First Citizens BancShares (FCNCA) 10 May 232023 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the First Citizens BancShares First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to introduce the host of this conference call, Ms. Deanna Hart, Senior Vice President of Investor Relations.

You may begin.

everyone. morning, Good joining for quarter call. earnings Thank our you first

FCB Officer, our Financial XXXX President, Our on Craig Chairman Bristow; outlook. Holding; Executive Chief the update an Chief and Peter quarter Frank and will provide our acquisition, first Nix and Officer, our

find During can will which we website. call, referencing our our the presentation investor be you on

to to X. comments update review assume that may uncertainties will risks to and We risks These include Our statements. on expectations. our such forward-looking differ results are subject no your from statements, obligation which are for materially cause outlined Page

We financial GAAP measures measures these be of will comparable in against found also X Section referencing measures. Reconciliations are directly the non-GAAP the most presentation. of

nor by accuracy transcripts Citizens earnings teleconference third our a guarantee the First responsible not not is provided of for party. and edit does

turn I over Frank. to will now it

morning, Deanna, you, Thank everyone. good and

We on results. Page quarter Starting financial X. of solid announced another

TBV the on resulted and This profitably know, company we're with growing our we're you transaction acquisition meaningfully date that long-term solid the delivering XXX% to shareholders. our in value the and more providing to XXX% foundation boosted pleased CECL As an us base after while continue SVB adjustments. focus TBV of capital our acquisition even accretion

meaningful have serve. communities commitments businesses business unique successfully to acquisition, our the we that merger leaders the reinforcing we deep including to and with clients CIT into that and we and clients Since integrated FCB have our included engagement had and us SVB key people model. commonalities SVB guide The have those many and

enable able SVB we'll well. to this with confident us recent we So that experience as be -- incorporate will to they are

have that to our direct And been that reported. associates I'd that some communications briefly like believed end, and recent essential. clients departures on long We've with are touch to

As churn level expected. in combination client discounts, of and is of with some turnover deposit associate any

deep innovation benches serving any However, we deepest financial and we SVB experienced the the as has SVB's economy. strength committed market and talent to forward. are of maintaining And leveraging most and of growing that seeded this confident move we're institution one by

the remains asset-liability Importantly, a operating liquidity by contingency this is in position TBV strong our our well-positioned access is and creation financially and and addition combined transaction driven significant from to was accretion, to enhanced of conservative of sheet organization the management, significant with on-balance funding. by funding strength, very

this with First The of momentum Turning performance. positive lines we We of the another and operating all loan continued to XXXX Citizens delivered strong asset quarter business. deposit loan repricing throughout year-over-year. positive tandem leverage growth quarter across in generate we've experienced that quality legacy growth favorable as helped experienced

we companies, increasing not faced have economic and our encouraged Overall, resiliency possibility in to seen and headwinds of recession, them. our however, remain stress credit like some We, rising portfolio. meaningful face the interest of by forward continuing we to in support clients including inflation the of elevated we increases look most the of rates

support of to franchise. attract these be day its legacy SVB. by harnessing SVB can new retain Long-term and clients than the value strategic by other of new related which Page the addition We to to remain the sustainable on to SVB's businesses in and continues and Turning driven benefits haven't out. day achieved focused leveraging priority our acquisition our long-term a strategic core priorities shareholder to changed X. clients

that deals supporting businesses. are In their growth several clients of recently with announced SVB, the fact, new

unhoused new and Francisco affordable housing housing high In closed formally facility in its for currently addition, lender SVB's this Finance military all-time has celebrating SVB's premium outstandings, lead line the San grand largest-ever construction as is week Development Community opening division veterans. the Group loan of

clients our colleagues while and then advantage it at client integrate of retain synergies, services; first, vision succeed; high-touch further the SVB create maintain embracing defined support innovation economy, committed demonstrating running drive SVB, to the as that Citizens the discipline management SVB SVB associates helping enhance infusing employees and continuing a in approach, are SVB years; is and continue our to to for third, following: to to products XXX their revenue-generating that time, the to and SVB businesses staff innovation legacy with First successfully lastly, secondly, key we same our the articulate competitive our cost them. To the our on risk and focused relationships we're has proactively the the

and our to are the clients. begun continue we to clearly of prioritize our to SVB in teams we actively days its support While integrate efforts we already have early acquisition, SVB and

a team, while results relationship risk our our and committed and liquidity, solid client-focused model, risk remain effectively strategic we to operating appetite. delivering managing our within long-term positions, As combined strong defined capital with focus,

a by and I would this for opportunity us SVB month work partnership. combined work strategic still We your my and over value FCB coming the past but to like associates to at the of all as to move close comments unlock recognizing financial company. hard provides do, real us our have the to forward together

President, it of discuss further on I'll areas Peter? Bristow And turn focus over now Peter to the SVB our to acquisition.

everyone. Frank, you, Thank good and morning,

SVB unlocks On Citizens. Page growth want on to the the for X, I touch potential combination opportunities First

total scale million of to in SVB adds addition financial approximately the First meaningful Citizens. With assets, $XXX

of deposit of the While day, was outflows which acquisition day level about half some on we experience expected did one. since

to some begun signs stabilization. have of see We

solutions exceptional foundation and adding their throughout scale, This talent, cycle. geographic on solid life by Citizens' financial acquisition importantly significant First valuable most builds for clients diversity,

serve historic in our nation. First in and is technology and the First, SVB's better and Citizens the positioned advances start-ups tech our venture-backed meaningfully and backyard of addition serves the to companies SVB position across these sectors in presence leadership innovation sectors.

existing our new opens SVB, By better of it client growth. Second, base. topline incremental opportunities while we business Citizens First can and serve driving combined leveraging offerings the

on presence already-growing West to Coast Fourth, to solutions Northeast, positioning Private SVB and clients adding the potential capabilities, of us to diversifying accelerate in while increases the markets wealth our Third footprint. our franchise. our business, enormous has talent, growth high-growth capture new attractive, digital new the SVB and our in

immediately financially term. in this both Finally, is as long and Frank mentioned, compelling the acquisition

