8-K: First Citizens BancShares Announces Second Quarter 2024 Earnings and $3.5 Billion Share Repurchase Program

First Citizens BancShares reported solid second-quarter earnings, highlighted by loan and deposit growth, and authorized a significant share repurchase program.

Summary

• First Citizens BancShares reported a net income of $707 million for the second quarter of 2024, compared to $731 million in the previous quarter.
• Adjusted net income for the quarter was $755 million, down from $784 million in the linked quarter.
• The company's net interest income was $1.82 billion, a slight increase of $4 million from the previous quarter.
• Total loans and leases reached $139.34 billion, reflecting a 2.9% linked quarter growth.
• Deposits totaled $151.08 billion, an increase of $1.47 billion since the end of the previous quarter.
• The Board of Directors authorized a share repurchase program of up to $3.5 billion of Class A common stock through 2025.
• The company's net interest margin was 3.64%, with a 3.36% margin excluding purchase accounting accretion.
• Noninterest income totaled $639 million, an increase of $12 million compared to the linked quarter.
• Noninterest expense was $1.39 billion, an increase of $10 million from the linked quarter.
• The provision for credit losses was $95 million, compared to $64 million in the linked quarter.
• Net charge-offs totaled $132 million, representing 0.38% of average loans.
• Nonaccrual loans were $1.14 billion, or 0.82% of total loans.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the share repurchase program and solid growth metrics, but tempered by slight decreases in net income and margin. The company is performing well but not exceptionally.

Positives

• The company experienced broad-based loan and deposit growth.
• Strong profitability metrics were achieved.
• Credit quality showed continued stabilization.
• The SVB Commercial segment achieved both loan and deposit growth.
• The company's capital ratios are well above regulatory requirements.
• The company's liquidity position remains strong with liquid assets of $56.91 billion.
• The pace of increase in deposit costs has slowed compared to previous quarters.

Negatives

• Net income decreased by $24 million compared to the linked quarter.
• Adjusted net income decreased by $29 million compared to the linked quarter.
• The net interest margin decreased slightly from 3.67% to 3.64%.
• The provision for credit losses increased by $31 million compared to the linked quarter.
• Net charge-offs increased by $29 million compared to the linked quarter.
• Nonaccrual loans increased from $1.07 billion to $1.14 billion compared to the linked quarter.

Risks

• The company faces risks related to general competitive, economic, and political conditions.
• There are risks associated with potential future bank failures and volatility in the banking industry.
• Fluctuations in interest rates and changes in the quality of the loan portfolio pose risks.
• Actions of government regulators and changes in regulatory requirements could impact the company.
• Cyberattacks and information security breaches are potential risks.
• The company faces risks associated with previous acquisition transactions.

Future Outlook

The company expects to begin share repurchases during the third quarter of 2024. They are forecasting a slight increase in total cumulative deposit beta in the third quarter due to higher for longer interest rates. They are projecting loans and leases to be between $143 billion and $146 billion by the end of 2024 and deposits to be between $153 billion and $155 billion. They are also projecting one to three 25 bps cuts in 2024 with the Fed funds rate ending between 4.75% and 5.25%.

Management Comments

• Chairman and CEO Frank B. Holding, Jr. stated that they are pleased with the second quarter financial results, which reflected broad-based loan and deposit growth, strong profitability metrics and continued stabilization of credit.
• He also noted the solid performance from all business segments and was encouraged by the continued progress in the SVB Commercial segment.

Industry Context

This announcement comes amid ongoing discussions about the health of the banking sector, particularly following recent bank failures. First Citizens' results, showing growth and stability, may be viewed positively by investors seeking reassurance in the sector. The share repurchase program also signals management's confidence in the company's financial position and future prospects.

Comparison to Industry Standards

• First Citizens' net interest margin of 3.64% is within the range of other large regional banks, but the exclusion of purchase accounting accretion at 3.36% is slightly lower than some peers.
• The loan growth of 2.9% for the linked quarter is solid, but not exceptional compared to some high-growth banks.
• The deposit growth of 4.0% annualized is a positive sign, especially given the current environment of deposit competition.
• The company's capital ratios are strong, exceeding regulatory requirements, which is a positive signal compared to banks with lower capital buffers.
• The adjusted efficiency ratio of 50.77% is competitive with other well-managed banks.
• Compared to peers such as Truist Financial and Regions Financial, First Citizens' results show a similar trend of managing interest rate pressures and maintaining credit quality.

Stakeholder Impact

• Shareholders will benefit from the share repurchase program and the company's solid financial performance.
• Employees will benefit from the company's continued growth and stability.
• Customers will benefit from the company's strong financial position and ability to provide financial services.
• Creditors will benefit from the company's strong capital ratios and liquidity position.

Next Steps

• The company will begin share repurchases during the third quarter of 2024.
• The company will continue to focus on balance sheet management and core deposit growth.
• The company will continue to execute on the SVB integration.

Key Dates

Keywords

share repurchase, earnings, financial results, loan growth, deposit growth, net interest margin, credit quality, capital ratios, liquidity, SVB Commercial, banking