Part One — Financial Information [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Consolidated financial statements for September 30, 2023, reflect significant growth in assets, liabilities, and equity, primarily driven by the SVBB acquisition Consolidated Balance Sheet Highlights (Unaudited) | Item | September 30, 2023 (millions) | December 31, 2022 (millions) | | :--- | :--- | :--- | | **Total assets** | **$213,765** | **$109,298** | | Loans and leases, net | $131,529 | $69,859 | | Total deposits | $146,233 | $89,408 | | Total borrowings | $37,712 | $6,645 | | **Total stockholders' equity** | **$20,389** | **$9,662** | | **Total liabilities and stockholders' equity** | **$213,765** | **$109,298** | Consolidated Income Statement Highlights (Unaudited) | Item | Nine Months Ended Sep 30, 2023 (millions) | Nine Months Ended Sep 30, 2022 (millions) | | :--- | :--- | :--- | | Net interest income | $4,801 | $2,144 | | Provision for credit losses | $1,126 | $566 | | Total noninterest income | $11,532 | $1,707 | | *Gain on acquisition* | *$9,891* | *$431* | | Total noninterest expense | $3,843 | $2,315 | | **Net income** | **$10,952** | **$841** | - The significant increase in financial metrics is primarily due to the acquisition of Silicon Valley Bridge Bank, N.A. (SVBB) on March 27, 2023[38](index=38&type=chunk) [NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION](index=14&type=section&id=NOTE%201%20%E2%80%94%20SIGNIFICANT%20ACCOUNTING%20POLICIES%20AND%20BASIS%20OF%20PRESENTATION) The company conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company (FCB), with over 500 branches in 30 states - The company conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company (FCB), with over 500 branches in 30 states[32](index=32&type=chunk) - On March 27, 2023, FCB acquired substantially all loans and certain other assets and assumed all customer deposits and certain other liabilities of Silicon Valley Bridge Bank, N.A. (SVBB) from the FDIC[38](index=38&type=chunk) - In the first quarter of 2023, a new reportable segment, Silicon Valley Banking (SVB), was added to include the operations from the SVBB Acquisition[40](index=40&type=chunk) - The company adopted ASU 2022-02 on January 1, 2023, which eliminates the Troubled Debt Restructuring (TDR) recognition and measurement guidance and requires new disclosures for loan modifications to borrowers experiencing financial difficulty[58](index=58&type=chunk) [NOTE 2 — BUSINESS COMBINATIONS](index=18&type=section&id=NOTE%202%20%E2%80%94%20BUSINESS%20COMBINATIONS) This section details the accounting for business combinations, primarily focusing on the SVBB acquisition and its financial impact - On March 27, 2023, FCB completed the acquisition of SVBB from the FDIC. The transaction resulted in a preliminary after-tax gain on acquisition of **$9.89 billion**[62](index=62&type=chunk)[73](index=73&type=chunk) SVBB Acquisition Purchase Price Allocation (as of March 27, 2023) | Item | Fair Value (millions) | | :--- | :--- | | **Purchase price consideration** | **$36,308** | | Total assets acquired | $107,539 | | Total liabilities assumed | $61,340 | | Fair value of net assets acquired | $46,199 | | **Preliminary gain on acquisition, after income taxes** | **$9,891** | - Key terms of the SVBB deal include a five-year, **~$36 billion** Purchase Money Note to the FDIC, a five-year, up to **$70 billion** line of credit from the FDIC, and a commercial shared-loss agreement covering an estimated **$60 billion** of commercial loans[67](index=67&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) - The merger with CIT Group Inc. on January 3, 2022, resulted in a non-taxable gain on acquisition of **$431 million**[92](index=92&type=chunk)[94](index=94&type=chunk) [NOTE 3 — INVESTMENT SECURITIES](index=25&type=section&id=NOTE%203%20%E2%80%94%20INVESTMENT%20SECURITIES) This section provides a summary of the company's investment securities portfolio, including amortized cost, fair value, and unrealized gains or losses Investment Securities Summary (Amortized Cost & Fair Value) | Item | Amortized Cost (Sep 30, 2023) (millions) | Fair Value (Sep 30, 2023) (millions) | Amortized Cost (Dec 31, 2022) (millions) | Fair Value (Dec 31, 2022) (millions) | | :--- | :--- | :--- | :--- | :--- | | Available for sale | $17,836 | $16,661 | $9,967 | $8,995 | | Held to maturity | $10,082 | $8,152 | $10,279 | $8,795 | | **Total** | **$27,993** | **$24,888** | **$20,321** | **$17,885** | - As of September 30, 2023, the investment portfolio had total gross unrealized losses of **$3.12 billion**, compared to **$2.46 billion** at December 31, 2022[97](index=97&type=chunk) - For the nine months ended September 30, 2023, the company recognized a net realized loss of **$26 million** on the sale of investment securities available for sale, primarily from municipal bonds acquired in the SVBB Acquisition[103](index=103&type=chunk)[104](index=104&type=chunk) [NOTE 4 — LOANS AND LEASES](index=31&type=section&id=NOTE%204%20%E2%80%94%20LOANS%20AND%20LEASES) This section details the composition of the loan and lease portfolio, including categories, past due status, and non-accrual loans Total Loans and Leases by Category | Item | September 30, 2023 (millions) | December 31, 2022 (millions) | | :--- | :--- | :--- | | Commercial | $58,050 | $53,455 | | Consumer | $18,288 | $17,326 | | SVB | $56,864 | $— | | **Total loans and leases** | **$133,202** | **$70,781** | - Total past due loans (30+ days) were **$1.17 billion** (**0.88%** of total loans) at September 30, 2023, compared to **$864 million** (**1.22%** of total loans) at December 31, 2022[117](index=117&type=chunk) - Non-accrual loans increased to **$899 million** at September 30, 2023, from **$627 million** at December 31, 2022, with the SVB portfolio contributing **$163 million** of the non-accrual balance[119](index=119&type=chunk) - For the nine months ended September 30, 2023, gross charge-offs totaled **$437 million**, with **$209 million** from the Commercial portfolio and **$208 million** from the SVB portfolio[138](index=138&type=chunk) [NOTE 5 — ALLOWANCE FOR LOAN AND LEASE LOSSES](index=50&type=section&id=NOTE%205%20%E2%80%94%20ALLOWANCE%20FOR%20LOAN%20AND%20LEASE%20LOSSES) This section outlines the activity and balance of the Allowance for Loan and Lease Losses (ALLL), including provisions and charge-offs Allowance for Loan and Lease Losses (ALLL) Activity | Item | Nine Months Ended Sep 30, 2023 (millions) | | :--- | :--- | | Balance at beginning of period | $922 | | Initial PCD ALLL (SVBB) | $220 | | Day 2 provision for loan and lease losses (SVBB) | $462 | | Provision for loan and lease losses | $452 | | Charge-offs | ($437) | | Recoveries | $54 | | **Balance at September 30, 2023** | **$1,673** | - The total provision for credit losses for the nine months ended September 30, 2023 was **$1.126 billion**, which included a **$914 million** provision for loan and lease losses and a **$212 million** provision for off-balance sheet credit exposure[163](index=163&type=chunk) [NOTE 10 — DEPOSITS](index=57&type=section&id=NOTE%2010%20%E2%80%94%20DEPOSITS) This section details the composition of the company's deposit base, categorized by type and interest-bearing status Deposit Composition | Item | September 30, 2023 (millions) | December 31, 2022 (millions) | | :--- | :--- | :--- | | Noninterest-bearing demand | $43,141 | $24,922 | | Checking with interest | $23,461 | $16,202 | | Money market | $30,082 | $21,040 | | Savings | $32,513 | $16,634 | | Time | $17,036 | $10,610 | | **Total deposits** | **$146,233** | **$89,408** | - Time deposits with a denomination of **$250,000** or more were **$4.23 billion** at September 30, 2023, up from **$2.22 billion** at December 31, 2022[187](index=187&type=chunk) [NOTE 11 — BORROWINGS](index=59&type=section&id=NOTE%2011%20%E2%80%94%20BORROWINGS) This section provides a summary of the company's short-term and long-term borrowings, including details on the Purchase Money Note related to the SVBB Acquisition Borrowings Summary | Item | September 30, 2023 (millions) | December 31, 2022 (millions) | | :--- | :--- | :--- | | Short-term borrowings | $453 | $2,186 | | Long-term borrowings | $37,259 | $4,459 | | **Total borrowings** | **$37,712** | **$6,645** | - Long-term borrowings significantly increased due to the **$36.07 billion** Purchase Money Note payable to the FDIC related to the SVBB Acquisition, which has a fixed rate of **3.50%** and matures in March 2028[193](index=193&type=chunk) [NOTE 17 — REGULATORY CAPITAL](index=73&type=section&id=NOTE%2017%20%E2%80%94%20REGULATORY%20CAPITAL) This section presents the company's regulatory capital ratios, demonstrating compliance with Basel III requirements and well-capitalized status BancShares Regulatory Capital Ratios | Ratio | September 30, 2023 | December 31, 2022 | Basel III Requirement | | :--- | :--- | :--- | :--- | | Common equity Tier 1 | 13.24% | 10.08% | 7.00% | | Tier 1 risk-based capital | 13.83% | 11.06% | 8.50% | | Total risk-based capital | 15.64% | 13.18% | 10.50% | | Tier 1 leverage | 9.73% | 8.99% | 4.00% | - Both BancShares and its subsidiary bank, FCB, exceed all Basel III requirements and are considered well-capitalized under Prompt Corrective Action (PCA) thresholds[249](index=249&type=chunk) [NOTE 21 — BUSINESS SEGMENT INFORMATION](index=78&type=section&id=NOTE%2021%20%E2%80%94%20BUSINESS%20SEGMENT%20INFORMATION) This section provides an overview of the