On to them Page Banking Fund we is commercial at to provides Private rest their industry. on sets every economy Global banking network SVB from entities combined X venture-backed from for Commercial life tailored and banks. powerful relationships life up the and banking corporate companies the entrepreneurs, of entities. the companies growth investors, solutions technology, acquired, we with The deeper a and the those to truly across leader model start-up SVB influencers. innovation SVB stage sciences, focus with of to delivering early-stage into the Commercial in healthcare best-in-class the and clients arm Their of apart and large clients on dive

digital to card, capital clients. solutions PE liquidity various through venture the banking banking support is business stages of advisory banking, tailored clients. and These FX, banking, of private the needs include as fund well solutions SVB as venture innovation debt wealth package treasury products management, and established with an a services, to Private comprehensive franchise

vendor works producers serves professionally non-liquid stock to these capabilities both positions, provide capital personally. address and premium include line compensation, Private clients SVB to SVB and and loans. lending also with equity SVB's assets. wealth solutions working concentrated private

business for I'm reference included financial not off-balance but we XXXX. segments all with provide data going XX, it as a in have sheet to and to cover along your XX detail, March Citizens of of of snapshot on Page Bank First

XX. Page to Turning

we efforts early While underway. the are stages, are in our integration

people is seek approach Our develop experienced business best model. the and minds our to out most who go-forward can

as to diligently will our in future. We we working position are are Meanwhile, which we innovation goals maintaining and the formalizing in partner integration address include: key a share plans immediate the priorities economy. that our first,

are long-term to committed and secular Despite we recent healthcare tailwinds move to are that continue We drive and forward. believe the future there supporting the innovators bold help sectors continuing will turmoil, investors growth. to enterprises ideas technology

trust. and working supporting regain Second, to clients

that functionality Our to have goal is to accustomed and are expect. come to SVB clients maintain seamless

have many communication plan effectively and to to quickly that met key We clients our received the be that commitment address. feedback them. reinforce to hold continue ensure discussions and to We initial transition and already around can with

staff support revenue talent them. key retaining and generating Third, to

One has most key the retention talent. been the of of important priorities SVB

meaningful talent. this We amount have of key a retention budget for a provided to retain

attrition we this have As some since mentioned, Frank acquisition date. had

our been talent have succession recruiting backfill plans, positions. allowed key we that internal resources pools, us pleased and external to However, have

including XX, Page by we composition impact of provides In capital On end strong this SVB commercially showed on and bringing venture the the client the diversification acquisition. strategy loan The transaction quarter way, SVB's portfolio First private focused of loan Citizens' at our portfolio. relationships. portfolio complements equity legacy our across

culture credit We aligns risk loss portfolio Page of XX. an portfolios into well has risk provide credit they divided low Moving SVB and the which legacy strategy. management history overview First categories. with The Citizens' acquired are a to and

risk fall As low-credit XX% Fund including portfolios, of Global the you and into SVB can Banking approximately see, Private loans Bank. the

prudently to team this portfolios credit underwriting strong legacy by while manage quality the already area standards. SVB maintaining executed efforts We positioned from these a standpoint. and have consistent bank will in continue effectively well the The and

including we XX, deposit impact acquisition. Page composition On of show our the SVB quarter-end, at the

noninterest-bearing are most One bringing immediate consolidated deposit in fourth we what ratio in the mix to up at of of SVB XX% reported XX% the from of XX% the noninterest-bearing, deposits benefits the quarter. shift

environment compete the deposit by we us deposit our believe current will a deposit base, in base. help diverse which transaction to provides more geographically rate position core growing Further, the

we've client on legacy and product their add bank outreach that Citizens. that as nationwide focus to the realizes safe digital with SVB offerings. depositors I to believe the First direct meantime, us left of will leveraging continue to clients are back We business our to move some balances quickly In competitive been successfully deposits

quarter it now to our results. Craig the will and first Craig? accounting discuss preliminary turn financial Nix I over purchase to

and everyone. Peter, you, Thank morning, good

provides in acquired assets After balance in sheet purchase of billion purchase Page $XX impacts. preliminary $XX we of acquired prior cash and approximately loans. and XX post accounting billion a comprised in billion $XXX view accounting, the

borrowings. XX, pay FDIC We April, $XXX and FDIC million. exercised FDIC instrument The have payable $XX a to in in up March its billion $XXX On of deposits cash appreciation $XX option value received in million. in billion seen we the and

of assuming or $X.X Page or estimated per resulted TBV increase billion to $XXX accretion. TBV impacts XX share. per acquisition to X accretion phased-in the billion million, value was $X,XXX was $X,XXX $X.X of After the at estimated of share $XXX of CDI XXX% per XXX% Starting acquisition standalone Estimated significant was with tangible increase fully and an in the cost Citizens CECL, an Day book shows X Day First accretion share. XXX%. accretion that

Page most the adjustment lend to XX, adjustments, purchase included and mark billion. significant a including adjustments of accounting consideration for on to CDI, for loans. for billion. pre-tax paid $XX.X billion after-tax $XX.XX X.X% asset commitments discount $X.X liquidity other FDIC, million to After credit After acquisition. million recognized The to $X.X of an Continuing $XXX we recognizing of the reduced $XXX and on the $XXX the gain is billion million

for estimate is non-PCD gross $XXX CECL current our the and X up million $XXX Day million. Our PCD provision, ACL it's

