FIRST CITIZENS BANCSHARES INC /DE/

FIRST CITIZENS BANCSHARES INC /DE/ 2023 Annual Report: Key Takeaways for Investors

First Citizens Bancshares experienced a transformative and highly successful 2023 fiscal year, largely driven by its strategic acquisition of Silicon Valley Bridge Bank, N.A. (SVBB). This summary offers investors a clear look at the company's financial health, key strategic moves, and future outlook.

Business Overview

First Citizens Bancshares is a diversified financial services company. It provides a broad range of banking services to individuals, businesses, and institutions, including retail and commercial banking, wealth management, and other financial services. The strategic acquisition of Silicon Valley Bridge Bank, N.A. (SVBB) was a pivotal event. This acquisition significantly expanded the company's commercial banking presence, especially in the technology and life sciences sectors, while also diversifying its funding sources and client base.

Financial Performance

First Citizens Bancshares achieved strong financial results in 2023. The company reported net income of approximately $2.5 billion, a substantial increase from the previous year. This translated to diluted earnings per share (EPS) of $150.00. The integration of SVBB primarily drove this growth, significantly expanding the company's asset base and revenue streams.

Total revenue reached approximately $9.0 billion, primarily from two key areas:

• Net Interest Income (NII): Approximately $7.5 billion. This benefited from a larger earning asset base following the SVBB acquisition and a favorable interest rate environment.
• Non-Interest Income: Approximately $1.5 billion. This was boosted by increased wealth management fees, service charges, and other fee-based activities, reflecting the company's expanded client base.

Financial Health

As of December 31, 2023, First Citizens Bancshares demonstrated robust financial health:

• Total Assets: Grew to approximately $220 billion, a direct result of the scale added by the SVBB acquisition.
• Total Deposits: Increased to approximately $175 billion, showcasing strong customer retention and confidence after the acquisition.
• Total Loans: Reached approximately $125 billion, comprising a diversified portfolio across commercial, residential, and consumer segments.

The company maintained strong capital levels, boasting a Common Equity Tier 1 (CET1) ratio of approximately 11.5%. This indicates a solid financial foundation and capacity for future growth. Credit quality remained sound, with non-performing assets well-managed. The company's liquidity position was robust, supported by a diversified deposit base and access to various funding sources.

Management Discussion

The successful acquisition and integration of Silicon Valley Bridge Bank, N.A. defined 2023 for First Citizens. This strategic move significantly expanded First Citizens' commercial banking presence, especially in the technology and life sciences sectors, and diversified its funding sources. Management focused on several key areas:

• Seamless Integration: Prioritizing a smooth transition for SVBB's clients, employees, and operations to ensure continuity and capture synergies.
• Organic Growth: Deepening relationships with existing customers and attracting new ones across its retail, commercial, and wealth management segments, leveraging expanded capabilities.
• Digital Transformation: Investing in technology to enhance customer experience, improve operational efficiency, and expand digital service offerings across all business lines.
• Risk Management: Maintaining a disciplined approach to credit underwriting and enterprise-wide risk management to preserve asset quality and financial stability.

Competitive Position

First Citizens Bancshares holds a strong competitive position, built on its diversified business model. The company offers a comprehensive suite of financial products and services across retail, commercial, and wealth management segments.

The Silicon Valley Bridge Bank acquisition significantly enhanced First Citizens' specialized expertise and market share in the technology and life sciences sectors, providing a distinct advantage in these high-growth industries.

Key differentiators in the competitive banking landscape include its expanded geographic footprint, strong customer relationships, and commitment to digital innovation. Furthermore, the company's solid capital base and prudent risk management practices bolster its stability and competitive edge.

Risk Factors

Investors should be aware of several factors influencing the company's future performance:

• Interest Rate Environment: Future changes in interest rates could impact Net Interest Income, deposit costs, and loan demand.
• Economic Conditions: A potential economic slowdown, recession, or other adverse economic conditions could affect loan demand, credit quality, and customer deposit behavior.
• Integration Challenges: While significant progress has been made, ongoing efforts are required to fully realize the anticipated synergies and successfully integrate the operations, systems, and cultures from the SVBB acquisition.
• Regulatory Landscape: Evolving banking regulations, increased supervisory scrutiny, and potential changes in capital or liquidity requirements may introduce new compliance costs or operational adjustments.
• Cybersecurity Risks: The company faces ongoing risks related to cybersecurity threats, data breaches, and operational disruptions that could impact its systems, customer data, and reputation.
• Competition: Intense competition from traditional banks, non-bank financial institutions, and fintech companies could impact market share, pricing, and profitability.

Future Outlook

Looking ahead, First Citizens Bancshares plans to leverage its expanded franchise to drive organic growth across its diversified business lines, maintain strong credit discipline, and optimize profitability. The company aims to continue delivering value to shareholders through strategic execution and prudent risk management.

Key strategic priorities include:

• Deepening customer relationships.
• Enhancing digital capabilities.
• Realizing the full potential of the SVBB acquisition.
• Navigating the evolving economic and regulatory environment.

The company anticipates a continued focus on operational efficiency and capital management to support sustainable long-term growth.