FIRST CITIZENS BANCSHARES INC /DE/ Q1 FY2024 earnings call

• SVB Integration: Successfully focused on SVB integration efforts, submitted capital plan to the Federal Reserve, with SVB Commercial growing loans, and liquidity/capital position strengthened. - Regulatory Readiness: Implemented expanded risk management, created dedicated regulatory remediation oversight team, enhanced regulatory affairs team, and completed large financial institution filings on time. - Wealth Business: Invested in wealth business, aligned SVB Private and First Citizens Wealth under one team, and rebranded wealth services to First Citizens Wealth. - Credit Performance: Net charge-offs declined $74 million to $103 million, with a charge-off ratio of 0.31%, and the innovation portfolio net charge-offs down $30 million.

Loans: Grew by over $2 billion in the quarter with an annualized growth rate of 6.2%. The General and Commercial segments saw loan growth of $900 million and $794 million respectively, while the SVB Commercial segment increased by $335 million. Deposits: Grew at an annualized rate of 10.4% or $3.8 billion in Q1. The General Bank saw deposits grow by $2.4 billion, Direct Bank by over $2 billion, but SVB Commercial deposits decreased by $760 million. Earnings: Earnings per share were $52.92, adjusted for notable items. Return metrics were strong with a peer-leading net interest margin, an adjusted efficiency ratio of 50%, and lower net charge-offs.

• Net Interest Income: Full-year guidance revised to $7.1 billion to $7.3 billion, up from previous $6.9 billion to $7.1 billion, due to higher for longer rates and shift in rate cut expectations (0-3 cuts in 2024). - Credit Losses: Reduced net charge-off guidance to 35-50 basis points for Q2 and full year 2024, benefiting from decreased innovation economy stress. - Expenses: Adjusted noninterest expense expected to be low to mid-single-digit percentage points, with the efficiency ratio in the low 50% range. - Loans: Anticipate low single-digit growth in Q2, with full-year loans expected in the $139 billion to $143 billion range. - Deposits: Q2 deposits expected to be flat to slightly up, with full-year mid-single-digit growth.

• Macroeconomic Headwinds: Uncertainty in VC investment, geopolitical tensions impacting loan growth and deposits. - Regulatory Changes: Changing regulatory requirements, requiring continued investment in regulatory capabilities. - Credit Lumpy Losses: Losses in certain portfolios can be lumpy, with unexpected large charge-offs potentially impacting the net charge-off ratio.

Q: Chris McGratty on cash levels and security purchases A: Craig Nix said they're around 15% cash, want to normalize to 10-15%, deployed $4 billion+ in investments over the last 3 quarters, and expect to continue deploying.

Q: Brian Foran on NII outlook and capital commentary A: NII outlook revised due to shift to 0-3 rate cuts. Capital plan to manage CET1 to the 10.5% range over 2 years.

Q: Steven Alexopoulos on SVB deposits and buybacks A: SVB deposits stable due to new money coming in, buybacks approached like open market acquisitions, considering price sensitivity.

Q: Christopher Marinac on loan origination and charge-offs A: Craig Nix and Elliot Howard discussed growth across segments, with the General Bank growth helping the charge-off ratio.

Q: Zachary C. Westerlind on loan yields A: Loan yields affected by accretion income, projected to decline with rate cuts.

Q: Brian Foran on loan-to-deposit ratio and rate cuts in 2025 A: Loan-to-deposit ratio expected to get to the mid-80s, rate cuts in 2025 would have similar sensitivities but push the trough out.