In X provision commitments Day addition bringing million X $XXX in Day expense to provision, we recorded to the provision lend, expense million. of for after-tax to $XXX

the value value adjustments presented Page preliminary accounting on On items. impact not earnings. statement income marks that will and line purchase exclude of present fair XX, that we fair Please NIM, adjustments note impact estimated future EPS, the

on have adjustments $XX.XX by impact $XX.XX. CECL non-PCD and a reserve X XXXX basis loans XX accretive XXXX the and impact NIM for value Day market EPS will for to is of The The by negative be estimated EPS XXXX points. of adjustments unfunded fair to estimated commitments to

total acquired were totaling ACL $XXX accretion million, Page March PCD recognized over determined income $X.X loans. the $X.X in remaining X%, interest XX on loans. X.XX% to ACL After to XX, of we of of SVB loans loans or ratio billion the on combined at approximately of that the estimate be billion the ACL XXXX. be PCD in lives is The $XX.X a recording shows acquired billion the loans resulting $X.X of billion loans

on XX, by maintained to strong us mark fortress Next Page it a liquidity. balance we sheet important was that post-acquisition, especially

investment our sheet quality, on and low-risk coverage. off strong maintaining portfolio, with respect appetite it's with balance credit a So and ACL provide appropriate to managed

portfolio, our the ranges. are proforma portfolio, ratios our the to ranges, securities capital unrealized further target above our these regulatory above current drops of limits losses adjusting and AOCI drops target XX.X%. then it it to ratios losses the CETX adding at on and remain Both ratio All CETX XX.XX% internal HTM well-capitalized operating XX.X% for when unrealized on

of We April have cash uninsured XX liquidity of liquid by as and Total sheet totaling strong billion on billion in XXX% and March XXX% XX. positions and high-quality securities in off-balance deposits and by contingent $XX.X liquidity as $XX.X sources. covered

Although well and strong quarter, net credit charge-offs increased in the performance remain first was reserved. we

your in first interest time, a gain adjusted comments anchor financial another adjusted of I Page quarter posted were going In strong I'm cover but reported by the as XX will Now net pages obviously my have but results, with reference. income XX. results, boosted net We we the to income not to on for the them quarter XX detail to takeaways pleased for quarter turning on and reported of well. was acquisition to included

Adjusted XX%, and by over the X.XX%. the margin points with contribution. year-over-year Linked linked basis impact to net interest income increased well X Noninterest XX% PPNR quarter up held of first income about and without increasing SVB. expanded SVB grew quarter by without quarter

FDIC seasonal in personnel on the deposit basis assessment and growth year-over-year and Overall, FCB, X.X% was and was loan, growth up a where the Annualized we we loan quarter and slightly industry-wide good higher feel due rate. the linked from during deposit but X.X% on increase to about costs strong Legacy are expenses. was respectively. improved ratio quarter. efficiency Our

with the Moving credit though areas to the outside credit, of ticket quality portfolio. towards general new strength we and and in are are levels, equipment -- our pleased in not our stress we small of net office an leasing, more clients have charge-offs leasing of uptick seeing historic seen we the even

Our ratio X declined points XX with basis without points it. basis SVB acquisition nonaccrual and by the

I capital strong. earlier, position our remains As mentioned

off matures a experiencing highs. our down portfolio come are have of as rates We recent AOCI burn losses securities and

our I focus. XX, areas will of highlight financial Page on Starting

we legacy are network our of total Direct branch balance billion nationwide on below collateralized fund and are Corporate and noted much deposits brokered sheet. by First, consist average represents is General and XX% core to of Bank. our Bank total deposit the of XX% CIT $XX the a our The total size General funding. maintaining base consisting commercial solid smaller deposits primarily account portion and segment of Bank deposits. deposit deposits deposits insured from are our focused over a our these $XX,XXX. bank base primarily of

deposits billion all have it SVB and together these of $XXX,XXX, are of our deposits were $XX.X Putting an size deposits insured. XXXX. at of XX% of base XX% XX% March insured represented average deposit XX, our of

Continuing to deposit shared post-acquisition. Page trends we XX, weekly

primarily in On $X.X the side, the FCB deposits Direct by Bank. have grown billion

outflow after billion and sweep at side, seeing a of date product On back outflows related $X begun expected acquisition balances the SVB online, billion coming repos to $X initial the a have that was deposit stabilize. to

our outflows outflows deposit use closely continue Bank SVB monitoring future are at at We and we'll deposits offset to of to Direct SVB.

Page XX our April two by covered XX, approximately that as of liquidity times. deposits XX and shows March uninsured

the some San or includes exposure loans XX% portfolio highlight total Francisco, hardest-hit under On billion well-diversified and office and XX York. general quarter-end. markets CRE which Page limited we geographically totaled $X.X of of total Chicago, XX, loans which on total with was the our Pages General office New exposure to X.X% is at XX of loans. information including

of last in and than portfolio past bridge less assets deterioration we of the total of reposition X% dues consists $X.X billion bank on our of loans, loans, area or the shared totaling commercial B office our and is in we $X.X concern loans our are loans. general billion the criticized largest Class is general with call, and As office seeing charge-offs. in This for where

specific loan-to-values ACL depending loans these on XX% the property. an portfolio could strong XX% the that X.XX%. We these market range. X.XX% originated Bank are current general ACL bring the the carrying Commercial location office higher were The We loans of versus and to in on of conditions in on general an overall with acknowledge office

we individual maturity, on and approach our an loans basis assess working them these we ensure to are are addressing with concerns clients quickly. potential As

So performing this types. size, while nature the deterioration. are and loan portfolio Most general we close are the we on in Bank, originating remaining the expect believe office loop portfolio, smaller the not manageable. in new some granular have in a is exposure are date, to do loans much is and to not this additional other downward in we with more of property average diversifying migration issues General this, we space To seeing this

is duration cash indirectly and and a stable take XX% short XX of This extending duration of our XX, portfolio is or evidenced up of is years purchase not source directly with strategy importantly, flow into the guaranteed basis Pages and of our by on to approximately risk. act rate and the On years. portfolio X.X as liquidity investment shock. do only securities U.S. And points government. portfolio X.X an XXX significant by the

