALLL

—

20

—

220

272

Day 2 provision for loan and lease losses

—

—

—

462

454

Provision for loan and lease losses

212

169

50

452

33

Net charge-offs

(176)

(157)

(18)

(383)

(55)

Allowance for loan and lease losses - ending

$       1,673

$       1,637

$          882

$       1,673

$          882
           

 

Dollars in millions

      

Average Balance Sheets, Yields and Rates

3Q23

2Q23

3Q22

Avg
Balance

Income/
Expense

Yield/Rate

Avg
Balance

Income/
Expense

Yield/Rate

Avg
Balance

Income/
Expense

Yield/Rate

Loans and leases (1)(2)

$ 131,926

$     2,426

7.29 %

$ 133,407

$     2,353

7.07 %

$   67,413

$        785

4.63 %

Investment securities

24,388

177

2.90

19,806

117

2.36

19,119

90

1.88

Securities purchased under agreements to resell

223

3

5.28

191

3

4.92

—

—

—

Interest-earning deposits at banks

37,456

504

5.34

38,014

480

5.07

5,685

31

2.17

Total interest-earning assets (2)

$ 193,993

$     3,110

6.36 %

$ 191,418

$     2,953

6.18 %

$   92,217

$        906

3.90 %
                   

Operating lease equipment, net (including held for sale)

$     8,617

    

$     8,405

    

$     7,981

    

Cash and due from banks

911

    

1,161

    

489

    

Allowance for loan and lease losses

(1,714)

    

(1,600)

    

(851)

    

All other noninterest-earning assets

10,187

    

9,925

    

8,133

    

Total assets

$ 211,994

    

$ 209,309

    

$ 107,969

    

Interest-bearing deposits

                  

Checking with interest

$   24,600

$        134

2.10 %

$   24,164

$        118

1.92 %

$   16,160

$           7

0.14 %

Money Market

29,684

179

2.40

29,066

148

2.04

22,993

32

0.55

Savings

29,988

303

4.01

21,979

188

3.44

13,956

28

0.78

Time deposits

16,686

153

3.64

14,958

121

3.24

8,436

11

0.54

Total interest-bearing deposits

100,958

769

3.02

90,167

575

2.56

61,545

78

0.50

Borrowings:

                  

Securities sold under customer repurchase agreements

454

—

0.35

456

1

0.31

617

1

0.16

ST FHLB Borrowings

—

—

—

110

1

5.17

1,188

8

2.60

Short-term borrowings

454

—

0.35

566

2

1.26

1,805

9

1.77

Federal Home Loan Bank borrowings

444

6

5.47

5,558

74

5.35

1,784

11

2.48

Senior unsecured borrowings

382

2

2.46

798

4

2.11

898

5

2.05

Subordinated debt

1,042

10

3.65

1,045

10

3.59

1,054

8

3.21

Other borrowings

35,831

333

3.68

35,168

327

3.74

67

—

4.47

Long-term borrowings

37,699

351

3.69

42,569

415

3.91

3,803

24

2.62

Total borrowings

38,153

351

3.65

43,135

417

3.88

5,608

33

2.34

Total interest-bearing liabilities

$ 139,111

$     1,120

3.19 %

$ 133,302

$        992

2.99 %

$   67,153

$        111

0.66 %
                   

Noninterest-bearing deposits

$   43,085

    

$   47,271

    

$   26,877

    

Credit balances of factoring clients

1,209

    

1,168

    

1,089

    

Other noninterest-bearing liabilities

8,473

    

8,047

    

2,351

    

Stockholders' equity

20,116

    

19,521

    

10,499

    

Total liabilities and stockholders' equity

$ 211,994

    

$ 209,309

    

$ 107,969

    
                   

Net interest income

  

$     1,990

    

$     1,961

    

$        795

  

Net interest spread (2)

    

3.17 %

    

3.19 %

    

3.24 %

Net interest margin (2)

    

4.07 %

    

4.10 %

    

3.42 %
                   

(1) Loans and leases include non-PCD and PCD loans, nonaccrual loans and held for sale. Interest income on loans and leases includes accretion income and loan fees.