company's business segments, including the newly added Silicon Valley Banking segment and net income contributions - A new segment, Silicon Valley Banking, was added following the SVBB acquisition. It serves commercial clients in innovation markets like healthcare and technology, as well as private equity and venture capital firms[264](index=264&type=chunk)[268](index=268&type=chunk) Net Income by Segment (Nine Months Ended Sep 30, 2023) | Item | Net Income (millions) | | :--- | :--- | | General Banking | $684 | | Commercial Banking | $141 | | Silicon Valley Banking | $381 | | Rail | $68 | | Corporate | $9,678 | | **Total BancShares** | **$10,952** | - The Corporate segment's net income includes the preliminary gain on the SVBB acquisition, day 2 provision for credit losses, and purchase accounting adjustments[272](index=272&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=83&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights the SVBB acquisition's transformative financial impact and ongoing regulatory considerations - The SVBB acquisition expanded the client base to private equity and venture capital clients, diversifying the loan portfolio and business mix, particularly in technology and life sciences[298](index=298&type=chunk) - Management is evaluating several Notices of Proposed Rulemaking (NPRs) from federal banking agencies, including a potential one-time FDIC special assessment of approximately **$30 million**, enhanced capital requirements (Basel III endgame), and new long-term debt requirements for banks with over **$100 billion** in assets[307](index=307&type=chunk)[308](index=308&type=chunk)[311](index=311&type=chunk) Financial Performance Summary (Nine Months Ended) | Item | September 30, 2023 (millions) | September 30, 2022 (millions) | | :--- | :--- | :--- | | Net interest income | $4,801 | $2,144 | | Provision for credit losses | $1,126 | $566 | | Noninterest income | $11,532 | $1,707 | | Net income | $10,952 | $841 | | Diluted EPS | $750.19 | $50.70 | [RESULTS OF OPERATIONS](index=92&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, including net interest income, provision for credit losses, noninterest income, and noninterest expense - Net interest income for Q3 2023 was **$1.99 billion**, a **2% increase** from Q2 2023, driven by higher loan yields and purchase accounting accretion, which offset higher deposit costs. Net interest margin (NIM) slightly decreased by **3 bps** to **4.07%**[336](index=336&type=chunk) - The provision for credit losses in Q3 2023 was **$192 million**, up from **$151 million** in Q2 2023, reflecting deterioration in macroeconomic factors and higher net charge-offs[343](index=343&type=chunk) - Noninterest income for Q3 2023 was **$615 million**, a decrease from **$658 million** in Q2 2023, primarily due to a smaller positive adjustment to the preliminary gain on acquisition (**$12 million** vs. **$55 million**)[352](index=352&type=chunk) - Noninterest expense decreased **10%** to **$1.42 billion** in Q3 2023 from **$1.57 billion** in Q2 2023, largely due to lower acquisition-related costs and salaries[357](index=357&type=chunk) [RESULTS BY BUSINESS SEGMENT](index=103&type=section&id=RESULTS%20BY%20BUSINESS%20SEGMENT) This section provides a detailed breakdown of financial results by the company's key business segments: General Banking, Commercial Banking, Silicon Valley Banking, and Rail - **General Banking:** Q3 net income was **$241 million**. Deposits grew to **$101.0 billion**, primarily driven by the Direct Bank channel[363](index=363&type=chunk)[365](index=365&type=chunk) - **Commercial Banking:** Q3 net income was **$37 million**. The provision for credit losses remained elevated at **$132 million**, with a focus on the general office real estate portfolio[367](index=367&type=chunk) - **Silicon Valley Banking:** Q3 net income was **$157 million**. Loans declined to **$56.9 billion** from **$58.8 billion** in Q2, mostly in Global Fund Banking. Deposits stabilized at **$40.0 billion**[370](index=370&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk) - **Rail:** Q3 net income was **$28 million**. Adjusted rental income increased to **$90 million**, benefiting from strong utilization (**98.7%**) and re-pricing of leases at **138%** of prior rates[378](index=378&type=chunk)[379](index=379&type=chunk) [BALANCE SHEET ANALYSIS](index=108&type=section&id=BALANCE%20SHEET%20ANALYSIS) This section analyzes key balance sheet components, including loans, deposits, and borrowings, highlighting the impact of the SVBB acquisition - Total loans and leases were **$133.2 billion** at September 30, 2023, an **88% increase** from year-end 2022, primarily due to the addition of **$56.9 billion** in SVB loans[402](index=402&type=chunk) - Total deposits reached **$146.2 billion**, a **64% increase** from year-end 2022. This includes **$40.0 billion** from the SVB segment and strong growth in the Direct Bank[409](index=409&type=chunk) - Total borrowings stood at **$37.7 billion**, up from **$6.6 billion** at year-end 2022, mainly due to the **$35.8 billion** Purchase Money Note from the FDIC related to the SVBB acquisition[415](index=415&type=chunk) [RISK MANAGEMENT](index=117&type=section&id=RISK%20MANAGEMENT) This section outlines the company's risk management framework, including credit risk, interest rate risk, and liquidity management - The company maintains a moderate risk appetite and a comprehensive Risk Management Framework overseen by the Board's Risk Committee[421](index=421&type=chunk) - The Allowance for Loan and Lease Losses (ALLL) was **$1.67 billion**, or **1.26%** of total loans, at September 30, 2023. The increase from year-end was driven by the SVBB acquisition and deteriorating macroeconomic forecasts[437](index=437&type=chunk)[438](index=438&type=chunk) - The company is asset-sensitive to interest rate changes. A **+100 basis point** parallel rate shock is estimated to increase Net Interest Income (NII) by **9.2%** over 12 months[484](index=484&type=chunk)[486](index=486&type=chunk) - Total liquid assets were **$57.0 billion** (**26.7%** of total assets) at September 30, 2023, with an additional **$88.6 billion** in contingent liquidity sources, including a **$70 billion** credit facility from the FDIC[504](index=504&type=chunk)[506](index=506&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=115&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's market risk profile significantly changed post-SVBB Acquisition, with interest rate risk being the primary concern - The company's market risk profile as of September 30, 2023, has changed since December 31, 2022, primarily due to the SVBB Acquisition[539](index=539&type=chunk) [Controls and Procedures](index=116&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with ongoing integration of SVBB internal controls - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of September 30, 2023[540](index=540&type=chunk) - The evaluation of internal controls over financial reporting related to the SVBB Acquisition is ongoing. No other material changes were identified during the quarter[541](index=541&type=chunk) Part Two — Other Information [Legal Proceedings](index=117&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions, none of which are expected to materially affect financial statements - In management's opinion, no currently existing legal actions would be material to BancShares' consolidated financial statements[544](index=544&type=chunk) [Risk Factors](index=117&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors occurred in Q3 2023, beyond those related to the SVBB Acquisition previously disclosed - No material changes in risk factors occurred during the third quarter of 2023, other than those previously disclosed in the Q1 2023 Form 10-Q related to the SVBB Acquisition[545](index=545&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=117&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no repurchases of its stock during the three months ended September 30, 2023 - There were no repurchases of the company's stock during the third quarter of 2023[546](index=546&type=chunk)

First Citizens BancShares, Inc. (NASDAQ:FCNCA) Q2 2023 Results Conference Call August 3, 2023 9:00 AM ET Company Participants Deanna Hart - SVP, IR Frank Holding - Chairman and CEO Peter Bristow - President Craig Nix - CFO Robert Hawley - Director, Corporate Accounting and Accounting Policy Conference Call Participants Brady Gailey - KBW Stephen Scouten - Piper Sandler Kevin Fitzsimmons - D.A. Davidson Brian Foran - Autonomous Research Christopher Marinac - Janney Montgomery Scott Brody Preston - UBS Operat ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________ FORM 10-Q ____________________________________________________ ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2023 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 001-16715 First Citizens BancShares, Inc. (Exact name of Registrant as ...

First Citizens BancShares, Inc. (NASDAQ:FCNCA) Q1 2023 Earnings Conference Call May 10, 2023 9:00 AM ET Company Participants Deanna Hart - SVP, IR Frank Holding - Chairman and CEO Peter Bristow - President Craig Nix - CFO Elliot Howard - Manager Mergers and Acquisitions Tom Eklund - Treasurer Lorie Rupp - Chief Risk Officer Conference Call Participants Stephen Scouten - Piper Sandler Brady Gailey - KBW Kevin Fitzsimmons - DA Davidson Christopher Marinac - Janney Montgomery Scott Brody Preston - UBS Operato ...