Page XX. to Turning

the our losses. quarters. AOCI same of over time We horizon, burndown XX% a receive XX% portfolio-related expect portfolio investment investment that flows we seven our Over expect to cash next of

On increasing acquired Page Purchase SVB rate The acquisition. variable XX, our rate the increased liability duration. fixed asset quarter cash rate during while primary shortened due the drivers for to the Note and loans interest sensitivity Money duration

are We of portfolio, $XX XX% cash percentage of of are equating of balance of our rate assets which the The March XX, keeping uncertainty drivers a and environment. loan due our as of variable liquidity risk XXXX. banking total the current as represents are a assets position sensitivity cash asset our the approximately larger and prioritizing management loans XX% earning to main to million in of

on information higher Page to On deposit moderate exhibit actual lower betas XX% betas. exhibit XX% XX, deposits of and our provide we betas. expected and our

to quarter by quarter, XX% of to with continue we beta last catch from quarter second cumulative cumulative end Our our expect line increases. up the was recent beta deposits XX% increase in and the through the projection first rate to

to cumulative our beta will range. forecast rate Over hiking the we be XX% the interest XX% cycle, in

XX, of XXXX. our remainder with Turning to conclude the I'll outlook for Page

outlook, we several reasonable acquisition projections it. little prepared believe our noted of into that Number of the uncertainty one, sources we a a we our achievable are we are While surrounding as month over and SVB.

lot we any path and quantitative assume we funds drive rate projections. Fed the there. easing have to impact recessionary the two, of of client changes, of policy deposit impact four, impact competition betas Number higher. So three, behavior pace impact the and will the our a digest could of including the still mild. Number our And be could

guidance quarter XXXX provides full The noninterest column expenses list and first for column Column the three the The the for page second year. first income for for items. our quarter numbers and our are adjusted on notable results. of XXXX two

single-digit pay a Banking we the in second On activity and the business percentage decline loans, legacy low FCB. low are expect in Global annualized offset market quarter percentage Fund by growth to mid-single-digit as from down slowed

trend mid-single-digit continue FCB with expect percentage achieving same legacy through $XX portfolio to to legacy and approximately We FCB the the year-end billion moderating growth.

of we while April, second we we expect end the year. of through decline to mid-single-digit the stabilization the by percentage are decline projecting billion $X a deposits, an since deposits encouraged low are SVB in quarter, first the week the of For

funding will level burn. With to we the continue lower SVB absolute levels some of of experience clients anticipate in marketplace, that cash

are to be growth Bank. in our in billion $XX by We that Direct expecting offset

to SVB and XX,XXX loans, deposits calling clients. in reach to expansive effort respect over With we engaged out an have to

While it initial have we are the results clients contacted. is in seeing positive first early, we

the return will upside could funding for deposit which clients be this included cautiously returns. optimistic are to in projection. we feel of We see depend loan in there projection. this our the on the marketplace that absolute not extent will to runoff the If or But our we happens, level

X% the only the interest cuts income back net anticipate interest we balance be basis at We will the The interest of rate the rate forecast sizable margin. has X.XX% peaked but acquisition XXX in Our points SVB given range. year. there, accretive, to forecasted to net not funds the implied forward rate follows From also sheet half curve. the to Fed

interest We $XXX XXXX. basis estimated net of purchase in expect impact an in NIM accounting income points of an million to impact of accretive XX

half this XXXX We in the materialize as to the Bank increases levels. primarily anticipate of the of current noninterest-bearing appreciation pace time, from beta previously we slides. back the do If to expect do be XX% XX anticipate as from well are as the more to of detailed on not we up -- year, rate While purchase we at cycle expensive deposits previous declining volume moderate in channel. providing XXXX Direct estimate income in full accounting guidance interest due decline net XX% our in cuts

X in to points points XX the second basis in to basis as annualized. primarily Absent portfolio range. The to uptick a expect be fully expect We charge-offs was charge-offs purchase be to related annualized in $XX a net view would quarter we nature. charge-off, mid-XXs charge-off is charge-off that the SVB reserved net that the XX that idiosyncratic accounting. We million in for Day

charge-offs For range. XX the point expect year XXXX, points basis XX we net full in points basis the -- to

basis, million adjusted an expect On second quarter. noninterest the $XXX in million income in we $XXX to

on We to close basis million SVB acquired. XXXX. were $XXX to of apples-to-apples the an quarter expect generate was $XXX $XXX million million to legacy This per to that quarter businesses per closer SVB in

of So the are products. than less half given sheet attrition, in suite especially be that run of slightly some rate the expecting off-balance to client we

With our we have momentum merchant, respect wealth, still to and rail First legacy Citizens, card, businesses. in

of expenses rates or the to utilization XXX% are at maintenance two almost previous past above and quarters XX% in rate. have renewal quarter's is in rail, been While the increase expected

include over remainder XX% estimated XXXX of $XXX XXXX. at do acquisition and other projections recognized expense not Noninterest half to expected million expenses SVB the related in the with

We the in expect range quarter. expense second noninterest billion $X.X in billion the $X.XX to of

processes systems existing we the office remain driven of and to approximately supporting or be rate do XX% $XXX focused duplicate will in $XXX was XXXX, quarter. as cost run $XXX by clients. on equating of in frontline million XX% to billion the annual consolidation rate of million. business to Most $X.X the pre-merger synergies run be end SVB We per of for redundant by back million to anticipate their the The synergies

compared we the increases marketing related to heightened digital benefits, by percentage basis, On bank. the to as standalone be to well partially elevated FCB merit as seasonal single-digit first expenses due an expenses points offset expect to low quarter down

with in We income efficiency in higher mid-XXs feel decline upside begin to low-XXs in mid-XXs of our ratio are rates to net cost in it If maintain expect to to for by the if the comfortable as ability we forecasted, decreases offset longer. rates an recognition remain interest synergies. maintain the as

finally, range, to And from in XX.X% an the XX% the be XX%. to corporate increase previous we of rate tax expect XX.X% range to our

