FCNCA - Earnings call transcript Q4 2020 | First Citizens BancShares, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the First Citizens BancShares Q4 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now like to introduce host of this conference call, Mr. Investor of Director Heath, Relations. Tom

You may begin.

Tom Heath

questions as Angie. for will happy joining you, our Nix, and Frank who any Good Officer, an to Chief pleasure results, morning much so Chairman after Holding, have. Officer, Executive of you will thank Chief as us. Craig be may you introduce our Financial and to Thank well overview It our provide my is we which take

of Credit and pleased the including Tom also We and Bryan; Officer, to our of Brian Accounting as Officer, other members Robert of our Chief with have Analytics. well, Howard; Head team lastly, Paull are Analysis our Lorie Data several us Rupp; Officer, Treasurer, Risk in Chief and our Elliot Risk Hawley; our Eklund; Chief Jim M&A,

if that, on And and of in presentation website. over to which filings. financial to SEC are in And will be measures to Our the available the an discussed Frank. actual measures and during in differ at in from going are forward-looking may that firstcitizens.com/earningspresentation. on statements is with non-GAAP the those presentation materially results call be should presentation the the materials, the and listed available presentation statements hand will materials, the earnings made could company’s materials measures note included those release, cause statements factors or included the reconciliations posted call any that press that the materials I’m the remarks I that earnings are it to today presentation the reference comparable statements GAAP

Frank Holding

appreciate and us. Tom, joining good you Thank morning, everybody. We you,

Citizens. before let for fourth I’ll a was couple communities team despite broad-based in clients have financial a period. this I’m walk First very seen, of you proud year This through to into I CFO exceptionally I to their and our for record quarter we’ve through and see hard make challenging had XXXX. Craig you’ve our wanted the they environment, made detail. translated Nix, all our do, efforts performance of But As Performance and comments. and our earnings the high-level more a full challenging good work

two First, to made we activity tough not this and both in power people the work in have times. it’s years the in PPP at demonstrates we’ve the handsomely. that to just now And in navigate is as me help we our to that underlying that paid very significant plan a clear investments fact hard of on example of skipped round and I of believe tough our people clients recent The off beat. Testament these PPP team to one franchise. to our technology is continue environment, in

with while know, understanding – Since the CIT partnership team. been CIT time a you spent had the front months even as the on transformational we opportunity. this we’ve that more we’ve with announced October, past we many Second, in end carefully time

team aid and can of given more the combined X as On Page underlying we quality that our about merger excited regulatory of and our even plan tell this today, update our filed applications enterprise of surrounding an with XXXX. entity. Drawing opportunity I both key As deck, capabilities established issues, the December coordinated to merger combined provide you a We’ve to the investment we’re of to in promote we’ve organizations, drive key approach decisions. CIT. activities planning from core a integration and teams executions

integration of to reporting. and We the February. structure shareholder to a management legal facilitate formed the quarter. at provide meeting and office close Subject to targeting approve scheduled an We merger approval, we have beginning shareholder regulatory in are the second governance

business unit decisions personnel As finalizing of our be will as as we integration we and plans. organizational forward, completion move well

Consequently, their close it plan our to accomplish right. And a do process, to And conversion confident to just our questions. customers by year. carefully Craig? that. and thanking we We with Citizens I’ll its take remain in like operational in then do a experience in to that our will importance. I’d to employees And we it for closer lengths active have going this Both understand M&A. commitment steadfast to your over XXXX. it continue that, CIT look We turn for challenging we’re and very been will their through at great Craig First to results.

Craig Nix

you, Thank morning, good Frank, and everyone.

release As will I’m and deck. press highlights yesterday, on with year earnings today. sure you’re full significant along a we quarter comments our financial quarter I in fourth touch investor our and my released aware, fourth

we very the are provided quarter results. As the strong year the Frank for well year as to and comments, ended quarter for X in X as fourth report fourth of deck Pages our highlights XXXX. a pleased his mentioned earnings and investor full