(2) The balance and rate presented is calculated net of credit balances of factoring clients.

Note: Certain items above do not precisely recalculate as presented due to rounding.

  

 

Dollars in millions

      

Average Balance Sheets, Yields and Rates

YTD 9/30/2023

YTD 9/30/2022

Avg
Balance

Income/
Expense

Yield/Rate

Avg
Balance

Income/
Expense

Yield/Rate

Loans and leases (1)(2)

$ 113,189

$     5,796

6.84 %

$   65,411

$     2,061

4.21 %

Investment securities

21,222

401

2.52

19,264

262

1.81

Securities purchased under agreements to resell

139

6

5.12

—

—

—

Interest-earning deposits at banks

27,794

1,071

5.15

8,242

50

0.81

Total interest-earning assets (2)

$ 162,344

$     7,274

5.98 %

$   92,917

$     2,373

3.41 %
             

Operating lease equipment, net (including held for sale)

$     8,421

    

$     7,960

    

Cash and due from banks

891

    

517

    

Allowance for loan and lease losses

(1,420)

    

(871)

    

All other noninterest-earning assets

17,193

    

8,102

    

Total assets

$ 187,429

    

$ 108,625

    

Interest-bearing deposits

            

Checking with interest

$   21,783

$        274

1.63 %

$   16,437

$         16

0.11 %

Money Market

26,686

407

2.04

24,875

65

0.35

Savings

23,208

601

3.46

13,640

48

0.47

Time deposits

14,606

350

3.20

9,004

30

0.45

Total interest-bearing deposits

86,283

1,632

2.53

63,956

159

0.33

Borrowings:

            

Securities sold under customer repurchase agreements

455

1

0.32

615

1

0.16

ST FHLB Borrowings

145

5

4.79

400

8

2.60

Short-term borrowings

600

6

1.40

1,015

9

1.12

Federal Home Loan Bank borrowings

3,084

120

5.22

941

15

2.10

Senior unsecured borrowings

686

11

2.16

1,497

21

1.85

Subordinated debt

1,045

29

3.59

1,057

24

3.07

Other borrowings

24,450

675

3.69

79

1

2.87

Long-term borrowings

29,265

835

3.81

3,574

61

2.30

Total borrowings

29,865

841

3.76

4,589

70

2.04

Total interest-bearing liabilities

$ 116,148

$     2,473

2.85 %

$   68,545

$        229

0.45 %
             

Noninterest-bearing deposits

$   39,007

    

$   26,253

    

Credit balances of factoring clients

1,129

    

1,146

    

Other noninterest-bearing liabilities

14,143

    

2,184

    

Stockholders' equity

17,002

    

10,497

    

Total liabilities and stockholders' equity

$ 187,429

    

$ 108,625

    
             

Net interest income

  

$     4,801

    

$     2,144

  

Net interest spread (2)

    

3.13 %

    

2.96 %

Net interest margin (2)

    

3.94 %

    

3.08 %

(1) Loans and leases include non-PCD and PCD loans, nonaccrual loans and held for sale. Interest income on loans and leases includes accretion income and loan fees.

(2) The balance and rate presented is calculated net of credit balances of factoring clients.

Note: Certain items above do not precisely recalculate as presented due to rounding.