As our revenue heavily weighted and pre-existing distribution such tax to larger tax as income more are amongst higher is base. pre-tax jurisdictions California benefits a our spread

forecast estimated synergies XXXX are XXXX side does XX% page, from in the XX range our of Starting per SVB the acquisition. run of of expenses. the left and began FCB's Page by $XX forecast shows EPS for to end of significant acquisition to cost $XX the EPS share. EPS rate we accretion The with assumes XXXX. the from XX% the standalone include of It impact that the not

the right, this the to $XX Moving right, be $XXX estimated $XX to accretive for share to $XX that to -- synergies in to on phased-in XXXX prior per $XX projection EPS the cost by the that cost the of to were to cost EPS the bringing to bar as the $XXX if to base gray share. Note estimated synergy impact base with Continuing SVB $X synergies $XX to combination of range combination per to per in EPS. share. another add are would assume fully $XX we

representing ended $XXX that contractual estimated amortization fully we impact on the with materially, pay EPS through accretion CDI share. are impacts to per SVB per that to respect The next $XXX range two XXX%. be between EPS and The $XX $XX the cost share to depending accretion with with particularly the $X estimated XX% by share reduces between would results by to XX, and results right accretive EPS loan and per Actual prepayments. gray phased-in date synergies XXXX. accounting includes will could share, boxes acquisition of purchase for Thus differ December the from of per on operating based accretion loans an maturities. pay-off the XX% XX% since side Note

I And closing back over to with that, Frank will it turn comments. for

all at today. to this of Well, thrown sort end of call now headlines like you we've lot But, you we've a takeaways, thrown some at with of material that it, sort morning. I'd the

First a EPS immediate and of SVB acquisition all, of run the home in accretion. terms accretion financially TBV was future

in balance Also, runoff take comfort fortress that stability deal us our and safety hopeful sheet the in our Secondly, SVB enabled should we maintain and and intend post-acquisition. to of in sign is do we're runoff recent to SVB their us. deposit confidence clients and reduction the their great a

positioned well to risk and increasingly scenarios range broad and capital on focused of talented in Citizens And are technology believe approach we Next, positions, our upside significant diverse clients strategic economic the committed business represents to given to and innovation a opportunity it moving for associates, liquidity our perform that and sector for the we and SVB First mix, shareholders. our finally, strong forward, management are culture.

with turn call. for the over portion the it Operator of I question-and-answer the for to that, will And instructions

question Piper from Stephen The Scouten [Operator with Instructions] first comes Sandler. line of the

You may proceed.

but you positive. Frank, Hi, the all it's like lot, good Appreciate morning. said, colors. everyone. Thanks, it's all a really

can billion a $XX how the outflows the and curious about, $X and it's I billion in in a around how that Direct Kind appreciate Bank. the we I'd into perspective longer-term? that think that guess think maybe said detail of do deposit you be cost expect we mix of migration the you year-end about through thing So one all there. about from you perspective

You're to year? talking this May about end we where in $X the of from the are billion

Yes.

replace billion if the $XX with SVB you $X out and from from flow expect you I billion said you think to Direct heard correctly. Bank, it I

went the burn and we That's correct. And be now. really, into the SVB it's cash being just it's really we remainder inflows very provide a of of continuation throughout in If cash the come that conservative logic some the specific Elliot, numbers. more of continue nature we just industrial related the could burn to year. to through there, of that he can business, developing but the expect it's the marketplace,

we pull number just the out air. didn't of So that

don't that built So, why you how about we projection? Elliot, talk

Silicon Valley kind beta of bearing overall that deposit we're range rates what Direct marginal of of cost the slide kind delta X.XX%, $X bearing we've conservative that. that related really you things, Few with that X.XX% as as is if our Valley kind so somewhere the replacing book kind at is absolutely. Direct when got certainly right Yes, on in a around Bank. interest come now noninterest book the offering coming there in of Silicon there, billion type kind talk base the look Bank, we is our and incremental a and the in so And of decline a to about far embedded cost

a Craig, industrial this -- As of kind is logic.

think we've a stabilization seen here. I

when -- at look lower kind new decline. of in kind of we think economy, now leaving I of absolute the of about capture being $X and what's levels that's that us amount the billion funding really we right

positive I we've the that's number the think in and optimism client stabilization conservative that we've the initial what hopeful upside of we outreach, there. seen steps seen, are

Okay, extremely helpful. And then..

Bristow. is This Peter

a comment about make me it quick Let as well.

on things our the Global VC transactional the and again Fund going sort balances business. that volume the of One the down of space of of is, that's drives impact that in the could because potentially lack PE in that

could think and change cash that our there quickly So of which -- tenor sort of now sort were it we if continues, -- turn but as sort we around think that's that some burn environment. of the and the well,

of well. as that's that part So

conservative change. could So, be line dynamics being market as is here the that punch we

have I Yes. doubt. Absolutely. no

that. of on conservative probably end are the You

appreciate that. I So

though are see there some I Silicon obviously we is Silicon changed I questions later well is outflows a you your of clearly more to assuming well accretive for a the you're this around or do that guess guess, capital And with Is stand bank even Valley, M&A range. you kind anything your lot then you targeted Valley potential two CETX, of your footprint, your know, and where of the stabilizing in there? come do about down and announcement north where road. there's from of laying market do this that, deposits all distressed one, Okay. on additional kind kind year? the as capital as digest buyback think massively

share ranges mentioned in your I need remain certainly ratios and all to is that benefit about our first. we digest now provided everyone second in ratios. our a our keep risk-based but 'XX. Well, elevated think well of thing But capital as 'XX capital and we question we projected target above to loss to One that we M&A mind always in that coverage acknowledge X% right about that didn't SVB needs

share, be TierX target without and going on towards loss our earnings So continue those we'd will and near top over our of CETX the capital, now ratios the range total growing to bottom be forward. replenish well-above target

process -- part capital planning previously, of our So as which repurchases, actions capital an assess to to including capital important remain assess our we've stated manage of share as part toolkit capital.