I pre-provision strong the the XXXX. million, our of remained EPS results XX.X% quarter net Credit charge-offs translated quarter-over-quarter a earnings was a quarter net comparable increase earlier declining our share by in a points. over on from will higher XX% and X basis basis $XXX.X in with primarily average XX.XX%. on assets an revenue. X.XX% fourth touch increase of quality the on quarter the some but the equity up in points the of XX.X% we reflecting return of to increase drivers During of ensuing impact driven earned Earnings XX of behind fourth average repurchases. return on earnings was into quarter, fourth positive pages,

around for return X.X%, quarterly net while year-over-year blunted again, interest reflecting on uncertainty translated return interest equity For year on COVID-XX. the a of full XX.XX%. XX.X%, average primary to impact X, were pre-provision the and up of higher impact but improved reserve net positive year behind income results, average the Page EPS was million take build of share at and On of repurchases. XXXX, assets by $XXX.X look This full to margin. the Earnings we growth was revenue up net Similar a related are we the the driver earnings, was earnings in billion. partially $XX.X and X.XX% a into

end the expected interest the at to the at basis quarter what margin to XX of as decline decline, by declined much This quarter. dropped to a on net points first stated we third we happened quarter, continue more the basis between is while net linked and a a modest expected interest it margin As pace. X points compared second basis

as quarter, detail, rolls but behind the margin up. interest did comparable the page primarily drivers just forward, X linked during $X by acceleration I income quarters. the income for won’t the forgiveness has the margin million, in and change by While decline over picked interest our Page up was loan cover SBA-PPP quarters of the driven net for

that a few I’d like to margin, Before make. I leave points

the margin a most present opportunity ample is prudently while keep sheet and flows does the and conservative strong, and have this potentially at the interest low our opportunistic liquidity this posture core We the liquidity. were to for increased part pressure of throughout for but some We see rate is quarter of selling fed as have the going gains growth. offset that And environment. pressure, retained challenging to we liquidity given on levels securities the with up reinvesting cash reinvestment balance due deposit margin strong the cash

combine balance quarter. Our during hopefully our sheet the with thinking second CIT, here is when opportunities that we we see

lower conservative our forward, most costs point And continue margin the has in deposit this we we cost value at but believe of to to expect So with liquidity. much the for benefit decline being not of so will there’s been realized. fall deposit looking already they further,

contributor net asset We offset by expect its net income interest to interest interest largely impact to earning be lower margin excess and will and positive SBA-PPP yields. that will income, a liquidity but continue be

our all customer and X, general relationship the good If and important quarters at each well Wealth remain yet pre-COVID not a take noninterest our merchant the management, offering. very will they we rebound levels, to of to income mortgage In Page continued fees quarter. during producing look have and businesses deposit turn you rebounded card, they fee to did to while had income.

X, Page We at a take noninterest relative a expense. we’ll quarter. look see slight turn you third our If uptick to the to did

you threw significant run give more to a of bit the on that of want off rate. our some I of factors us So color

out First, resulting strong, producing higher lines business expense. the year incentive in revenue of finished

and incurred and were were to building delayed related during Second paid to maintenance sale properties quarters third the that in fourth quarter. And COVID during repairs due the finally the losses quarter. of second was the and up two OREO on expense foreclosure

XX fourth now within of for rate nature we forward. lumpy to in be like an provides point Page the these interest All-in our of the and ratio I balance XX.XX% next strategy us in low do expense range snapshot of quarter operating in our the run giving our to discuss a fourth rate will expect was the noninterest here. reflective environment. but expenses, efficiency loans pages, both Given of moving I well things would few acceptable the deposits a quarter couple out sheet.

finishing grew at just year, First, total the billion. over the XX% $XX year during assets under by

funded by core year at organic deposit Asset ratio XX.X%. and loan-to-deposit our strong growth was ex-PPP the growth ended

that book we year-over-year tangible Page per a to provides our share over share snapshot I’d a close at ended is measure composition growth. of the up year out basis. thing point pay per XX.X% value a XX on Second a that $XXX loan and attention

the loans were impact year operating we acquisitions XX.X%, stripping the up with and of growth backdrop. out was given which pleased both PPP particularly So the current X.X%, were

annualized down activity quarter, commercial loan pay and loan estate period fourth at both an the downs, year-over-year quarter by linked indicative X.X%, for look the rate loans driven up. Most were owner-occupied lines. you if by was slightly of X.X% of grew the the ex-PPP of real During growth picking loans but