  

 

Dollars in millions, except share and per share data
           

YTD

YTD

Non-GAAP Reconciliations

    

3Q23

2Q23

3Q22

9/30/2023

9/30/2022
               

Net income and EPS

              

Net income (GAAP)

  

a

$          752

$          682

$          315

$     10,952

$          841

Preferred stock dividends

    

15

15

12

44

36

Net income available to common stockholders (GAAP)

  

b

737

667

303

10,908

805

Total notable items, after income tax

  

c

76

98

23

(9,038)

90

Adjusted net income (non-GAAP)

  

d = (a+c)

828

780

338

1,914

931

Adjusted net income available to common stockholders (non-GAAP)

  

e = (b+c)

$          813

$          765

$          326

$       1,870

$          895

Weighted average common shares outstanding

              

Basic

  

f

14,528,310

14,528,134

15,711,976

14,527,718

15,849,219

Diluted

  

g

14,539,133

14,537,938

15,727,993

14,539,383

15,867,314

EPS (GAAP)

              

Basic

  

b/f

$       50.71

$       45.90

$       19.27

$     750.79

$       50.76

Diluted

  

b/g

50.67

45.87

19.25

750.19

50.70

Adjusted EPS (non-GAAP)

              

Basic

  

e/f

$       55.96

$       52.64

$       20.79

$     128.74

$       56.46

Diluted

  

e/g

55.92

52.60

20.77

128.64

56.40
               

Noninterest income and expense

              

Noninterest income

  

h

$          615

$          658

$          433

$     11,532

$       1,707

Impact of notable items, before income tax

    

(147)

(196)

(145)

(10,293)

(856)

Adjusted or core noninterest income

  

i

$          468

$          462

$          288

$       1,239

$          851
               

Noninterest expense

  

j

$       1,416

$       1,572

$          760

$       3,843

$       2,315

Impact of notable items, before income tax

    

(284)

(370)

(183)

(832)

(600)

Adjusted or core noninterest expense

  

k

$       1,132

$       1,202

$          577

$       3,011

$       1,715
               

Provision for credit losses

              

Provision for credit losses

    

$          192

$          151

$            60

$       1,126

$          566

Less: Day 2 provision for loan and lease losses and off-balance sheet exposure

    

—

—

—

716

513

Plus: Benefit for credit losses on investment securities available for sale

    

3

1

—

—

—

Adjusted provision for credit losses

    

$          195

$          152

$            60

$          410

$            53
               

PPNR

              

Net income (GAAP)

  

a

$          752

$          682

$          315

$     10,952

$          841

Plus:

              

Provision for credit losses

    

192

151

60

1,126

566

Income tax expense (benefit)

    

245

214

93

412

129

PPNR (non-GAAP)

  

l

$       1,189

$       1,047

$          468

$     12,490

$       1,536

Impact of notable items (1)

    

137

174

38

(9,461)

(256)

Adjusted PPNR (non-GAAP)

  

m

$       1,326

$       1,221

$          506

$       3,028

$       1,279
               

(1) Excludes the notable items for the provision for credit losses and income taxes as these items are excluded from PPNR as presented in the table above.

Note: Certain items above do not precisely recalculate as presented due to rounding.

Dollars in millions, except share and per share data
           

YTD

YTD

Non-GAAP Reconciliations (continued)

   

3Q23

2Q23

3Q22

9/30/2023

9/30/2022
               

ROA

              

Net income (GAAP)

  

a

$          752

$          682

$          315

$     10,952

$          841

Annualized net income

  

n = a annualized

2,983

2,734

1,250

14,642

1,124

Adjusted net income (non-GAAP)

  

d

828

780

338

1,914

931

Annualized adjusted net income

  

p = d annualized

3,286

3,126

1,341

2,560

1,245

Average assets

  

o

211,994

209,309

107,969

187,429

108,625

ROA

  

n/o

1.41 %

1.31 %

1.16 %

7.81 %

1.04 %

Adjusted ROA

  

p/o

1.55

1.49

1.24

1.37

1.15
               

PPNR ROA

              

PPNR (non-GAAP)

  

l

$       1,189

$       1,047

$          468

$     12,490

$       1,536

Annualized PPNR

  

q = l annualized

4,717

4,200

1,858

16,699

2,054

Adjusted PPNR (non-GAAP)