[Part One — Financial Information](index=5&type=section&id=Part%20One%20%E2%80%94%20Financial%20Information) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements for the quarter ended March 31, 2023 [Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) The balance sheets show a significant increase in assets, loans, and deposits driven by the SVBB acquisition | Metric | March 31, 2023 (millions) | December 31, 2022 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Total Assets | $214,658 | $109,298 | +$105,360 | | Loans and leases, net | $136,683 | $69,859 | +$66,824 | | Total Deposits | $140,050 | $89,408 | +$50,642 | | Total Borrowings | $46,094 | $6,645 | +$39,449 | | Total Stockholders' Equity | $19,216 | $9,662 | +$9,554 | [Consolidated Statements of Income (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20(Unaudited)) The income statements reflect a substantial increase in net income due to a significant gain on acquisition | Metric | Three Months Ended March 31, 2023 (millions) | Three Months Ended March 31, 2022 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Total Interest Income | $1,211 | $710 | +$501 | | Total Interest Expense | $361 | $61 | +$300 | | Net Interest Income | $850 | $649 | +$201 | | Provision for Credit Losses | $783 | $464 | +$319 | | Total Noninterest Income | $10,259 | $850 | +$9,409 | | Total Noninterest Expense | $855 | $810 | +$45 | | Income Before Income Taxes | $9,471 | $225 | +$9,246 | | Net Income | $9,518 | $271 | +$9,247 | | Net Income Available to Common Stockholders | $9,504 | $264 | +$9,240 | | Basic EPS | $654.22 | $16.70 | +$637.52 | | Diluted EPS | $653.64 | $16.70 | +$636.94 | - The significant increase in Net Income and EPS was primarily driven by a **$9,824 million gain on acquisition** in 2023, compared to $431 million in 2022[15](index=15&type=chunk) [Consolidated Statements of Comprehensive Income (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) Total comprehensive income increased substantially due to high net income and unrealized gains on securities | Metric | Three Months Ended March 31, 2023 (millions) | Three Months Ended March 31, 2022 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Net Income | $9,518 | $271 | +$9,247 | | Net Unrealized Gain (Loss) on Securities Available for Sale | $58 | $(318) | +$376 | | Other Comprehensive Income (Loss), Net of Tax | $66 | $(315) | +$381 | | Total Comprehensive Income (Loss) | $9,584 | $(44) | +$9,628 | [Consolidated Statements of Changes in Stockholders' Equity (Unaudited)](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Unaudited)) Stockholders' equity grew significantly, driven by net income and other comprehensive income | Metric | March 31, 2023 (millions) | December 31, 2022 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $19,216 | $9,662 | +$9,554 | | Retained Earnings | $14,885 | $5,392 | +$9,493 | | Accumulated Other Comprehensive Loss | $(669) | $(735) | +$66 | - Net income of **$9,518 million** and other comprehensive income of **$66 million** contributed to the increase in stockholders' equity for the three months ended March 31, 2023[20](index=20&type=chunk) [Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Cash flows show a net increase in cash, with significant cash provided by investing activities | Metric | Three Months Ended March 31, 2023 (millions) | Three Months Ended March 31, 2022 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(362) | $577 | $(939) | | Net Cash Provided by Investing Activities | $2,628 | $2,195 | +$433 | | Net Cash Used in Financing Activities | $(1,186) | $(2,587) | +$1,401 | | Change in Cash and Due from Banks | $1,080 | $185 | +$895 | | Cash and Due from Banks at End of Period | $1,598 | $523 | +$1,075 | - Significant non-cash investing activities in 2023 included a **$35,150 million Purchase Money Note** and a **$500 million Value Appreciation Instrument** as consideration for the SVBB Acquisition[24](index=24&type=chunk) [Notes to the Unaudited Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed disclosures for the unaudited consolidated financial statements [NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION](index=12&type=section&id=NOTE%201%20%E2%80%94%20SIGNIFICANT%20ACCOUNTING%20POLICIES%20AND%20BASIS%20OF%20PRESENTATION) - First Citizens BancShares, Inc (BancShares) is a financial holding company operating through its banking subsidiary, First-Citizens Bank & Trust Company (FCB), with over **550 branches in 23 states**[26](index=26&type=chunk) - The consolidated financial statements are presented in accordance with Form 10-Q and Article 10 of Regulation S-X, and should be read with the 2022 Form 10-K[27](index=27&type=chunk) - BancShares accounts for business combinations using the acquisition method, recognizing a gain on acquisition if the fair value of identifiable net assets exceeds the purchase price[31](index=31&type=chunk) - On March 27, 2023, FCB acquired substantially all loans and certain assets, and assumed all customer deposits and certain liabilities of Silicon Valley Bridge Bank, N.A (SVBB Acquisition)[32](index=32&type=chunk) - During Q1 2023, BancShares added the **Silicon Valley Banking (SVB) reportable segment**, which includes operations from the SVBB Acquisition[35](index=35&type=chunk) - New SVB loan classes include Global Fund Banking, Investor Dependent (Early-Stage, Growth Stage), Innovation Commercial & Industrial (C&I), Cash Flow Dependent, Private Bank, Commercial Real Estate (CRE), and Other[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - BancShares adopted ASU 2022-02 (eliminating TDR recognition guidance and requiring new loan modification disclosures) and ASU 2022-01 (expanding portfolio layer method for fair value hedging) as of January 1, 2023[50](index=50&type=chunk)[53](index=53&type=chunk) [NOTE 2 — BUSINESS COMBINATIONS](index=16&type=section&id=NOTE%202%20%E2%80%94%20BUSINESS%20COMBINATIONS) - FCB acquired SVBB on March 27, 2023, in an FDIC-assisted transaction, acquiring assets with an estimated fair value of **$106.60 billion** (including $68.50 billion in loans and $35.28 billion in cash) and assuming liabilities of **$61.13 billion** (primarily $55.96 billion in customer deposits)[55](index=55&type=chunk) - BancShares recorded a preliminary gain on acquisition of **$9.82 billion** (net of income taxes) due to the fair value of net assets acquired exceeding the purchase price[63](index=63&type=chunk) - Consideration for the SVBB Acquisition included a **$35.15 billion Purchase Money Note** payable to the FDIC and a **$500 million Value Appreciation Instrument**[56](index=56&type=chunk)[57](index=57&type=chunk) - FCB also entered into a five-year, up to **$70 billion Credit Facility** with the FDIC and a commercial Shared-Loss Agreement covering an estimated **$60 billion** of commercial loans[58](index=58&type=chunk)[59](index=59&type=chunk) | Item | Fair Value Purchase Price Allocation as of March 27, 2023 (millions) | | :--- | :--- | | Purchase Price Consideration | $35,650 | | Total Assets Acquired | $106,600 | | Total Liabilities Assumed | $61,126 | | Fair Value of Net Assets Acquired | $45,474 | | Preliminary Gain on Acquisition (after taxes) | $9,824 | - The CIT Merger was completed on January 3, 2022, resulting in BancShares issuing approximately **6.1 million shares** of Class A Common Stock and recording a gain on acquisition of **$431 million**[79](index=79&type=chunk)[81](index=81&type=chunk) [NOTE 3 — INVESTMENT SECURITIES](index=22&type=section&id=NOTE%203%20%E2%80%94%20INVESTMENT%20SECURITIES) | Category | March 31, 2023 (Fair Value, millions) | December 31, 2022 (Fair Value, millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Investment securities available for sale | $9,061 | $8,995 | +$66 | | Investment securities held to maturity | $8,993 | $8,795 | +$198 | | Investment in marketable equity securities | $85 | $95 | $(10) | | Total Investment Securities | $18,139 | $17,885 | +$254 | | Metric | Three Months Ended March 31, 2023 (millions) | Three Months Ended March 31, 2022 (millions) | | :--- | :--- | :--- | | Interest Income - Taxable Investment Securities | $106 | $82 | | Dividend Income - Marketable Equity Securities | $1 | $1 | | Net Realized Losses on Sales of AFS Securities | $(14) | $0 | | Fair Value Adjustment on Marketable Equity Securities, Net | $(9) | $3 | - As of March 31, 2023, investment securities available for sale had gross unrealized losses of **$897 million**, with **337 securities** having continuous unrealized losses for more than 12 months[84](index=84&type=chunk)[91](index=91&type=chunk) - A credit-related loss of **$4 million** was recognized for one corporate bond as of March 31, 2023[91](index=91&type=chunk) [NOTE 4 — LOANS AND LEASES](index=27&type=section&id=NOTE%204%20%E2%80%94%20LOANS%20AND%20LEASES) | Loan Class | March 31, 2023 (millions) | December 31, 2022 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Commercial | $54,390 | $53,455 | +$935 | | Consumer | $17,727 | $17,326 | +$401 | | SVB | $66,171 | $0 | +$66,171 | | Total Loans and Leases | $138,288 | $70,781 | +$67,507 | - The significant increase in total loans and leases is primarily due to the acquisition of **$66.17 billion in SVB loans**[98](index=98&type=chunk) | Delinquency Status | March 31, 2023 (millions) | December 31, 2022 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | 30-59 Days Past Due | $674 | $480 | +$194 | | 60-89 Days Past Due | $159 | $214 | $(55) | | 90 Days or Greater | $380 | $170 | +$210 | | Total Past Due | $1,213 | $864 | +$349 | | Non-Accrual Status | March 31, 2023 (millions) | December 31, 2022 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Commercial | $510 | $529 | $(19) | | Consumer | $94 | $98 | $(4) | | SVB | $224 | $0 | +$224 | | Total Non-Accrual Loans | $828 | $627 | +$201 | - Gross charge-offs for the three months ended March 31, 2023, totaled **$59 million**, with **$54 million** from commercial loans and **$5 million** from consumer loans[121](index=121&type=chunk) - Loan modifications for borrowers experiencing financial difficulties totaled **$92 million** in amortized cost for the three months ended March 31, 2023, primarily term extensions[126](index=126&type=chunk) - PCD loans acquired in the SVBB Acquisition had a UPB of **$2,529 million** and a purchase price of **$2,030 million**, with an initial PCD ACL of **$200 million**[141](index=141&type=chunk) | Pledged Loans | March 31, 2023 (millions) | December 31, 2022 (millions) | | :--- | :--- | :--- | | FHLB of Atlanta (Lendable Collateral) | $14,662 | $14,918 | | FRB (Lendable Collateral) | $4,676 | $4,203 | [NOTE 5 — ALLOWANCE FOR CREDIT LOSSES](index=43&type=section&id=NOTE%205%20%E2%80%94%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) | Metric | March 31, 2023 (millions) | December 31, 2022 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | ACL for Loans and Leases | $1,605 | $922 | +$683 | | ACL for Unfunded Commitments | $352 | $106 | +$246 | | ACL for Investment Securities | $4 | $0 | +$4 | | Total Provision for Credit Losses (Q1 2023) | $783 | $79 (Q4 2022) | +$704 | - The increase in ACL for loans and leases is primarily due to the SVBB Acquisition, including an **Initial PCD ACL of $200 million** and a **Day 2 provision for loans and leases of $462 