How did First Citizens perform in the second quarter of 2024?

The company reported GAAP net income of $707 million, or $47.54 per diluted share, and adjusted net income of $755 million, or $50.87 per diluted share. Both figures were modestly lower than the prior quarter, reflecting slightly lower GAAP results, higher credit losses, and the impact of acquisition-related and other notable items.

How large is the new share repurchase program and when will it begin?

The board authorized repurchases of up to $3.5 billion of Class A common stock through 2025. Management expects repurchases to begin during the third quarter of 2024, though the company is under no obligation to buy a specific amount and can suspend the program at any time.

What drove loan and deposit growth this quarter?

Loan growth of $3.97 billion was led by the SVB Commercial segment's global fund banking portfolio, along with business and commercial lending in the General Bank and growth across several industry verticals in the Commercial Bank. Deposit growth of $1.47 billion came mainly from SVB Commercial and the branch network, partially offset by declines in brokered and Direct Bank deposits.

Is credit quality deteriorating at First Citizens?

Credit metrics moved modestly weaker. Net charge-offs rose to $132 million (0.38% of average loans) from $103 million, and nonaccrual loans increased to $1.14 billion (0.82% of loans). The allowance declined to 1.22% of loans, which management attributed to portfolio mix shifts toward lower-loss Global Fund Banking loans and stable credit trends.

What is the company's outlook and how strong is its capital position?

Management projects FY2024 net interest income of $7.2 to $7.3 billion, a net charge-off ratio of 35 to 40 basis points, and adjusted noninterest expense of $4.65 to $4.70 billion. Capital ratios are well above regulatory requirements, with a CET1 ratio of 13.33% and a Tier 1 leverage ratio of 10.29%. Note that several presentation slides were marked as draft and subject to change.

FCNCA 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed July 25, 2024. Cited figures are marked; the original filing is the authoritative source.

First Citizens BancShares (FCNCA) reported second-quarter 2024 results on July 25, 2024, with GAAP net income of $707 million^a ($47.54 per diluted share) versus $731 million in the prior quarter, and adjusted net income of $755 million ($50.87 per diluted share), excluding notable items such as $44 million of acquisition-related expenses.

Net interest income was essentially flat at $1.82 billion^b, and net interest margin edged down to 3.64% from 3.67%, though margin excluding purchase accounting accretion held steady at 3.36%. Loans grew 2.9% quarter over quarter to $139.3 billion, led by the SVB Commercial segment's global fund banking portfolio, while deposits rose 4.0% annualized to $151.1 billion. Credit showed mixed signals: net charge-offs rose to 0.38% of average loans from 0.31%, nonaccrual loans climbed to 0.82% of loans, and the allowance fell to 1.22% of loans, producing a $37 million reserve release.

The most consequential announcement for shareholders is a board-authorized share repurchase program of up to $3.5 billion^c of Class A common stock through 2025, with repurchases expected to begin in the third quarter of 2024. The program carries no obligation to buy any minimum amount and may be suspended at any time, and execution will depend on factors including price, market conditions, regulatory requirements, and alternative capital uses. Capital ratios remain strong, with a CET1 ratio of 13.33% and a Tier 1 leverage ratio of 10.29%, and the company declared a $1.64 per share dividend.

For investors, the quarter reflects solid core profitability and stabilizing credit, but earnings were slightly lower sequentially and headline margin pressure from deposit costs persists. Management's outlook projects FY24 net interest income of $7.2 to $7.3 billion^d and adjusted noninterest expense of $4.65 to $4.70 billion, while many slides in the supporting presentation were marked as draft, so the reliability of some figures should be weighed accordingly.

02—Key points

Key Highlights

GAAP EPS of $47.54 and adjusted EPS of $50.87 for Q2 2024, down from $49.26 and $52.92 respectively in Q1 2024 but up from GAAP $45.87 in Q2 2023 on a comparable basis.
Authorized a share repurchase program of up to $3.5 billion of Class A common stock through 2025, with repurchases expected to start in Q3 2024 and no obligation to repurchase a minimum amount.
Net interest margin of 3.64% (3.36% excluding purchase accounting accretion), a modest decline of 3 basis points from the prior quarter, with the pace of deposit cost increases slowing.
Loans and leases grew $3.97 billion (11.8% annualized) to $139.3 billion, driven by SVB Commercial's global fund banking portfolio and General Bank business lending.
Deposits rose $1.47 billion to $151.1 billion, with growth in SVB Commercial and General Bank offset by a $667 million decline in Corporate brokered and Direct Bank deposits.
Credit quality showed some pressure: net charge-offs rose to 0.38% of average loans from 0.31%, and nonaccrual loans increased to 0.82% of total loans, though the company recorded a $37 million allowance release.
Capital remains strong with a CET1 ratio of 13.33%, total risk-based capital of 15.45%, and a Tier 1 leverage ratio of 10.29%; a $1.64 per share dividend was declared and paid.

03—Questions

Frequently Asked Questions

How did First Citizens perform in the second quarter of 2024?
The company reported GAAP net income of $707 million, or $47.54 per diluted share, and adjusted net income of $755 million, or $50.87 per diluted share. Both figures were modestly lower than the prior quarter, reflecting slightly lower GAAP results, higher credit losses, and the impact of acquisition-related and other notable items.
How large is the new share repurchase program and when will it begin?
The board authorized repurchases of up to $3.5 billion of Class A common stock through 2025. Management expects repurchases to begin during the third quarter of 2024, though the company is under no obligation to buy a specific amount and can suspend the program at any time.
What drove loan and deposit growth this quarter?
Loan growth of $3.97 billion was led by the SVB Commercial segment's global fund banking portfolio, along with business and commercial lending in the General Bank and growth across several industry verticals in the Commercial Bank. Deposit growth of $1.47 billion came mainly from SVB Commercial and the branch network, partially offset by declines in brokered and Direct Bank deposits.
Is credit quality deteriorating at First Citizens?
Credit metrics moved modestly weaker. Net charge-offs rose to $132 million (0.38% of average loans) from $103 million, and nonaccrual loans increased to $1.14 billion (0.82% of loans). The allowance declined to 1.22% of loans, which management attributed to portfolio mix shifts toward lower-loss Global Fund Banking loans and stable credit trends.
What is the company's outlook and how strong is its capital position?
Management projects FY2024 net interest income of $7.2 to $7.3 billion, a net charge-off ratio of 35 to 40 basis points, and adjusted noninterest expense of $4.65 to $4.70 billion. Capital ratios are well above regulatory requirements, with a CET1 ratio of 13.33% and a Tier 1 leverage ratio of 10.29%. Note that several presentation slides were marked as draft and subject to change.

04—Continue

← View all 8-K filings