XX, give on we Page PPP. a Going you to to few wanted comments

pleased PPP went small vast loans businesses. meaningful the we clients our to amount that are helped majority of secure loans, a of We a

of of As for and had totaling to amount the the over original XX% to forgiveness of XX% loan of year-end received almost loans. we number applications

from We XX% approximately the have SBA. loan original of amount received the

forgiveness quarter. expect during the to be to managing meaningful first that and activity process continue actively are We the

of of bucket year, they PCI as Good second X for losses trends. for see the a approximately our the of the in taken program form loan value related the allowance had both annual this points more NPAs the X quarter did Overall average was years. million been and the business through Overall, losses further has addition, the acquired credit charge year. clients fourth In the the stable on accounting throughout take been as we relationship PCD. offs and has more quarter life community re-classified basis the CECL credit of quality reserves any for of XX XX but true for book impactful net a total loans for for of focus have X.XX summarize points relatively to X.XX% credit the fourth of not first quarter that for loan will continued the two. year, Net is Pages loans We first very year. function an well coming XX.X the did full us COVID pools spike trends on during both and as and ex-PPP the quarters times round a our affirm banking. offs year. in and quarter representing charge way PPP allowance of with the to one our credit funding basis for during quality were been four in

during an basis. to for XX% on XX, estimated deposits grew annualized Total touch XX.X% at acquisitions fourth grew deposits, Page quarter year-over-year and the briefly to year-over-year and basis. organically a a I XX.X% Adjusting Turning on want rate by PPP almost of deposits. on by deposits

relationship and grew deposits continues oriented as deposit of clientele. to the billion Noninterest X or stood Our our at of during by bearing total be over year-end. XX% year XX.X% core generated base about over deposits from

XX quarter core and continue continue only during cash factors, accounts of Of asset real our and more of bulk banking, shows The their XXXX is We change deposit on to business XX by to the quality relationship profile basis basis uncertainty. consequently day-to-day since economic deposits flight deposit points that note to including holding higher round our attribute economic first growth. the we lower-consumer cost funding balances, out interest debt support is quarter stack decreased up to did of focus many that to and times, and opportunistically customers X by first strong some the our to due capital since subordinated that note deposits in the earning points make Page our bearing a our to and commercial quarter. funding. spending in challenging deposit during add and growth

year-end. basis Our overall on a the quarter declined points at points at and basis XX by XX and points deposits basis stood linked at X quarter cost of first by

We single of of Page not much ratios will mid-to-upper expect you this the end XXXX. to from and the so fall evolution snapshot year, here. On quick may more digits their fall to next a we since room give capital XX,

of would ratio have we within year internal year, All by asset well result has growth X.XX% and was loans both our of impacted leverage ratios regulatory capital that Tier X.XX%. the program. been end, would are this a call The have as X guidelines. experienced ratio healthy I but X the actual particularly ex-PPP SBA-PPP our most Tier out been at leverage and

in comfortable capital are current our We operating levels. at

worst margin net to us. it wanted the decline, general you a the give think is we XX, interest quarter, expect outlook on Page of we on first behind we while to Finally,

lower income uptick decrease businesses continue the a loan lower yields, economic more it hold interest because to overall, slightly income historically and their at of stimulus in should converting were they net strength. recovery. on low change growth of to are levels Fee as expecting asset are to remains charge expect trends but net should to costs. quarter to the impacts economic significantly. But we income, We that dependent realized. credit of slight PPP of linked of levels than offsetting continue expect the benefits relatively consistent Non-interest will should and subside. banks not and deposit impact on quality the well due continuous offs do temporary could remain earning expense We the currently trend, a primarily a acquired be source normalized They interest the basis acceleration of generating return do top such and

continued the and be expense will be; prudent Q&A. continued on maintaining and range. discipline mid open now retention; our loan see profitability; organic four, one, control. you up maintaining and To Thank joining single deposit integration same CIT; expect today. First quarter of the to We growth will digits, growth customer and quality, selection three, in SPP low it expect to for focus us to two, credit in close, Citizens we all I growth for and first

Operator

[Operator Foran comes Instructions] the Brian Autonomous. from line Your first question with of

Brian Foran

especially been an or but know I the $XX Hi, CIT good per worse deal, that’s assumed? I and trending anything expected wonder morning. little Maybe you than original performance? quality of in relative there Is three you when you kind than months going one so better you kind then, context or that could put if up share to to announced those of better start, in a the XXXX. illustrative growth of credit that’s maybe deposit since maybe it’s the the assumptions, only originally $XX just talk and anything