million**[148](index=148&type=chunk) - The increase in ACL for unfunded commitments is primarily due to a **Day 2 provision of $254 million** related to the SVBB Acquisition[149](index=149&type=chunk) [NOTE 6 — LEASES](index=45&type=section&id=NOTE%206%20%E2%80%94%20LEASES) | Metric | March 31, 2023 (millions) | December 31, 2022 (millions) | | :--- | :--- | :--- | | Operating Lease ROU Assets | $337 | $345 | | Operating Lease Liabilities | $345 | $352 | | Weighted-Average Remaining Lease Term (Operating) | 9.4 years | 9.6 years | | Weighted-Average Discount Rate (Operating) | 2.22% | 2.19% | | Lease Income (millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Operating Leases | $233 | $208 | | Finance Leases | $46 | $47 | | Total Lease Income | $294 | $266 | [NOTE 7 — GOODWILL AND CORE DEPOSIT INTANGIBLES](index=46&type=section&id=NOTE%207%20%E2%80%94%20GOODWILL%20AND%20CORE%20DEPOSIT%20INTANGIBLES) - BancShares had goodwill of **$346 million** at March 31, 2023, related to business combinations prior to the SVBB Acquisition and CIT Merger, with no goodwill impairment during the quarter[159](index=159&type=chunk) | Core Deposit Intangibles (millions) | 2023 | | :--- | :--- | | Balance, net of accumulated amortization at January 1 | $140 | | Core deposit intangibles related to SVBB Acquisition | $230 | | Amortization for the period | $(6) | | Balance at March 31, net of accumulated amortization | $364 | | Expected Amortization (millions) | Amount | | :--- | :--- | | Remainder 2023 | $52 | | 2024 | $63 | | 2025 | $54 | | 2026 | $46 | | 2027 | $39 | | 2028 | $34 | | Thereafter | $76 | [NOTE 8 — VARIABLE INTEREST ENTITIES](index=47&type=section&id=NOTE%208%20%E2%80%94%20VARIABLE%20INTEREST%20ENTITIES) - BancShares had no consolidated VIEs at March 31, 2023, but held unconsolidated VIEs primarily in qualified affordable housing projects[166](index=166&type=chunk)[167](index=167&type=chunk) | Unconsolidated VIEs (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets (maximum loss exposure) | $1,833 | $762 | | Liabilities for commitments to tax credit investments | $991 | $295 | [NOTE 9 — OTHER ASSETS](index=48&type=section&id=NOTE%209%20%E2%80%94%20OTHER%20ASSETS) | Other Assets (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Other Assets | $7,450 | $4,369 | | Affordable housing tax credit and other unconsolidated investments | $1,869 | $762 | | Accrued interest receivable | $772 | $329 | | Fair value of derivative financial instruments | $547 | $159 | - The increase in other assets is primarily due to approximately **$2.18 billion** of miscellaneous assets acquired in the SVBB Acquisition[170](index=170&type=chunk) [NOTE 10 — DEPOSITS](index=48&type=section&id=NOTE%2010%20%E2%80%94%20DEPOSITS) | Deposit Type (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Noninterest-bearing demand | $54,649 | $24,922 | | Interest-bearing | $85,401 | $64,486 | | Total Deposits | $140,050 | $89,408 | - The increase in deposits is primarily due to the SVBB Acquisition, which added **$49.26 billion** in deposits[171](index=171&type=chunk) | Time Deposit Maturities (millions) | Amount | | :--- | :--- | | 2024 | $9,199 | | 2025 | $3,281 | | 2026 | $437 | | 2027 | $55 | | 2028 | $31 | | Thereafter | $125 | | Total Time Deposits | $13,128| [NOTE 11 — BORROWINGS](index=50&type=section&id=NOTE%2011%20%E2%80%94%20BORROWINGS) | Borrowing Type (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Short-term Borrowings | $1,009 | $2,186 | | Long-term Borrowings | $45,085 | $4,459 | | Total Borrowings | $46,094 | $6,645 | - The significant increase in long-term borrowings is primarily due to the **$35,150 million Purchase Money Note** to the FDIC related to the SVBB Acquisition[178](index=178&type=chunk) - FHLB borrowings increased to **$8,500 million** at March 31, 2023, from $4,250 million at December 31, 2022, to enhance liquidity[178](index=178&type=chunk) - BancShares pledged **$29.6 billion** of loans to the FHLB and FRB at March 31, 2023[179](index=179&type=chunk) [NOTE 12 — DERIVATIVE FINANCIAL INSTRUMENTS](index=53&type=section&id=NOTE%2012%20%E2%80%94%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) | Derivative Type (millions) | March 31, 2023 (Notional) | March 31, 2023 (Asset Fair Value) | March 31, 2023 (Liability Fair Value) | | :--- | :--- | :--- | :--- | | Interest Rate Contracts | $23,557 | $285 | $(535) | | Foreign Exchange Contracts | $18,419 | $262 | $(255) | | Other Contracts | $713 | $0 | $(1) | | Total Derivatives | $42,689 | $547 | $(791) | - BancShares' derivatives are not designated as hedging instruments[185](index=185&type=chunk) | Gains on Non-Qualifying Hedges (millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Interest Rate Contracts | $21 | $4 | | Foreign Currency Forward Contracts | $(2) | $0 | | Total | $19 | $4 | [NOTE 13 —OTHER LIABILITIES](index=54&type=section&id=NOTE%2013%20%E2%80%94OTHER%20LIABILITIES) | Other Liabilities (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Other Liabilities | $8,172 | $2,588 | | Deferred Taxes | $3,551 | $286 | | Commitments to fund tax credit investments | $991 | $295 | | Fair value of derivative financial instruments | $791 | $486 | | ACL for unfunded commitments | $352 | $106 | - The increase in other liabilities is primarily due to approximately **$1.85 billion** of other liabilities assumed in the SVBB Acquisition and **$3.31 billion** in deferred tax liabilities[188](index=188&type=chunk) - The balance at March 31, 2023, includes **$500 million** payable to the FDIC for the Value Appreciation Instrument[188](index=188&type=chunk) [NOTE 14 — FAIR VALUE](index=54&type=section&id=NOTE%2014%20%E2%80%94%20FAIR%20VALUE) - BancShares measures certain financial assets and liabilities at fair value, categorized into a three-level hierarchy based on input observability (Level 1: quoted prices in active markets; Level 2: observable inputs other than Level 1; Level 3: unobservable inputs)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) | Recurring Fair Value Measurements (millions) | March 31, 2023 (Total) | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Investment securities available for sale | $9,061 | $0 | $8,901 | $160 | | Marketable equity securities | $85 | $29 | $56 | $0 | | Loans held for sale | $9 | $0 | $9 | $0 | | Derivative assets | $547 | $0 | $546 | $1 | | Derivative liabilities | $791 | $0 | $790 | $1 | - Corporate bonds and certain derivative instruments are classified as **Level 3** due to unobservable inputs[193](index=193&type=chunk)[196](index=196&type=chunk) | Non-Recurring Fair Value Measurements (millions) | March 31, 2023 (Total) | Level 3 | Total Gains (Losses) | | :--- | :--- | :--- | :--- | | Assets held for sale - loans | $9 | $9 | $0 | | Loans - collateral dependent loans | $87 | $87 | $(15) | | Other real estate owned | $36 | $36 | $0 | | Total | $132 | $132 | $(15) | - Net loans are generally valued using discounted cash flow models with unobservable market inputs, classifying them as **Level 3**[211](index=211&type=chunk) [NOTE 15 — STOCKHOLDERS' EQUITY](index=61&type=section&id=NOTE%2015%20%E2%80%94%20STOCKHOLDERS'%20EQUITY) | Common Stock (Shares) | December 31, 2022 | March 31, 2023 | | :--- | :--- | :--- | | Class A | 13,501,017 | 13,514,808 | | Class B | 1,005,185 | 1,005,185 | - Class A Common Stock has one vote per share, while Class B Common Stock has **16 votes per share**[220](index=220&type=chunk) | Preferred Stock Series | Liquidation Preference (millions) | Dividend Rate | | :--- | :--- | :--- | | Series A | $345 | 5.375% | | Series B | $325 | LIBOR + 3.792%| | Series C | $200 | 5.625% | [NOTE 16 — ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME](index=61&type=section&id=NOTE%2016%20%E2%80%94%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20(LOSS)%20INCOME) | AOCI Component (millions) | March 31, 2023 (Net Unrealized) | December 31, 2022 (Net Unrealized) | | :--- | :--- | :--- | | Unrealized loss on securities available for sale | $(681) | $(739) | | Unrealized loss on securities available for sale transferred to securities held to maturity | $(6) | $(6) | | Defined benefit pension items | $18 | $10 | - Total accumulated other comprehensive loss improved from **$(735) million** at December 31, 2022, to **$(669) million** at March 31, 2023, primarily due to a **$58 million** net unrealized gain on available-for-sale securities[223](index=223&type=chunk)[224](index=224&type=chunk) [NOTE 17 — REGULATORY CAPITAL](index=63&type=section&id=NOTE%2017%20%E2%80%94%20REGULATORY%20CAPITAL) | Regulatory Capital Ratio | Basel III Requirements | PCA Well-Capitalized Thresholds | BancShares (March 31, 2023) | FCB (March 31, 2023) | | :--- | :--- | :--- | :--- | :--- | | Total Risk-Based Capital | 10.50% | 10.00% | 14.86% | 14.74% | | Tier 1 Risk-Based Capital | 8.50% | 8.00% | 13.13% | 13.32% | | Common Equity Tier 1 | 7.00% | 6.50% | 12.53% | 13.32% | | Tier 1 Leverage | 4.00% | 5.00% | 16.72% | 16.97% | - BancShares and FCB **significantly exceed all Basel III requirements** and PCA well-capitalized thresholds as of March 31, 2023[229](index=229&type=chunk) - FCB could have paid an additional **$6.94 billion** in dividends to the Parent Company while remaining well-capitalized at March 31, 2023[232](index=232&type=chunk) [NOTE 18 — EARNINGS PER COMMON SHARE](index=65&type=section&id=NOTE%2018%20%E2%80%94%20EARNINGS%20PER%20COMMON%20SHARE) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Income Available to Common Stockholders (millions) | $9,504 | $264 | | Basic Shares Outstanding | 14,526,693 | 15,779,153 | | Diluted Shares Outstanding | 14,539,709 | 15,779,153 | | Basic EPS | $654.22 | $16.70 | | Diluted EPS | $653.64 | $16.70 | [NOTE 19 — INCOME TAXES](index=65&type=section&id=NOTE%2019%20%E2%80%94%20INCOME%20TAXES) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Income Before Income Taxes (millions) | $9,471 | $225 | | Income Tax (Benefit) Expense (millions) | $(47) | $(46) | | Effective Tax Rate | (0.5)% | (20.4)% | - The increase in the effective tax rate for Q1 2023 was primarily due to the **bargain purchase gain** relating to the SVBB Acquisition[234](index=234&type=chunk) - Net deferred tax liabilities increased by approximately **$3.31 billion** due to the SVBB Acquisition, primarily related to acquired loans and other assets[237](index=237&type=chunk) [NOTE 20 — EMPLOYEE BENEFIT PLANS](index=66&type=section&id=NOTE%2020%20%E2%80%94%20EMPLOYEE%20BENEFIT%20PLANS) | Net Periodic Benefit Cost (millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Service Cost | $2 | $3 | | Interest Cost | $15 | $11 | | Expected Return on Assets | $(21) | $(22) | | Amortization of Net Actuarial Loss | $0 | $3 | | Total Net Periodic Benefit | $(4) | $(5) | [NOTE 21 — BUSINESS SEGMENT INFORMATION](index=66&type=section&id=NOTE%2021%20%E2%80%94%20BUSINESS%20SEGMENT%20INFORMATION) - BancShares' segments include General Banking, Commercial Banking, **Silicon Valley Banking (new in Q1 2023)**, Rail, and Corporate[242](index=242&type=chunk) - Silicon Valley Banking (SVB) was added in Q1 2023, focusing on healthcare and technology industries, private equity/venture capital firms, and private banking[246](index=246&type=chunk) | Segment Net Income (millions) | Three Months Ended March 31, 2023 | | :--- | :--- | | General Banking | $202 | | Commercial Banking | $94 | | Silicon Valley Banking | $35 | | Rail | $22 | | Corporate | $9,165 | | Total BancShares | $9,518 | | Segment Loans and Leases (millions) | March 31, 2023 | | :--- | :--- | | General Banking | $43,353 | | Commercial Banking | $28,684 | | Silicon Valley Banking | $66,171 | | Rail | $80 | | Total BancShares | $138,288 | | Segment Deposits (millions) | March 31, 2023 | | :--- | :--- | | General Banking | $85,982 | | Commercial Banking | $3,045 | | Silicon Valley Banking | $49,259 | | Rail | $14 | | Corporate | $1,750 | | Total BancShares | $140,050 | [NOTE 22 — COMMITMENTS AND CONTINGENCIES](index=68&type=section&id=NOTE%2022%20%E2%80%94%20COMMITMENTS%20AND%20CONTINGENCIES) | Commitments (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Financing Commitments | $74,507 | $23,452 | | Letters of Credit | $4,039 | $480 | | Deferred Purchase Agreements | $1,707 | $2,039 | | Purchase and Funding Commitments | $869 | $941 | - Financing commitments significantly increased due to the SVBB Acquisition, with undrawn and available commitments primarily in Silicon Valley Banking and Commercial Banking segments[255](index=255&type=chunk) - Management estimates an aggregate range of reasonably possible losses from litigation of up to **$10 million** in excess of established reserves and insurance as of March 31, 2023[264](index=264&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=70&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and results of operations [EXECUTIVE OVERVIEW](index=70&type=section&id=EXECUTIVE%20OVERVIEW) - BancShares is a bank holding company regulated by the Federal Reserve System and the North Carolina Commissioner of Banks, conducting banking operations through its subsidiary FCB[273](index=273&type=chunk) - The SVBB Acquisition adds a global fund banking business, diversifies the loan portfolio across technology and life sciences, and enhances wealth management capabilities[276](index=276&type=chunk) [Significant Events in 2023](index=71&type=section&id=Significant%20Events%20in%202023) - The SVBB Acquisition closed on March 27, 2023, acquiring **$106.60 billion** in assets and assuming **$55.96 billion** in deposits, resulting in a **$9.82 billion** preliminary gain on acquisition (net of tax) and a **$230 million** core deposit intangible[278](index=278&type=chunk)[284](index=284&type=chunk) - A new business segment, **Silicon Valley Banking (SVB)**, was added in conjunction with the SVBB Acquisition[279](index=279&type=chunk) [Recent Economic and Industry Developments](index=71&type=section&id=Recent%20Economic%20and%20Industry%20Developments) - The Federal Open Market Committee (FOMC) continued to raise interest rates by **25 basis points** in January, March, and May 2023, bringing the federal funds rate to **5.00%-5.25%** to combat inflation[280](index=280&type=chunk) - The banking industry experienced increased volatility due to high-profile bank failures, raising concerns about liquidity, deposit outflows, uninsured deposit concentrations, and unrealized losses on securities[282](index=282&type=chunk) - Potential regulatory actions, including higher capital requirements and special assessments to repay FDIC losses, are being discussed in response to recent bank failures[282](index=282&type=chunk) [Financial Performance Summary](index=71&type=section&id=Financial%20Performance%20Summary) | Metric | Q1 2023 (millions) | Q4 2022 (millions) | Q1 2022 (millions) | | :--- | :--- | :--- | :--- | | Net Income | $9,518 | $257 | $271 | | Net Income Available to Common Stockholders | $9,504 | $243 | $264 | | Diluted EPS | $653.64 | $16.67 | $16.70 | | Return on Average Assets (ROA) | 33.23% | 0.93% | 1.00% | | Net Interest Margin (NIM) | 3.41% | 3.36% | 2.73% | | Provision for Credit Losses | $783 | $79 | $464 | | Noninterest Income | $10,259 | $429 | $850 | | Noninterest Expense | $855 | $760 | $810 | - Net income for Q1 2023 increased significantly by **$9.26 billion** from Q4 2022, primarily due to a **$9.82 billion** preliminary gain on acquisition, partially offset by a **$716 million** provision for Non-PCD loans and unfunded commitments from the SVBB Acquisition[289](index=289&type=chunk) - Total loans and leases increased by **$67.51 billion** to **$138.29 billion** at March 31, 2023, mainly due to **$66.17 billion** in SVB loans[289](index=289&type=chunk) - Total deposits increased by **$50.64 billion** to **$140.05 billion** at March 31, 2023, primarily from **$49.26 billion** in SVB deposits[289](index=289&type=chunk) - Total borrowings increased by **$39.45 billion** to **$46.09 billion**, mainly due to a **$35.15 billion Purchase Money Note** to the FDIC related to the SVBB Acquisition[289](index=289&type=chunk) - BancShares remained well capitalized with a total risk-based capital ratio of **14.86%** at March 31, 2023[290](index=290&type=chunk) [Funding, Liquidity and Capital Overview](index=74&type=section&id=Funding,%20Liquidity%20and%20Capital%20Overview) - Deposits represent approximately **75%** of total funding at March 31, 2023[291](index=291&type=chunk) | Segment | Deposits as of March 31, 2023 (millions) | Uninsured % | | :--- | :--- | :--- | | General Banking | $85,982 | 29% | | Commercial Banking | $3,045 | 86% | | SVB Segment | $49,259 | 86% | | Total Uninsured Deposits | $69,960 | 50% | - SVB deposits declined from **$55.96 billion** at acquisition to **$49.26 billion** at March 31, 2023, and further to **$41.43 billion** by April 28, 2023, due to banking industry uncertainty[294](index=294&type=chunk) - At March 31, 2023, liquid assets totaled **$51.42 billion**, with additional contingent liquidity sources of **$79.49 billion**, including a **$70 billion FDIC Credit Facility**[295](index=295&type=chunk) | Investment Securities (millions) | Amortized Cost | Fair Value | | :--- | :--- | :--- | | Available for Sale | $9,955 | $9,061 | | Held to Maturity | $10,381 | $8,993 | | Marketable Equity | $75 | $85 | | Total | $20,411 | $18,139 | - The available for sale securities portfolio has an average duration of **3.4 years**, and held to maturity has an average duration of **4.9 years**[296](index=296&type=chunk) [RESULTS OF OPERATIONS](index=75&type=section&id=RESULTS%20OF%20OPERATIONS) [NET INTEREST INCOME AND NET INTEREST MARGIN](index=75&type=section&id=NET%20INTEREST%20INCOME%20AND%20NET%20INTEREST%20MARGIN) | Metric | Q1 2023 (millions) | Q4 2022 (millions) | Change (millions) | | :--- | :--- | :--- | :--- | | Net Interest Income (NII) | $850 | $802 | +$48 | | Net Interest Margin (NIM) | 3.41% | 3.36% | +5 bps | | Total Interest Income | $1,211 | $1,040 | +$171 | | Total Interest Expense | $361 | $238 | +$123 | | Average Interest-Earning Assets | $100,901 | $94,359 | +$6,542 | | Average Interest-Bearing Liabilities | $75,333 | $69,926 | +$5,407 | - The increase in NII was primarily due to higher yields on loans and interest-earning deposits, and loan growth, partially offset by higher costs on interest-bearing deposits and borrowings[303](index=303&type=chunk) - The SVBB Acquisition impacted average balances and NII/NIM for only five days in Q1 2023, with more prominent impacts expected in Q2 2023[303](index=303&type=chunk) | Average Interest-Earning Asset Mix | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Loans and leases | 73% | 73% | 67% | | Investment securities | 19% | 20% | 21% | | Interest-earning deposits at banks | 8% | 7% | 12% | | Average Funding Mix | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Total interest-bearing deposits | 89% | 89% | 93% | | Short-term borrowings | 1% | 4% | 1% | | Long-term borrowings | 10% | 7% | 6% | [PROVISION FOR CREDIT LOSSES](index=80&type=section&id=PROVISION%20FOR%20CREDIT%20LOSSES) | Provision for Credit Losses (millions) | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Day 2 provision for loans and leases | $462 | $0 | $454 | | Provision (benefit) for credit losses - loans and leases | $71 | $64 | $(53) | | Day 2 provision for unfunded commitments | $254 | $0 | $59 | | (Benefit) provision for unfunded commitments | $(8) | $15 | $4 | | Provision for credit losses - investment securities available for sale | $4 | $0 | $0 | | Total Provision for Credit Losses | $783 | $79 | $464 | - The **$704 million** increase in provision for credit losses from Q4 2022 to Q1 2023 was primarily due to a **$716 million day 2 provision** related to the SVBB Acquisition[309](index=309&type=chunk) [NONINTEREST INCOME](index=82&type=section&id=NONINTEREST%20INCOME) | Noninterest Income (millions) | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Rental income on operating lease equipment | $233 | $224 | $208 | | Gain on acquisition | $9,824 | $0 | $431 | | Realized loss on sale of investment securities available for sale, net | $(14) | $0 | $0 | | Factoring commissions | $19 | $26 | $27 | | Wealth management services | $42 | $35 | $35 | | Total Noninterest Income | $10,259 | $429 | $850 | - Total noninterest income increased by **$9.83 billion** from Q4 2022 to Q1 2023, primarily due to the **$9.82 billion preliminary gain on acquisition**[317](index=317&type=chunk) - Factoring commissions decreased by **$7 million** due to seasonally stronger Q4 volume and slowing customer orders[317](index=317&type=chunk) [NONINTEREST EXPENSE](index=83&type=section&id=NONINTEREST%20EXPENSE) | Noninterest Expense (millions) | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Salaries and benefits | $420 | $354 | $356 | | Maintenance and other operating lease expenses | $56 | $47 | $43 | | FDIC insurance expense | $18 | $5 | $12 | | Acquisition-related expenses | $28 | $29 | $135 | | Total Noninterest Expense | $855 | $760 | $810 | - Total noninterest expense increased by **$95 million** from Q4 2022 to Q1 2023, primarily due to higher salary and benefit costs (including SVBB Acquisition employees, incentive awards, and payroll taxes) and increased FDIC insurance expense[322](index=322&type=chunk)[323](index=323&type=chunk) [INCOME TAXES](index=84&type=section&id=INCOME%20TAXES) | Income Tax Data (millions) | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Income before income taxes | $9,471 | $392 | $225 | | Income tax (benefit) expense | $(47) | $135 | $(46) | | Effective tax rate | (0.5)% | 34.6% | (20.4)% | - The effective tax rate decreased to **(0.5)%** in Q1 2023 from 34.6% in Q4 2022, primarily due to the preliminary gain on acquisition from the SVBB Acquisition[324](index=324&type=chunk) [RESULTS BY BUSINESS SEGMENT](index=84&type=section&id=RESULTS%20BY%20BUSINESS%20SEGMENT) [General Banking](index=84&type=section&id=General%20Banking) | Metric (millions) | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Net Income | $202 | $212 | $126 | | Loans and leases | $43,353 | $42,921 | $38,528 | | Deposits | $85,982 | $84,361 | $85,458 | - Net income decreased slightly from Q4 2022 due to higher noninterest expenses, despite increased NII and noninterest income[330](index=330&type=chunk) - Loan growth was concentrated in commercial and business loans, and consumer mortgage loans increased due to lower prepayments[331](index=331&type=chunk) - Deposit growth was primarily in the Direct Bank, specifically in time and savings accounts[332](index=332&type=chunk) [Commercial Banking](index=85&type=section&id=Commercial%20Banking) | Metric (millions) | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Net