share. loss share after approval are our actions late the a to capital of slated and for the well we And on this the July. take as all of this to SVB of risk-weighted combined our Board We in of capital assets will plan as currently environment, portfolio considered the behavior, plan have contemplate capital external dynamics needs

So a lot on going there.

combined capital plan provide this that our too of to So it's early SRP. construction, is setting timing under an given

is the contained the do that investments? -- Got and one million investments okay. And people it you in how million try me. from I cost SVB. employees, do be, that and retain that $XXX that incremental it, to for about kind how guess, of around charges retain incentivize is to and then noted those to attempting noted kind Is it, got merger you think of could last those $XXX within you you of or

$XXX XX% million is that that is of related. No, personnel

deal helpful. much Okay, so for in the congrats perfect. the quarter. Extremely the on and Thanks color

Thank Steve. you,

Mr. Brady Gailey question from next KBW. comes The with you. Scouten. Thank

may now proceed. You

you. Good guys. morning, Thank

more common X. Tier on So one the question I equity with to start wanted

guys X% the last you internally in your past about the XX% have talked over are feels changed It at the Citizens First to world think quarter. is kind of I target. like

do the think So should target range is X. going about about like that be new we that your what's could How common to knowing you think in get new embedded equity how where AOCI like Tier range? eventually

included. the Well, set to capital it. target losses quarter will -- contemplated HTM with sat the plans we in change of losses HTM and don't by the We're including be end ratio. X% AFS with and the and over ratios as the losses range any plan. just Because, losses X% AOCI unrealized in That have AFS by -- at currently first obviously the even

of keep our the contemplate boost change But ratios. don't these in mind we a in of stage, providing will obviously, too, this at range, considered in types plan. is coverage but be So things share those to capital the little loss a bit

to developing take going plan all forward. we're So our in into that going consideration of

on add have you that? comments to any do Tom,

I I capital test through banks our that potential to internal of methodology, up and think to look from what No. of important building We stress sort other similar how this to be, large -- at it. could do be build it's there. sort note very we're mean, burn go

a risk changes ranges. we see we don't material profile, unless expect in to change overall our capital material So

the year? Citizens Okay. is stock think just telling got you plan half comment, in X.X will then last go the your buyback I Do million year. to Board. And know to you mean, the it's gut the of you think I back about according shares do I to What your know, to back First likely? you and that's did you? back buy

can't time. this on that comment at I

know so First And been overtime ticket it's Citizens. of with right. ratio? down deposit all Okay, then, and low at that work you historically pretty the Silicon ratio, XXX%. near it's loan-to-deposit loan for up target what's I kind Valley, longer-term Do the

believe that long-term. We sustainable -- is obviously, XXX% don't we

we in back about get term, the line. this Money given to LOC that we morning. have have took short the in a it just Frank talked place, Note time Purchase and I FDIC and However, in Longer-term,

the ratio. question. see We'd relevant eight-handle very to an on like a loan-to-deposit it's So

be cash, So, cetera considering should balance of we of that -- like et of sheet. assets, sort our on sort it earning our where feel net the that's

will So on this around having the be an -- eight-handle more term. over long comfortable

about the Okay. has to new historically been you Silicon layer Citizens can of probably, rates Once interest finally, you And sensitivity in just asset-sensitive. the company? then I Valley, talk First know

environment. because cost very loans operating sensitivity. effect variable of asset the of downside And and are our the the side top one, risk hedging liability number risk cash is and makes priority on But cost addition rate asset the fairly Yes, we -- of current the mitigate here, two, hedging liquidity a in the difficult. cost-effective on significantly Purchase downside accepting increased side, our to Note number Money

Purchase So for the them points. tried about floating the XXX example, if Note basis Money we swap has cost us

margin where we also comfortable comfortable our cuts. we're sit. So lands rate where after We're

we an we're standpoint. from So risk pretty here we now, where interest are pleased as sit rate right

color. for the thanks Okay,

of comes Thank DA Davidson. from The line question with you, Gailey. Fitzsimmons Kevin Mr. the next

now may You proceed.

Hi, good morning, everyone.

Good morning.

Well, core if of Craig, way any on just wondering talk was whether to described of in the to baked want was we kind at all-in look X.XX% NII. Brady's where a it's -- dovetailing we're -- that just kind on ex-purchase your what you accounting of versus Brady's quarter guidance there, interest at question net the margin, think into margin about percentage as best the on this about trajectory

without Yes. Are you asking with accretion? and

that can mean, margin trending? I all GAAP when both, maybe like yes, if accretion give see but you in you how it

you. got I it. Got

but talk impact I'm if of accounting CIT you at when out just residual if immaterial you fairly the -- to -- So to some purchase going the SVB. I from impact the about is -- impact still there, it's look and at look

accounting-related. that was quarter, were look we at of at XX and that X.XX% our margin, basis you if first So of the points the end our purchase

X.XX%. So was without it, it

The of of in have July, third a upward in in and we the given that quarter. in Margin is starting then XX rate in December. accounting 'XX one purchase September, in the quarter. at margin have the looked X%, which another And migrating cut X.XX% we fourth We accretion. basis points then the second quarter to falls one X.XX%

given be feel would very the year but margin for X.XX% down sensitivity, will asset as migration be a see we still the So our like rates decline, expected strong. which

Okay, of the you're that of hedging that -- off X%? of off Are off X.XX%, that you into you're Craig? going that - hedging the X.XX%

off it taking I'm X.XX%. of

Got projection says. know, we higher on forward we it topic it, okay, curve to that you what that longer -- very helpful. of sensitivity sort of environment then if more spoke as alluded the the in that think as of your I you I a like kind up, given then And margin well NII. comments have for do there's likely upside But asset

that of the is So to way it? think

there Yes, is.