  

m

1,326

1,221

506

3,028

1,279

Annualized PPNR

  

r = m annualized

5,261

4,893

2,009

4,049

1,710

PPNR ROA

  

q/o

2.23 %

2.00 %

1.72 %

8.91 %

1.89 %

Adjusted PPNR ROA

  

r/o

2.48

2.34

1.86

2.16

1.58
               

ROE and ROTCE

              

Annualized net income available to common stockholders

  

s = b annualized

$       2,923

$       2,675

$       1,202

$     14,583

$       1,076

Annualized adjusted net income available to common stockholders

  

t = e annualized

$       3,225

$       3,067

$       1,293

$       2,501

$       1,197

Average stockholders' equity (GAAP)

    

$     20,116

$     19,521

$     10,499

$     17,002

$     10,497

Less: average preferred stock

    

881

881

881

881

875

Average common stockholders' equity (non-GAAP)

  

u

$     19,235

$     18,640

$       9,618

$     16,121

$       9,622

Less: average goodwill

    

346

346

346

346

346

Less: average other intangible assets

    

338

357

148

290

162

Average tangible common equity (non-GAAP)

  

v

$     18,551

$     17,937

$       9,124

$     15,485

$       9,114

ROE

  

s/u

15.20 %

14.35 %

12.49 %

90.46 %

11.18 %

Adjusted ROE

  

t/u

16.77

16.46

13.47

15.51

12.44

ROTCE

  

s/v

15.76

14.91

13.17

94.17

11.80

Adjusted ROTCE

  

t/v

17.39

17.10

14.20

16.15

13.13
               

Tangible common equity to tangible assets

              

Stockholders' equity (GAAP)

  

w

$     20,389

$     19,771

$       9,833

    

Less: preferred stock

    

881

881

881

    

Common equity (non-GAAP)

  

x

$     19,508

$     18,890

$       8,952

    

Less: goodwill

    

346

346

346

    

Less: other intangible assets

    

329

347

145

    

Tangible common equity (non-GAAP)

  

y

$     18,833

$     18,197

$       8,461

    

Total assets (GAAP)

  

z

213,765

209,502

109,310

    

Tangible assets (non-GAAP)

  

aa

213,090

208,809

108,819

    

Total equity to total assets

  

w/z

9.54 %

9.44 %

9.00 %

    

Tangible common equity to tangible assets (non-GAAP)

  

y/aa

8.84

8.71

7.78

    

Note: Certain items above do not precisely recalculate as presented due to rounding.
               

Dollars in millions, except share and per share data
           

YTD

YTD

Non-GAAP Reconciliations (continued)

   

3Q23

2Q23

3Q22

9/30/2023

9/30/2022
               

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

    

Tangible book value per share

  

y/bb

1,297.00

1,253.20

564.97

    
               

Efficiency ratio

              

Net interest income

  

cc

$       1,990

$       1,961

$          795

$       4,801

$       2,144

Efficiency ratio (GAAP)

  

j / (h + cc)

54.34 %

60.06 %

61.91 %

23.53 %

60.10 %

Adjusted efficiency ratio (non-GAAP)(1)

  

k / (i + cc)

46.04

49.65

53.32

49.85 %

57.25 %
               

Rental income on operating lease equipment

              

Rental income on operating lease equipment

    

$          248

$          238

$          219

$          719

$          640

Less:

              

Depreciation on operating lease equipment

    

95

91

87

275

257

Maintenance and other operating lease expenses

    

51

56

52

163

142

Adjusted rental income on operating lease equipment

    

$          102

$            91

$            80

$          281

$          241
               

Income tax expense

              

Income tax expense

    

$          245

$          214

$            93

$          412

$          129

Impact of notable items

    

58

75

15

293

167

Adjusted income tax expense

    

$          303

$          289

$          108

$          705

$          296
               

Note: Certain items above do not precisely recalculate as presented due to rounding.

 

Contact:

Deanna Hart

Barbara Thompson
 

Investor Relations

Corporate Communications
 

919-716-2137

919-716-2716

 

 

SOURCE First Citizens BancShares, Inc.