Income | $94 | $99 | $121 | | Loans and leases | $28,684 | $27,782 | $26,922 | | Deposits | $3,045 | $3,225 | $4,698 | - Net income decreased from Q4 2022 due to higher noninterest expenses, partially offset by lower provision for credit losses[335](index=335&type=chunk) - Loan growth was observed in real estate, maritime, healthcare, and commercial mortgages[336](index=336&type=chunk) [Silicon Valley Banking](index=86&type=section&id=Silicon%20Valley%20Banking) | Metric (millions) | Q1 2023 (5 days) | | :--- | :--- | | Net Income | $35 | | Loans and leases | $66,171 | | Deposits | $49,259 | - Q1 2023 results for SVB reflect only **five days of operations** post-acquisition and are not indicative of future performance[338](index=338&type=chunk) - SVB loans declined from **$68.50 billion** at acquisition to **$66.17 billion** at March 31, 2023, due to maturities and paydowns[340](index=340&type=chunk) - SVB deposits declined from **$55.96 billion** at acquisition to **$49.26 billion** at March 31, 2023, due to banking industry uncertainty[341](index=341&type=chunk) [Rail](index=86&type=section&id=Rail) | Metric (millions) | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Net Income | $22 | $24 | $32 | | Rental income on operating leases | $176 | $168 | $159 | | Adjusted rental income on operating lease equipment (non-GAAP) | $74 | $76 | $75 | | Operating lease equipment, net | $7,612 | $7,433 | $7,251 | - Net income and adjusted rental income on operating leases slightly decreased from Q4 2022 due to higher maintenance costs, despite increased rental income from more railcars and higher re-lease rates[344](index=344&type=chunk) - Average re-pricing of equipment upon lease maturities was **137.0%** of the prior lease rate, and railcar utilization improved to **97.9%** at March 31, 2023[345](index=345&type=chunk) - The total operating lease fleet increased to approximately **119,700 railcars** at March 31, 2023[346](index=346&type=chunk) [Corporate](index=89&type=section&id=Corporate) | Metric (millions) | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Net Income (Loss) | $9,165 | $(78) | $(8) | | Net interest income | $13 | $35 | $24 | | Provision for credit losses | $720 | $5 | $513 | | Noninterest income | $9,809 | $14 | $453 | | Noninterest expense | $96 | $105 | $110 | - Q1 2023 results were significantly impacted by a **$9.82 billion preliminary gain on acquisition** and a **$716 million day 2 provision for credit losses** related to the SVBB Acquisition[350](index=350&type=chunk) - Q4 2022 income tax expense included **$55 million** related to the strategic decision to surrender **$1.25 billion** of BOLI policies[351](index=351&type=chunk) [BALANCE SHEET ANALYSIS](index=89&type=section&id=BALANCE%20SHEET%20ANALYSIS) [INTEREST-EARNING ASSETS](index=89&type=section&id=INTEREST-EARNING%20ASSETS) - Interest-earning deposits at banks increased to **$38.52 billion** at March 31, 2023, from $5.03 billion at December 31, 2022, primarily due to **$33.93 billion** acquired in the SVBB Acquisition and increased liquidity[353](index=353&type=chunk) - The carrying value of investment securities increased slightly to **$19.53 billion** at March 31, 2023, from $19.37 billion at December 31, 2022[355](index=355&type=chunk) - Investment securities available for sale had a net pre-tax unrealized loss of **$894 million** at March 31, 2023, improving from $972 million at December 31, 2022[356](index=356&type=chunk) - Assets held for sale increased to **$94 million** at March 31, 2023, from $60 million at December 31, 2022, primarily due to SVB portfolio loans[362](index=362&type=chunk) | Loans and Leases (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Loans and Leases | $138,288 | $70,781 | | Commercial | $54,390 | $53,455 | | Consumer | $17,727 | $17,326 | | Silicon Valley Banking | $66,171 | $0 | - The increase in loans and leases is primarily due to **$66.17 billion of SVB loans** acquired[364](index=364&type=chunk) [OPERATING LEASE EQUIPMENT, NET](index=93&type=section&id=OPERATING%20LEASE%20EQUIPMENT,%20NET) | Operating Lease Equipment (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Railcars and locomotives | $7,612 | $7,433 | | Other equipment | $719 | $723 | | Total | $8,331 | $8,156 | [INTEREST-BEARING LIABILITIES](index=93&type=section&id=INTEREST-BEARING%20LIABILITIES) | Deposits (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Deposits | $140,050 | $89,408 | | Noninterest-bearing demand | $54,649 | $24,922 | | Interest-bearing | $85,401 | $64,486 | - Total deposits increased by **$50.64 billion**, primarily due to **$49.26 billion** of SVB deposits and growth in the Direct Bank and community association banking[370](index=370&type=chunk) - Estimated uninsured deposits were **$69.96 billion (50% of total deposits)** at March 31, 2023, up from $29.13 billion (33%) at December 31, 2022, reflecting SVB deposits[374](index=374&type=chunk) | Borrowings (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Borrowings | $46,094 | $6,645 | | Federal Deposit Insurance Corporation (Purchase Money Note) | $35,151 | $0 | | Federal Home Loan Bank borrowings | $8,500 | $4,250 | - The increase in borrowings is primarily due to the **$35.15 billion Purchase Money Note** from the SVBB Acquisition and net increases in FHLB borrowings[376](index=376&type=chunk) [RISK MANAGEMENT](index=96&type=section&id=RISK%20MANAGEMENT) [CREDIT RISK](index=98&type=section&id=CREDIT%20RISK) - Credit risk is managed through underwriting, periodic reviews, and maintaining an appropriate Allowance for Credit Losses (ACL)[386](index=386&type=chunk) - SVB loans are graded using a rating system from Silicon Valley Bank, with ACL estimated based on PD, LGD, and EAD over the exposure's life, and qualitative adjustments for uncaptured risks[391](index=391&type=chunk)[392](index=392&type=chunk) | ACL (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total ACL | $1,605 | $922 | | ACL as % of Total Loans | 1.16% | 1.30% | | SVB ACL | $662 | $0 | - The **$683 million** increase in ACL is primarily due to the SVBB Acquisition, including a **$200 million Initial PCD ACL** and a **$462 million Day 2 provision** for loans and leases[395](index=395&type=chunk) | Non-Performing Assets (millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Non-Performing Assets | $875 | $674 | | Non-Accrual Loans | $828 | $627 | | OREO | $47 | $47 | | Ratio of Non-Performing Assets to Total Loans, Leases and OREO | 0.63% | 0.95% | - Non-accrual loans increased by **$201 million** due to **$224 million** from the SVBB Acquisition[403](index=403&type=chunk) - SVB loans are concentrated in **Global Fund Banking (55% of SVB loans)**, **Technology and Life Science/Healthcare (25% of SVB loans)**, and **Private Banking (14% of SVB loans)**[415](index=415&type=chunk)[417](index=417&type=chunk)[418](index=418&type=chunk)[419](index=419&type=chunk) | SVB Loans - State Concentrations | March 31, 2023 (% of Total) | | :--- | :--- | | California | 30.1% | | New York | 15.3% | | Massachusetts | 14.6% | | Texas | 6.9% | | Connecticut | 6.8% | [MARKET RISK](index=107&type=section&id=MARKET%20RISK) - BancShares is exposed to interest rate risk, managed through NII Sensitivity (short-term earnings) and EVE Sensitivity (long-term equity value)[424](index=424&type=chunk)[425](index=425&type=chunk)[426](index=426&type=chunk) - The SVBB Acquisition significantly increased the balance sheet and changed rate sensitivity, with most acquired loans having variable rates and a fixed-rate Purchase Money Note[429](index=429&type=chunk) | NII Sensitivity Simulation Analysis | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | -100 bps change | (11.1)% | (4.0)% | | +100 bps change | 11.1% | 3.4% | | +200 bps change | 22.0% | 6.7% | - BancShares maintains an **asset-sensitive interest rate risk profile**, with approximately **65%-70%** of loans having floating contractual reference rates[432](index=432&type=chunk) | EVE Sensitivity Modeling Analysis | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | -100 bps change | (6.1)% | (5.3)% | | +100 bps change | 5.3% | 4.1% | | +200 bps change | 10.0% | 3.0% | - BancShares is transitioning from LIBOR to SOFR as its preferred replacement index for floating-rate instruments, with processes in place to manage the transition[444](index=444&type=chunk)[445](index=445&type=chunk)[446](index=446&type=chunk) [LIQUIDITY RISK](index=111&type=section&id=LIQUIDITY%20RISK) - BancShares maintains a strong liquidity position with **$51.42 billion** in liquid assets and **$79.49 billion** in contingent liquidity sources at March 31, 2023[451](index=451&type=chunk) | Liquidity Sources (millions) | March 31, 2023 | | :--- | :--- | | Available Cash | $37,670 | | High Quality Liquid Securities | $13,745 | | FHLB Capacity | $4,712 | | FRB Capacity | $4,676 | | FDIC Credit Facility | $70,000 | - FHLB borrowings increased to **$8.50 billion** at March 31, 2023, from $4.25 billion at December 31, 2022, to enhance liquidity during banking uncertainty[454](index=454&type=chunk) - The FDIC Credit Facility provides up to **$70 billion** for liquidity support, including deposit withdrawal or runoff and funding unfunded commercial lending commitments acquired in the SVBB Acquisition[457](index=457&type=chunk) | Contractual Obligations (millions) | Less than 1 year | 1-3 years | 4-5 years | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Time deposits | $9,199 | $3,718 | $86 | $125 | $13,128 | | Long-term obligations | $476 | $8,259 | $35,708 | $642 | $45,085 | | Total Contractual Obligations | $10,684 | $11,977 | $35,794 | $767 | $59,222 | | Commitments (millions) | Less than 1 year | 1-3 years | 4-5 years | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Financing commitments | $48,696 | $14,112 | $5,656 | $6,043 | $74,507 | | Letters of credit | $3,614 | $295 | $118 | $12 | $4,039 | | Deferred purchase agreements | $1,707 | $0 | $0 | $0 | $1,707 | | Total Commitments | $55,271 | $14,954 | $5,793 | $6,095 | $82,113 | [CAPITAL](index=114&type=section&id=CAPITAL) - The SVBB Acquisition increased BancShares' total assets from **$109.30 billion** at December 31, 2022, to **$214.66 billion** at March 31, 2023, requiring compliance with enhanced prudential standards for Category IV banking organizations[461](index=461&type=chunk) - BancShares paid a quarterly dividend of **$0.75 per common share** in Q1 2023 and declared the same for Q2 2023[463](index=463&type=chunk) | Capital Ratio | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Risk-Based Capital | 14.86% | 13.18% | | Tier 1 Risk-Based Capital | 13.13% | 11.06% | | Common Equity Tier 1 | 12.53% | 10.08% | | Tier 1 Leverage Ratio | 16.72% | 8.99% | - BancShares' stockholders approved increasing authorized shares of Class A Common Stock from **16 million to 32 million** and Preferred Stock from **10 million to 20 million**[466](index=466&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=117&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) - The Allowance for Credit Losses (ACL) and fair values of acquired loans and core deposit intangibles from business combinations are considered critical accounting estimates[470](index=470&type=chunk)[471](index=471&type=chunk) - Fair value estimates for the SVBB Acquisition