for this think year.. I

The rest that else. or something don't perhaps is happen

Yes.

impacts cuts basis I get if right. this if I we don't rate higher margin. it time think a mean, through. -- think Obviously, year, fall points we takes to those X have that's didn't for I we'd

on of So EPS. 'XX the about $X higher, the be impact will and

for higher long even more would year significant. next be So

but you that broader how the of increased evident want region I at that was that lot region, mentioned at of Okay. do But -- customers coming that guardrails to the deposits, issue do deposits by was SVB. by One -- persistence? on question customers large their becoming plan lot case how deposits, prevent on an larger and from the lumpy How in. put the a you you know their a diversity you you they a or do in diversity curb

of relationships and long-term break them terms when decades. have in down, depositors, Well, with of our some that them I commercial mean, us of large we depositors or many large for

know with in we and mentioned. strong Frank them touch as they we're stay stable So and

the going on even an going So, there don't with external see to outflow anticipate I that what's we're environment.

customers And with We interest-bearing secured and widespread. been money long not have this in of staying accounts but or suites customers seen is some diversification our relationships for into of having the move ease and mind, it's them. front

really don't for a we us. So being that big as see issue

one future and foreseeable liquid fortress sheet? given the the place to line, a for balance in the are just focus And maintaining just on one, borrowing, Okay, keep the the borrowing your that last presence FDIC on the intentions of

our shift happen like rapidly. longer-term going but mix certainly funding would We that's to not to shift deposits, to core --

off long-term core And then over what are borrowings. So envisioning in TLAC-type increases period. we paid portion level through debt of Note with five-year is Purchase some the being replacing Money deposits a that

for a Money be Purchase to we sources time. have deposits other burned So the gradual down Note of of -- shifting wholesale over it funding would

No.

here in I therefore, place to think something obviously purposes really the that's mean, getting the on. it's all, contingency we're in we'll keep future. on focusing intermediate And that line support on transaction, the Craig. I that's, FDIC

much, Okay, guys. thanks very

Thank you.

Mr. comes the from Fitzsimmons. of Scott. Marinac Christopher next question Janney Thank The with you, Montgomery line

now may You proceed.

all you the.. today. thank wanted Thanks, good to ask and the about I morning, for disclosures

Good morning.

see playing Is forward? CIT different contribute impact going mix funding that evolving Bank been channel. there can out? base that how the you do online is and the How a and that therefore

of at benefits me to think use obviously deposit to insured. deposits. the it's of and a higher to I going like, some that XX% portfolio growth it a Do you add hit there core over well-diversified it? want discussed it's comes earlier, continue channel marginal we're but cost, we obviously Obviously, Elliot mentioned, Yes, as a is

strength found of this sort that of and now of months sort base of guess it's week us. we through sort deposit has sort source truly bank it's I that funding been for retail stable a last And of very solid very

the that there is Direct acquisition, of an plan our with that company. about see in before the the to augment aggregate that And to XX% level sort of to coming So, total for back Bank to continue XX% we growth made-up deposits. combined

-- Tom, then by expect Yes, increase normalized from spending we're think, we I XX% XX that XX? in about

right. That's Yes.

deeper wanted all disclosures And the CRE dig Got on just office and for to little that. the a there. it, I bit then, you thank

out So of versus rating loans office, is criticized are level just that much there of in defaults of the there? internal system how your expectations being an high abundance the caution that

Andy, take can one? you that

monthly -- Sure. property timely we a deep and and so is individually are it we dive evaluating credit of do as believe portfolio ratings as our on type. combination each is accurate the a It well

Great. of go if that will forward. And know level that the year not curious at a as same? envision would I two but would be down looking just or same exposure the incrementally come we it's out high, you office

In levels? terms of criticized

percentage total the com bulk of all loan if the a together just compensation? Really

new office. originating any Sorry, are not yes, we

So, office I exposure in terms of imagine dollars down. that absolute come would in would

this criticized broke you that information office perspective other And the beyond just quarter from Great. credit then any overall out? trends the

ticket see not As Craig and Bank, the our much. portfolio but noted, some equipment did finance small in we migration some migration Commercial in leasing then

this clarity. time for that Great, thank morning. the appreciate you I

Thank you.

Thank you. of with the from next UBS. The Preston question comes Brody line Marinac. Mr.

You proceed. may now

morning, good everyone. Hi,

Good morning.

on SVB cost to then wanted follow expenses. billion the to just that I expense working savings. for legacy base XX% and up you're the like is Craig, XX% off of $X.X It sounded

do heard is you the Where be XXXX. said I on of exit us expect guess, correctly you run XXXX? for think rate by 'XX, help cost I the the for understand better then to you I much of savings? cadence could non-interest how quarter year-end left the expense fourth you and the

Yes.

a to are range We projecting of $XXX million million. $XXX

that So, it acquisition baseline would run and in be of would and of the roughly that of XXX% XXXX the be into the of coming by of rate million that's end XX% we XX% it that expect run would the then to rate at the million and $XXX the XXXX. half $XXX of in end

the Got over? and they it, when were what the costs okay. SVB And give could deposit what you help could from yields came us loan you me --

Okay.

that's so X.XX, I the 'XX X.XX, the was for First So was this be there. quarter. Citizens projection. and, mean, would X.XX year, quarter. year, first so for combined so it's pre-purchase I'm for sorry in one accounting on we're it X.XX yield with with-- X.XX SVB first the in yields, close and pretty the It

think interest-bearing our of at But -- and like broken were cost cost the to don't if I deposits about -- X.XX in quarter talking SVB I'm hand this interest-bearing and cost I have we out kind SVB X.XX. Deposit I separately. the okay, deposits. of first of call

it's X.XX X.XX. fourth for we by the escalating So the quarter ours, for year. And similar the very X.XX have that to and

was flagged.. SVB So, was

it. Got

Okay.