Craig Nix

Okay, Craig Nix’s here.

general economic pro we we those updated – be established and formas. not those outlook our original acknowledge and We the have do in that will to marks we’re that We established pro improved has going doing here soon. and since formas

tell ball can the worse. our ready And encouraged think time – and We create fourth and we any And assumptions don’t we’re in additional not the We on marks But results. time, did right the CIT’s and year. provide consider fall eyes guidance. circumstances are you, had I things information with in of to at establish we are but CIT. marks encouraged best plan again, quarter on we facts final have we’ll our close, are to at we transaction that based now as gotten the the last we also integrating

Brian Foran

shareholder question, up is shareholder to things goes you call ultimate and you maybe that unusual little an I a over and friendly get of the guys And on really. common I a bit that stock setup Probably most one it, have on setup. outperforms time or certainly ultimately your have could be because question stock maybe hesitate delivered And separate the that that. friendly is follow-up

the has existing B, the and maybe inclusion, like if I index all But it call dividend, that wonder I if like the setup broadening level over Class well Class would of in the served time. outlook, that So bucket, go not the shareholder two A, you consideration to things that’s and the could that think you your change anything or then? Just on you broadening over look like share or what three time? not next just transition the if – are subject under about table years, could where things shareholder things

Frank Holding

Brian, is Frank this Holding.

shareholder we much broadening, our shareholder of terms a friends. in broader having with to think I forward base look

with combining friends We’re our CIT. at

have our we that. recognition. you on If a I that for and about, are total we for shareholder for compliment something But that plans returns. there class B, believe job we you’re our to share asking you thank planning your change reasonable done no a A structure would thank question have

was have no – of your part it demonstrate while changing dividend. And having from I modest modest You intention that would I of a we dividend. asked occasionally, question nominally think history And we about move of a we path our also have say a we dividend. long having very

Brian Foran

Great. questions. Thank the for taking you

Operator

follow-up We do from Foran a Instructions] question [Operator Brian with have Autonomous.

Brian Foran

we’d core on now I other loans a it ability grow fireside figured one owner-occupied to I question I right pretty get is nice just mean, guess make certainly lot chat. differentiator. CRE. a is your your a I

the coming is little to or whatever makes retail talk growth nine help COVID now. have different kind concerning and and people, that think you it’s both the a CRE the I opportunities be typical on even might might us if you from the wonder finding a bit I as now. head CRE maybe or you scratch understand right look my not of just three, the opportunity I and differences that months, about, as sometimes bit than owner-occupied six, owner-occupied of recent be the always it clear in you some where hotel past at little over what could

Craig Nix

Bryan, Credit question. that address our I’m going to Officer ask to Jim Chief

Jim Bryan

Craig. Thank you,

We obviously our nice is that this professional business have focus as growth activities. occupied medical repays credit had non-owner compared in the occupied business owner And category. And past that that flow credit. on is year small the cash to

the operate. the needs that business So supporting to housing it’s of business

that with opportunity that us. for continue opportunity creates activity, and of outside and has in all sectors industry impacted across that to merger to of our a of do see and professional We medical area small the primarily lot business category COVID including acquisition restaurant consolidation within that

If want question, where answered want the question, be to help. if to rephrase you if you I’d to – additional haven’t I ask properly, glad an

Brian Foran

No, incremental piece I is on, or think think growth I CRE medical guess about property, of in if right where – I market finding you that’s a in about market helpful. maybe share is portfolio? about kind mean, geographies, is gaining follow it the it And the that I the owner-occupied is of it I that now? the stereotypical Or new mean, growth it, or are that

Frank Holding

I are Virginia Carolina, would that of little think North seeing footprint we it’s what also South in both because we our growth and bit Carolina, our legacy consider as other markets both, our, a well. of in

and So along with clients new of where it’s to continue expand our base within existing combination grow. client they gaining a growth

sides both And are the so those ledger. on opportunities of

Brian Foran

know for Craig And this if is but or Frank, maybe on I capital. don’t

might’ve fully remember costs. CETX and loaded I if think that deal you a close think merger even I I out at put X.X%