involved significant management judgment regarding discount rates, future cash flows, and market conditions, which are subject to change[471](index=471&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=117&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) - ASU 2020-04, ASU 2021-01, and ASU 2022-06 (Reference Rate Reform) provide optional expedients for contract modifications and hedging relationships related to LIBOR transition, with the sunset date extended to December 31, 2024[473](index=473&type=chunk) - ASU 2023-02 (Investments—Equity Method and Joint Ventures) allows entities to elect the proportional amortization method (PAM) for qualifying tax equity investments, effective January 1, 2024[473](index=473&type=chunk) - ASU 2022-03 (Fair Value Measurement) clarifies that contractual sale restrictions on equity securities are not considered in fair value measurement, effective January 1, 2024[473](index=473&type=chunk) [NON-GAAP FINANCIAL MEASUREMENTS](index=118&type=section&id=NON-GAAP%20FINANCIAL%20MEASUREMENTS) - BancShares provides non-GAAP financial measures to offer additional data for evaluating operations, believing they provide transparency and an alternate means of assessing results[474](index=474&type=chunk) - Adjusted rental income on operating lease equipment for the Rail segment is a non-GAAP measure calculated as gross revenue less depreciation and maintenance, used to monitor segment profitability[476](index=476&type=chunk) | Rail Segment Adjusted Rental Income (millions) | Q1 2023 | Q4 2022 | Q1 2022 | | :--- | :--- | :--- | :--- | | Net income (GAAP) | $22 | $24 | $32 | | Adjusted rental income on operating lease equipment (non-GAAP) | $74 | $76 | $75 | [Forward-Looking Statements](index=119&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements subject to inherent risks and uncertainties, including competitive, economic, political, and market conditions, interest rate fluctuations, and regulatory actions[480](index=480&type=chunk)[481](index=481&type=chunk) - Risks related to the SVBB Acquisition include integration challenges, potential loss of customers or key employees, and unanticipated costs[481](index=481&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=102&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The market risk profile has changed due to the SVBB Acquisition, with details discussed in Item 2 - BancShares' market risk profile changed significantly since December 31, 2022, primarily due to the SVBB Acquisition[483](index=483&type=chunk) - Market risk is the potential economic loss from changes in market prices and interest rates, affecting fair values of financial instruments or net interest income[483](index=483&type=chunk) [Item 4. Controls and Procedures](index=103&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were effective, and evaluation of internal controls for the SVBB Acquisition is ongoing - Disclosure controls and procedures were effective as of March 31, 2023, providing reasonable assurance for timely and accurate financial reporting[484](index=484&type=chunk) - The evaluation of changes to internal control over financial reporting related to the SVBB Acquisition is ongoing, with new controls designed and implemented as needed[485](index=485&type=chunk) - No other material changes in internal control over financial reporting occurred during the three months ended March 31, 2023[485](index=485&type=chunk) [Part Two — Other Information](index=103&type=section&id=Part%20Two%20%E2%80%94%20Other%20Information) [Item 1. Legal Proceedings](index=103&type=section&id=Item%201.%20Legal%20Proceedings) Management believes no current legal actions would materially affect the consolidated financial statements - BancShares is a defendant in various legal actions, including those from acquired banks, but management believes no current actions are material to the consolidated financial statements[487](index=487&type=chunk) - Further details on legal proceedings are provided in Note 22 — Commitments and Contingencies[487](index=487&type=chunk) [Item 1A. Risk Factors](index=103&type=section&id=Item%201A.%20Risk%20Factors) This section outlines new and updated risk factors related to the SVBB Acquisition and industry volatility - New and updated risk factors are primarily related to the **SVBB Acquisition** and recent banking industry volatility[488](index=488&type=chunk) - Strategic risks include challenges in **integrating SVBB operations**, potential loss of customers or key employees, and the possibility of not realizing anticipated benefits from the acquisition[490](index=490&type=chunk)[493](index=493&type=chunk)[494](index=494&type=chunk) - Credit risks are heightened by concentrations in certain industries (technology, life science, healthcare, private equity, venture capital, rail) and the potential for losses not fully covered by the **Shared-Loss Agreement**[491](index=491&type=chunk)[498](index=498&type=chunk)[499](index=499&type=chunk) - Market risks include significant market volatility, regulatory uncertainty, and decreased confidence in the U.S banking system due to recent bank failures, potentially leading to **deposit volatility** and special FDIC assessments[500](index=500&type=chunk)[501](index=501&type=chunk)[502](index=502&type=chunk) - Liquidity risks involve potential pressure on balance sheet liquidity and reliance on non-core funding sources, including the **FDIC Credit Facility**, which are dependent on collateral availability and counterparty willingness[503](index=503&type=chunk)[504](index=504&type=chunk) - Capital adequacy risks include increased indebtedness from the **$35 billion Purchase Money Note**, which could limit additional financing, restrict dividends, and increase vulnerability to economic conditions[506](index=506&type=chunk) - Financial reporting risks stem from the **preliminary valuation** of the SVBB Acquisition, which involves significant estimates subject to change, particularly for acquired loans with unique credit profiles and intangible assets[508](index=508&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=106&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no repurchases of BancShares' stock during the three months ended March 31, 2023 - No repurchases of BancShares' stock occurred during the three months ended March 31, 2023[509](index=509&type=chunk) [Item 6. Exhibits](index=107&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including agreements and certifications - Key exhibits include the Purchase and Assumption Agreement, Purchase Money Note, and Commercial Shared-Loss Agreement related to the **SVBB Acquisition**[510](index=510&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) are filed herewith[510](index=510&type=chunk) - Inline XBRL Instance Document and Taxonomy Extension files are furnished[510](index=510&type=chunk) [Signatures](index=107&type=section&id=Signatures) This section contains the signature of the registrant confirming the filing of the report - The report is signed by Craig L Nix, Chief Financial Officer of First Citizens BancShares, Inc, on May 10, 2023[512](index=512&type=chunk)

Acquisition Highlights - First Citizens Bank acquired Silicon Valley Bridge Bank, N A , expanding its nationwide franchise and adding scale in attractive West Coast and Northeast markets[4,9] - The acquisition includes approximately $110 1 billion in assets and $56 5 billion in deposits[24,33] - First Citizens has the option to purchase or lease 17 branches and private banking offices from Silicon Valley Bridge Bank[11] Financial Details and Downside Protection - The transaction involves a $16 5 billion discount bid on assets[33] - A five-year loss share agreement stipulates that the FDIC will reimburse First Citizens for 50% of losses on commercial loans exceeding $5 billion[21] - First Citizens entered into a five-year $35 billion note payable to the FDIC with an annual interest rate of 3 50%[23] Strategic Benefits - The acquisition diversifies First Citizens' client base and expands its portfolio, unlocking new business opportunities[15,27] - It enhances First Citizens' wealth business by adding the digital capabilities, talent, and solutions of SVB Private[13] - The combined company has total liquidity that covers uninsured deposits by over 175%[50]

Company and Industry Overview * **Company**: First Citizens BancShares, Inc. (NASDAQ: FCNCA) * **Industry**: Banking, specifically focusing on commercial lending, private banking, and wealth management. * **Key Event**: Acquisition of Silicon Valley Bridge Bank, N.A. by First Citizens Bank. Core Points and Arguments * **Acquisition Details**: * First Citizens acquired $110 billion in assets, including $72 billion in loans and $56 billion in deposits. * The acquisition included 20 branch locations and private banking offices, expanding First Citizens' footprint to 570 locations. * The transaction was structured to maintain First Citizens' strong capital ratios and liquidity position. * First Citizens entered into a loss-share agreement with the FDIC to limit credit risk. * The acquisition was immediately accretive to tangible book value per share and earnings per share. * **Strategic Benefits**: * **Scale and Growth**: The acquisition enhances First Citizens' scale, expands its customer base, and accelerates growth in key markets. * **Innovation and Technology**: The acquisition strengthens First Citizens' presence in the innovation and technology sectors, leveraging Silicon Valley Bank's expertise and relationships. * **Diversification**: The acquisition diversifies First Citizens' client base and expands its offerings, particularly in the venture capital and private equity communities. * **Risk Management**: First Citizens maintains a strong risk management culture and continues to prioritize conservative practices. Other Important Points * **Customer Value Proposition**: The acquisition strengthens First Citizens' commitment to long-term, high-quality relationships and expands its ability to serve a broader range of customer needs. * **Employee Benefits**: The acquisition creates additional career opportunities and mobility for First Citizens' employees, while also leveraging the expertise and experience of Silicon Valley Bank's team. * **Community Impact**: First Citizens and Silicon Valley Bank share a commitment to investing in and supporting their communities, and the acquisition will further enhance their ability to do so. * **Financial Impact**: * The acquisition is expected to be accretive to tangible book value per share and earnings per share. * First Citizens expects to maintain its capital ratios within or above its target ranges without the need to raise additional capital. * The acquisition is expected to generate significant revenue synergies and cost savings. * **Regulatory Considerations**: * First Citizens will remain a Category 4 bank following the acquisition. * First Citizens has no current plans to move up to a Category 3 bank. Conclusion The acquisition of Silicon Valley Bridge Bank by First Citizens Bank represents a significant strategic move that enhances the company's scale, capabilities, and market position. The transaction is expected to be immediately accretive to financial performance and provides a strong foundation for future growth and success.