and lower So on they us deposits. than slightly yield higher loan were us cash accretive and on than to margin

have do happen have the projected April and deposits Got to at deposits XX, mix and interest-bearing look what with run-off that mix were SVBs between going like the of you then noninterest-bearing forward? you it. the those of with And

second. one on Hold

XX. March we have I think that as of

for April March XX. only asked You XX, talk about we would

okay. Okay,

Brody, this Howard. is Elliot

of XX So is to low kind see of migrating of XX%. total. that in to of We kind March XXs down in kind mid at our the roughly noninterest-bearing assumptions

that you of just capital above for But on you're day then And range. leverage, to of want right the your most I helpful. if Tier that That's understand operating the X did pretty from I notice great. did ratios. the middle. adjust in right, kind I All on well ask them, you're count, the

a did the them? I buyback as about play Tier have in role should so, - I understand we want ask, with should July. that your going view And CETX constraining on Which think for there ratio a leverage well? from just capital you more forward. -- of And all later we And to planning as as there it we should or we so should be focus buybacks X

X% certainly the so migrate of over dead by year was be then Well, It's 'XX of at it. going the Tier range it's right. and that range, over of middle to was and going XX%, one and leverage X up would 'XX, our the end the top well -- the to over be to XX%

In constrain, let I'll talk terms binding of a about Tom that. little bit

there say too is, consider as I'll to What important it's those you at look ratios.

the total boosting gain constraining over. obviously that are CETX coming Tier see more X can instruments instruments or due CETX, and but and no You Tier the purchase that's X to X Tier than bargain

things subordinated As some add and are those out roll-off the ratios capital will with X ratios share. or loans we not are, Tier maybe future, future debt. obviously lost in of little look at but those short-term raises, makes where more in looking the consider they that through if slope that expect into with the sense potential capital these would to we a size We right planning

-- off need to from bank? you're more when of I here. what thinking we of is you want spend balance now larger the the try regulatory that it part guess about do sheet now, What of couple think Okay, a to did size kind question. I perspective. just couple great. additional expenses I'll have about to this a quickly I ask, rattle a just and

like of the rules when know, stated what of then TLAC? from think have be your us you be about $XXX of the prepared think a so then some feels about And the billion and be regulators where bank getting the might LCR. it being And of in perspective, sand wake and assets. pushed away total some will been you that might some in you you the have the things are by in absorbing failures, a help loss needs for back contemplated, going tailoring capacity in line to

stack. just TLAC has and Tom mentioned Yes. capital briefly

do So billion right rules in mix to us probably now range in some senior those contemplate and were $X of a preferred would we with and if and that expect is sub-debt $XX range and somewhere debt, smaller of for the subject senior sub-debt. to that we stock preferred billion portion portion we debt the heavy that

regulatory for monitoring are the here rule, to regulatory I impact ready oversight definitely obviously more our about and tailoring We we're And Lorie we changes, and talk going areas we'll we're let think have prepared capital little be in we're and liquidity us. that stringent to that within think But investment risk management well-positioned a risk bit SVB for management. and it. our absorb framework. I'll

program built risk management a we've last of result Thanks, to large a bank a CIT as from perspective. Craig. year, say would What over I meet the regulatory the integration is expectations

management to in have the risk any fully SVB size processes expect perspective into begun and place it's a for And technology invest from aligned current people with risk a we'll and So that's we our management of ensure that and alignment growth. today. program and future scalable our our to businesses program

Craig. Hi, it. Got

make with concentration I securities, concentration a coming about a we're strength believe there, in LCR higher from there's a comment and We of lot buffers a the to mean I cash. and lower going liquidity side. on everything. position in of was talk obviously, just liquidity in investment

perspective. So believe we from we're well-prepared that

us given off your sheet. point. were? more within and give I will you loan-to-deposit on kind of for to questions Could then then you've as it is the that you sense you forward -- that get to acquisition the be a of but for of through the remain portfolios a that loans, just projections had one SVB within longer-term? just Yes, capacity kind likely run of longer leave see this. where for any XXXX kind that's are environment once fair want know ratio, just runoff for on on I thing Couple have following is little a that And kind what loans leave back-down to Craig, right the there to probably there from industry. an do the it the a And balances, -- I'll it XXXX, eight-handle managing there. deposit a did here going longer-term challenging more circled loan going likely ask -- ask, and bit the of know, balance

some broad in quarter this that I'll comments Elliott portfolio. SVB make recession. in demand become decline has And a given industry forecast, are we year declined let X% the potential and loans for the in from cautious a growth talk Yes, about terms we from tightening. of by be will expect for And just in the first the softened down in the that's year, been our FCB quarter first network more and but broad-based an of a as customers increase the I'll expecting within the that as levels FCB, X% this we has but think verticals, it as branch lot X% the Fed

current quarter. the X% the level off first is in annualized of growth we So which backed

not In $XX terms if add will remain some markets for anything and of decline X% that's Peter you to certainly now be as settle is and there that's we the hope billion, to muted upside case 'XX, mentioned, FCB, which of we have comment. And private the remainder and about public that? are would projecting loans there so. the an my could Do expectation

of largest said, Silicon banking. I funds I as would of Global to think the Craig at add just portion Brody. kind you Bank Valley the the like what when Yes, look

not so of kind And the share. a to a market really the market of part little losing here. activity. of the that's just that's And bit really decline of expect reflection underlying, we -- It's

Private Bank, pretty And that's stable. so the

with I care. out taking think

all Got much it. it. you my taking everyone. questions, appreciate Thank I very for

Thank you, Brody.

not Deanna our time. for call to any questions Preston. turn the remarks. I'm you, over at Thank to this like host, further back Hart Mr. showing I'd any closing

in our further feel out questions Thank for our in have you, to today. team. to information, and Company need you call your We Relations if free reach appreciate interest everyone, additional the or any participating please Investor ongoing

this concludes gentlemen, call. and Ladies today's conference

wonderful day. a disconnect. now may Have You