PPP, both little hand, maybe sheet. might referenced leverage higher. now But ratio a for I on ratio the a so right earnings and are might did cash CETX coming guess X you marks it maybe balance the improve, depressed you that CIT CETX good, by little the one comes even that So the being on Tier in by pretty been conservative.

limiting waterfall about number then, guess think attractiveness close, uses the number capital? limiting relative kind and one? you factor whenever what’s the excess do think capital of deal factor, position, of we how one get about into think versus what’s maybe of you So As I of will other which into posts you And deal an then re-emerge excess you the two, the maybe a buyback do an priorities? back the when another post-deal be do close position or

Craig Nix

question. CETX either and factor. Sure. Very to as good both limiting we With respect a don’t leverage, see really

operating within are our within comfortable ranges. It or ranges those falls We in level. that

we start we combined So see we’re in to rebounding in. do comfortable And the there. streams as the starts both company nicely kick operating earning as

concerns respect our no in repurchases, levels. With acquisitions be have those to we XXXX first will So CIT. integrate and priority to operating in

activity, So back But buying in our our be you wouldn’t strategy would own away. to And opportunistic we M&A certainly that see certainly with that stock. anything long-term see opportunities. include is that right in

Brian Foran

around growth could in deposit XX% PPP wonder pretty one deposit, that, you insights was stickiness of bearing grow if order you these the that of If it sneak how played year you once companies of PPP, using And to have much getting stick last not one kind actually those a the your bearing I past I’m noninterest of yet. fully might any cash and this levels? kind demand from some in, phenomenal any continue get on could and forward fully noninterest on you part thoughts maybe I have deposits your going year-over-year. or of into assuming

Frank Holding

Eklund Yes. will treasurer that address our Tom question. on

Tom Eklund

Yes.

initially had from we $X mentioned billion program. the program, looked in growth. you we at had we think the PPP one-for-one, PPP I growth basically resulting PPP When checking

end up grew of from looking balances those using way, came into that growth billion billion not coming billion did $X.X deposit year, new that clients at at clients for by the from we total $X it sort XXXX. billion When $X that was that looking about to another PPP the going that we program. see the of of to watermark were on a $X However, down approach billion, $X year, when of about

on top year clients where the add for to growth $X.X point on as that. on think holding resulted little we’re and both bit strong some to capitalize about their well cash of earlier it’s then new very more were sheet, $X.X existing a Craig’s us, of balance able to back going was I seeing both, in a billion, So opportunities clients, we which for billion which

Brian Foran

great. That’s taking you Thank all my for questions.

Operator

question of Credit with Suisse. Our final from line the Moshe Orenbuch comes

Moshe Orenbuch

will Great, And Like of terms in expand what’s thanks. on the the liquidity little of take? how your it one you I funding have into see how guess you’ll what that and liquidity it do of assume maybe the assets can of the I working look like, just the they’ve will you points get raised some excess you long at deploying process, to that quarter book. rid talk you the like point on? a on through just that got that some actually about CIT’s and from the could second

Tom Eklund

This Tom sure. is Yes, Eklund again.

I way perspective. been business clear from we’re think sort very think on about the thinking a of is I it we’ve

We’re make there. not changes looking to any

We’re client CIT the broader the direct brings the that opportunities some footprint and excited from the banks to about of table.

those the However, senior when accomplish opportunities. some proposed. starts the debt looking of looking balance with we at for The at I’m us really can deal sheet, assuming obviously as waterfall structure

basis sort to the for see with, pieces I of with you and can total mean, where cost the Some there deposits. deposit XX non-core it’s ideally we of replay year. do cost funding the points what mentioned low

So we’ll over at able schedule maturity that of to that obviously mean the reposition for early, us all we maturity. that synergistic come we’re something facing as be that, potential for that. comes those that future The looking in it’s start time as those not in provides instruments up opportunities

Moshe Orenbuch

you. Thank

Operator

to conference for closing the any additional Tom turn Heath to like now Mr. or would remarks. I

Tom Heath

all. that’s Angie,

for Thank us. very and good much. you you all joining thank We’re

Operator

today’s call. in conference participating for you Thank

may now lines You this your disconnect at time.

First Citizens BancShares (FCNCA) 27 Jan 212020 Q4 Earnings call transcript