First Citizens BancShares Reports First Quarter 2024 Earnings
Chairman and CEO
FINANCIAL HIGHLIGHTS
Measures referenced as adjusted below are non-GAAP financial measures (refer to the Financial Supplement available at ir.firstcitizens.com or www.sec.gov for a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure).
Net income for the first quarter of 2024 ("current quarter") was
Adjusted net income for the current quarter was
Current quarter results were primarily impacted by the following notable items to arrive at adjusted net income available to common stockholders:
- Acquisition-related expenses of
$58 million ,
- Intangible asset amortization of
$17 million ,
-
FDIC insurance special assessment of $9 million, and
- Unfavorable fair value adjustment on marketable equity securities of
$4 million .
SEGMENT REPORTING INTEGRATION
At
BancShares made the following changes to its segment reporting during the current quarter to better align components of the SVB segment and the
- the private banking and wealth management components of the SVB segment were integrated into the
General Bank segment which already included other wealth management activities;
- the SVB segment was renamed SVB Commercial as its customers now primarily include commercial clients in key innovation markets, as well as private equity and venture capital clients; and
- the
Direct Bank (a nationwide digital banking platform that delivers deposit products to consumers) previously included in theGeneral Bank segment is now reflected in Corporate which already included wholesale funding and brokered deposits.
Segment results for prior periods discussed in this release were recast to reflect the segment reporting changes.
NET INTEREST INCOME AND MARGIN
- Net interest income totaled
$1.82 billion compared to$1.91 billion in the linked quarter. The$94 million decrease in net interest income was due to a$61 million increase in interest expense and a$33 million decrease in interest income.
- Interest income was
$3.08 billion compared to$3.12 billion in the linked quarter. The$33 million decrease in interest income was due to a$37 million decrease in interest on loans and a$37 million decrease in interest on interest-earning deposits at banks, partially offset by a$41 million increase in interest on investment securities. The decrease in interest on loans was primarily due to a$35 million decrease in loan accretion, primarily related to the acquisition ofSilicon Valley Bridge Bank , N.A. (the "SVBB Acquisition"). Continued purchases of short duration investment securities led to a higher average balance and increased interest income on investment securities and a lower average balance and a decrease in interest income on interest-earning deposits at banks.
- Interest expense was
$1.27 billion compared to$1.21 billion in the linked quarter. The$61 million increase was due to a$63 million increase in interest expense on deposits, primarily from growth in theDirect Bank and a higher rate paid, partially offset by a$2 million decrease in borrowing costs from a slightly lower average balance.
- Net interest margin was 3.67%, a decrease of 19 basis points compared to the linked quarter. The yield on average interest-earning assets was 6.23%, a decrease of 7 basis points from the linked quarter primarily due to lower loan accretion. The rate paid on average interest-bearing liabilities increased 12 basis points, primarily due to a higher rate paid on average interest-bearing deposits.
NONINTEREST INCOME AND EXPENSE
- Noninterest income totaled
$627 million , an increase of$84 million compared to the linked quarter. The increase was mainly due to a reduction of$83 million to the gain on acquisition as we further refined income tax estimates related to the SVBB Acquisition in the linked quarter.
- Adjusted noninterest income totaled
$478 million compared to$455 million in the linked quarter, an increase of$23 million . The increase was mostly due to a$17 million increase in adjusted rental income on operating lease equipment due to lower maintenance expenses and higher rental income, and an$11 million increase in other noninterest income primarily related to changes in the fair value of customer derivative positions. The increases were partially offset by a$5 million decrease in factoring commissions due to lower volume following seasonal holiday retail activity and a$5 million decrease in fee income and other service charges primarily resulting from lower capital markets fees.
- Noninterest expense totaled
$1.38 billion compared to$1.49 billion in the linked quarter, a decrease of$116 million . The decrease was primarily attributable to a$58 million decrease in acquisition-related expenses, a$41 million decrease in totalFDIC insurance expense, and a$14 million decrease in maintenance and other operating lease expenses.
- Adjusted noninterest expense totaled
$1.15 billion compared to$1.14 billion in the linked quarter, an increase of$19 million . The increase was primarily due to an increase of$30 million in salaries and benefits, partially offset by a$10 million decrease in marketing expense and a$6 million decrease in third-party processing fees.
BALANCE SHEET SUMMARY
- Loans and leases totaled
$135.37 billion atMarch 31, 2024 , an increase of$2.07 billion compared to$133.30 billion atDecember 31, 2023 . The increase was mostly related to$900 million of growth in theGeneral Bank segment (5.8% annualized) and$794 million of growth in theCommercial Bank segment (10.3% annualized).The General Bank segment growth was primarily related to commercial and business loans in the branch network.The Commercial Bank segment generated growth in many of our industry verticals. Loans in the SVB Commercial segment increased$335 million (3.4% annualized) as growth in global fund banking portfolio was partially offset by declines in the technology and healthcare portfolio.