PART I [Business](index=5&type=section&id=Item%201.%20Business) First Citizens BancShares, Inc. became a top 20 U.S. bank with **$109.3 billion** in assets post-CIT merger, operating in four segments and subject to enhanced prudential standards - BancShares completed its largest acquisition, the CIT Group Inc. merger, on January 3, 2022, adding approximately **$53.2 billion** in assets[26](index=26&type=chunk) - The CIT Merger positioned FCB as a top 20 U.S. bank with over **$100 billion** in total assets, integrating retail and commercial banking operations[27](index=27&type=chunk) - The company now operates through four segments: General Banking, Commercial Banking, Rail, and Corporate, with Commercial Banking and Rail primarily from the CIT acquisition[28](index=28&type=chunk) Company Overview as of December 31, 2022 | Metric | Value | | :--- | :--- | | Total Consolidated Assets | $109.3 billion | | Total Branches | 550 | | States of Operation | 22 | | Total Employees | 10,684 | - With over **$100 billion** in total assets, BancShares is a Category IV banking organization subject to enhanced prudential standards, including capital and liquidity requirements[47](index=47&type=chunk)[55](index=55&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant strategic, operational, credit, market, and compliance risks, exacerbated by post-merger integration and enhanced regulatory scrutiny - Strategic risks include potential difficulties in managing significantly expanded and more complex operations following the CIT Merger, which more than doubled the company's asset size[101](index=101&type=chunk)[106](index=106&type=chunk) - Operational risks are significant, particularly from cyberattacks, information security breaches, or technology outages, which could disrupt business and cause harm[101](index=101&type=chunk)[124](index=124&type=chunk) - Credit risks are inherent, with potential for insufficient allowance for credit losses and concentrations in specific industries like medical/dental and rail[102](index=102&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) - Market risks stem from unfavorable economic conditions and interest rate volatility, potentially compressing net interest margins and affecting loan repayment ability[102](index=102&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) - As a Category IV banking organization with over **$100 billion** in assets, the company is subject to enhanced prudential standards, increasing compliance costs and risks[102](index=102&type=chunk)[172](index=172&type=chunk)[192](index=192&type=chunk) [Properties](index=41&type=section&id=Item%202.%20Properties) The company's headquarters is an owned building in Raleigh, North Carolina, with 582 branches and offices comprising a mix of owned and leased properties - The company's headquarters is an owned, nine-story building in Raleigh, North Carolina[209](index=209&type=chunk) - As of December 31, 2022, FCB operated 582 branches and offices, with a mix of owned and leased properties[209](index=209&type=chunk) [Legal Proceedings](index=41&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal actions arising from normal business activities, none of which management considers material to the consolidated financial statements - The company is involved in various legal actions from normal business activities, but management does not consider any to be material to the financial statements[211](index=211&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=42&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A common stock is listed on Nasdaq, while Class B is traded OTC, and a **1,500,000** share repurchase program for Class A stock was completed in 2022 - The company has two classes of common stock: Class A (FCNCA) with one vote per share, listed on Nasdaq, and Class B (FCNCB) with 16 votes per share, traded OTC with limited volume[213](index=213&type=chunk) - A share repurchase program for up to **1,500,000** shares of Class A common stock, authorized on July 26, 2022, was completed during 2022[217](index=217&type=chunk) Q4 2022 Share Repurchase Activity (Class A Common Stock) | Period | Total Shares Repurchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 1 - 31, 2022 | 472,586 | $842.61 | | Nov 1 - 30, 2022 | — | $— | | Dec 1 - 31, 2022 | — | $— | | **Total Q4 2022** | **472,586** | **$842.61** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The CIT Merger significantly boosted 2022 financial results, driving substantial growth in net income, net interest income, and total assets, while increasing the provision for credit losses Selected Financial Data (Year ended December 31) | Metric (in millions, except per share) | 2022 | 2021 | | :--- | :--- | :--- | | Net Interest Income | $2,946 | $1,390 | | Provision for Credit Losses | $645 | $(37) | | Noninterest Income | $2,136 | $508 | | Net Income | $1,098 | $547 | | Diluted EPS | $67.40 | $53.88 | | Total Assets (End of Period) | $109,298 | $58,309 | | Total Loans and Leases (End of Period) | $70,781 | $32,372 | | Total Deposits (End of Period) | $89,408 | $51,406 | - The significant increases in financial performance in 2022 are primarily attributable to the CIT Merger, which added substantial earning assets, deposits, and new revenue streams like rental income on operating leases[228](index=228&type=chunk)[229](index=229&type=chunk)[239](index=239&type=chunk) - The provision for credit losses in 2022 included a one-time provision of **$513 million** for non-purchased credit deteriorated loans and unfunded commitments acquired in the CIT Merger (the "Day 2 provision")[239](index=239&type=chunk)[251](index=251&type=chunk) - Noninterest income for 2022 includes a one-time gain on acquisition of **$431 million** and new rental income on operating lease equipment of **$864 million**, both resulting from the CIT Merger[239](index=239&type=chunk)[253](index=253&type=chunk) [Quantitative and Qualitative Disclosure about Market Risk](index=99&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) The company's market risk profile significantly changed due to the CIT Merger, with management employing NII and EVE sensitivity analyses to monitor potential economic losses from market price and interest rate fluctuations - The company's market risk profile was significantly altered by the CIT Merger[469](index=469&type=chunk) - Market risk is managed through analysis of Net Interest Income (NII) Sensitivity and Economic Value of Equity (EVE) Sensitivity, with further details provided in the MD&A and financial statement notes[362](index=362&type=chunk)[364](index=364&type=chunk)[469](index=469&type=chunk) [Financial Statements and Supplementary Data](index=100&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2022 and 2021, with KPMG LLP's report highlighting critical audit matters related to the allowance for credit losses and the valuation of acquired CIT assets - The report includes audited consolidated financial statements for the years ended December 31, 2022 and 2021, audited by KPMG LLP[478](index=478&type=chunk) - The independent auditor's report identified three critical audit matters requiring complex judgment: 1) Allowance for credit losses (ACL) for legacy FCB loans, 2) ACL for loans acquired from CIT, and 3) Valuation of loans, rail equipment, and the core deposit intangible acquired from CIT[482](index=482&type=chunk)[484](index=484&type=chunk)[488](index=488&type=chunk)[492](index=492&type=chunk) Consolidated Balance Sheet Highlights (December 31) | Account (in millions) | 2022 | 2021 | | :--- | :--- | :--- | | Total Assets | $109,298 | $58,309 | | Loans and leases, net | $69,859 | $32,194 | | Goodwill | $346 | $346 | | Total Deposits | $89,408 | $51,406 | | Total Liabilities | $99,636 | $53,571 | | Total Stockholders' Equity | $9,662 | $4,738 | [Controls and Procedures](index=199&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes during Q4 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[913](index=913&type=chunk) - Management assessed internal control over financial reporting using the COSO framework and believes it to be effective as of December 31, 2022[916](index=916&type=chunk) PART III [Principal Accounting Fees and Services](index=200&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) KPMG LLP serves as the company's independent registered public accounting firm, with details on accounting fees and services incorporated by reference from the 2023 Proxy Statement - The company's independent registered public accounting firm is KPMG LLP[920](index=920&type=chunk) - Details on accounting fees and services are incorporated by reference from the 2023 Proxy Statement[921](index=921&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=201&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index of all exhibits filed with the Form 10-K, including merger agreements, corporate governance documents, and executive certifications - This section contains the Exhibit Index, listing all documents filed with the report, such as merger agreements, corporate governance documents, and executive certifications[924](index=924&type=chunk)[925](index=925&type=chunk)

Start Time: 09:00 January 1, 0000 10:04 AM ET First Citizens BancShares, Inc. (NASDAQ:FCNCA) Q4 2022 Earnings Conference Call January 26, 2023, 09:00 AM ET Company Participants Frank Holding - Chairman and CEO Craig Nix - CFO Tom Eklund - Treasurer Marisa Harney - Chief Credit Officer Elliot Howard - Manager Mergers and Acquisitions Deanna Hart - SVP, IR Conference Call Participants Brady Gailey - KBW Stephen Scouten - Piper Sandler Brian Foran - Autonomous Christopher Marinac - Janney Montgomery Scott Oper ...

Financial Performance Highlights - Net interest income increased by $7 million from Q3 2022, primarily due to a higher yield on earning assets and loan growth[47] - Noninterest income increased by $2 million from Q3 2022, driven by higher rental income on operating leases, factoring commissions, service charges on deposits, and insurance commissions[47] - Adjusted efficiency ratio declined from 643% in 2021 to 564% in 2022, with a fourth-quarter ratio of 541%[12] - Adjusted pre-provision net revenue was up $557 million, a 455% increase over 2021[11] Key Strategic Objectives and Accomplishments - Achieved approximately $200 million in cost savings in 2022 and expect to recognize the remaining approximately $50 million of targeted cost savings in 2023[10] - Loans grew by $56 billion, or 85%, driven by solid performance in both the General and Commercial banks[32] - Repurchased 15 million Class A common shares for $12 billion during the third and fourth quarters[32] Balance Sheet and Capital Management - Common Equity Tier 1 (CET1) capital ratio was 1008% in Q4 2022, a decrease of 142% compared to Q4 2021[138] - Tangible book value per common share was $57189 in Q4 2022, compared to $41074 in Q4 2021[138] - The company strategically surrendered $12 billion in BOLI policies, triggering a taxable gain of $160 million and resulting in a tax expense of $55 million[67, 81]