- Total investment securities were
$35.04 billion atMarch 31, 2024 , an increase of$5.05 billion sinceDecember 31, 2023 . The increase was due to purchases of approximately$6.67 billion , primarily in short duration U.S.Treasury andU.S. agency mortgage-backed investment securities available for sale during the current quarter, partially offset by paydowns and maturities.
- Deposits totaled
$149.61 billion atMarch 31, 2024 , an increase of$3.76 billion , or 10.4% on an annualized basis, sinceDecember 31, 2023 . Deposits in theDirect Bank increased$2.15 billion and deposits in theGeneral Bank segment increased$2.42 billion , primarily due to growth in the branch network and wealth. The increases were partially offset by declines in deposits in theCommercial Bank and SVB Commercial segments of$205 million and$716 million , respectively.
- Noninterest-bearing deposits represented 26.3% of total deposits as of
March 31, 2024 , compared to 27.3% atDecember 31, 2023 . The cost of average total deposits was 2.53% for the current quarter, compared to 2.35% for the linked quarter. While the cost of deposits increased 18 basis points, the pace continued to decelerate.
- Funding mix remained stable with 79.9% of the total funding composed of deposits.
PROVISION FOR CREDIT LOSSES AND CREDIT QUALITY
- Provision for credit losses totaled
$64 million for the current quarter compared to$249 million in the linked quarter, a decrease of$185 million . The current quarter provision for credit losses included$93 million for loan and lease losses, partially offset by a$29 million benefit for off-balance sheet credit exposure.
- Provision for loan and lease losses decreased
$158 million compared to the linked quarter, due to a$74 million decrease in net charge-offs and a reserve release of$10 million in the current quarter compared to a$74 million reserve build in the linked quarter. The reserve release for the current quarter was primarily the result of changes in the macroeconomic forecasts and a decline in specific reserves on individually evaluated loans. The reserve build in the linked quarter was primarily the result of mild credit quality deterioration in our commercial portfolios, including general office, increases in specific reserves in the investor dependent portfolio and changes in the macroeconomic forecasts.
- The benefit for off-balance sheet credit exposure of
$29 million increased$27 million compared to the linked quarter, primarily due to a continued decline in unfunded commitments.
- Net charge-offs totaled
$103 million during the current quarter, representing 0.31% of average loans, compared to$177 million , or 0.53% of average loans, during the linked quarter. Net charge-offs in theCommercial Bank segment were$49 million , a decrease of$44 million compared to the linked quarter, and were primarily in real estate finance and equipment finance portfolios. Net charge-offs in the SVB Commercial segment were $33 million, a decrease of $31 million from the linked quarter, and were primarily concentrated in the investor dependent portfolios. Net charge-offs in theGeneral Bank segment were $21 million, an increase of $1 million compared to the linked quarter.
- Nonaccrual loans were
$1.07 billion , or 0.79% of loans, atMarch 31, 2024 , compared to$969 million , or 0.73% of loans, atDecember 31, 2023 .
- The allowance for loan and lease losses totaled
$1.74 billion , or 1.28% of total loans, atMarch 31, 2024 , a decrease of$10 million compared to the linked quarter.
CAPITAL AND LIQUIDITY
- 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 15.66%, 14.00%, 13.44%, and 10.11%, respectively, at
March 31, 2024 .
- During the current quarter, a dividend of
$1.64 per share of common stock was declared and paid.
- Liquidity position remains strong as liquid assets were
$59.33 billion atMarch 31, 2024 compared to$57.28 billion atDecember 31, 2023 .
EARNINGS CALL/ WEBCAST DETAILS
BancShares will host a conference call to discuss the company's financial results on
The call may be accessed via webcast on the company's website at ir.firstcitizens.com, or through the dial in details below:
All other locations: 1-929-526-1599
Access code: 401165
Our earnings release, investor presentation, and financial supplement are available at ir.firstcitizens.com. In addition, these materials will be furnished to the
ABOUT
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 factors that are difficult to predict. Many possible events or factors could affect BancShares' future financial results and performance and could cause 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
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
NON-GAAP MEASURES
Certain measures in this release, including those referenced as "adjusted", are "non-GAAP," meaning they are numerical measures of BancShares' financial performance, financial position or cash flows that are not presented in accordance with generally accepted accounting principles in the
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