FIRST CITIZENS(FCNCP) - 2024 Q1 - Quarterly Report

PART I Item 1. Financial Statements This section presents the unaudited consolidated financial statements of First Citizens BancShares, Inc. and its subsidiaries, including balance sheets, statements of income, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, business combinations, investment securities, loans, and other financial components Consolidated Balance Sheets (Unaudited) Consolidated Balance Sheet Highlights (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Total assets | $217,836 | $213,758 | | Total liabilities | $195,988 | $192,503 | | Total stockholders' equity | $21,848 | $21,255 | | Total deposits | $149,609 | $145,854 | | Loans and leases, net | $133,633 | $131,555 | Consolidated Statements of Income (Unaudited) Consolidated Statements of Income Highlights (dollars in millions, except per share data) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $3,084 | $1,211 | | Total interest expense | $1,267 | $361 | | Net interest income | $1,817 | $850 | | Provision for credit losses | $64 | $783 | | Net income | $731 | $9,518 | | Net income available to common stockholders | $716 | $9,504 | | Diluted Earnings per common share | $49.26 | $653.64 | Consolidated Statements of Comprehensive Income (Unaudited) Consolidated Statements of Comprehensive Income Highlights (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $731 | $9,518 | | Other comprehensive (loss) income, net of tax | $(91) | $66 | | Total comprehensive income | $640 | $9,584 | Consolidated Statements of Changes in Stockholders' Equity (Unaudited) Changes in Stockholders' Equity (dollars in millions) | Item | Balance at Dec 31, 2023 | Net Income | Other Comprehensive Loss | Stock Based Compensation | Cash Dividends Declared | Preferred Stock Dividends Declared | Balance at Mar 31, 2024 | | :------------------------------------- | :---------------------- | :--------- | :----------------------- | :----------------------- | :---------------------- | :------------------------------- | :---------------------- | | Total Stockholders' Equity | $21,255 | $731 | $(91) | $(9) | $(23) | $(15) | $21,848 | Consolidated Statements of Cash Flows (Unaudited) Consolidated Statements of Cash Flows Highlights (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $461 | $(362) | | Net cash (used in) provided by investing activities | $(4,291) | $2,628 | | Net cash provided by (used in) financing activities | $3,620 | $(1,186) | | Change in cash and due from banks | $(210) | $1,080 | | Cash and due from banks at end of period | $698 | $1,598 | Notes to Unaudited Consolidated Financial Statements NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION This note outlines BancShares' nature of operations, accounting for business combinations (specifically the SVBB Acquisition), principles of consolidation, reclassification of prior period financial statements, changes in segment and loan class reporting, and the adoption of new accounting standards (ASU 2023-02 and ASU 2022-03) which had no material impact - BancShares is a financial holding company operating through its banking subsidiary, FCB, providing commercial and consumer banking, lending, leasing, and wealth management services across various U.S. regions[26] - The SVBB Acquisition on March 27, 2023, was accounted for using the acquisition method, with acquired assets and assumed liabilities recorded at estimated fair value[27][28] - During Q1 2024, segment reporting was updated: SVB segment was renamed SVB Commercial, private banking/wealth management components of SVB were integrated into General Bank, and Direct Bank was transitioned to Corporate[34][35][41] - Loan classes were also remapped in Q1 2024, moving private bank, CRE, and 'other' loan classes from the SVB portfolio to Commercial and Consumer portfolios[37][38][39][42] - BancShares adopted ASU 2023-02 (proportional amortization method for tax credit structures) and ASU 2022-03 (fair value measurement of equity securities with sale restrictions) as of January 1, 2024, neither of which had a material impact[45][46] NOTE 2 — BUSINESS COMBINATIONS This note details the Silicon Valley Bridge Bank (SVBB) acquisition, finalized on March 27, 2023. It covers the fair value allocation of acquired assets and assumed liabilities, the Purchase Money Note issued to the FDIC, the Value Appreciation Instrument, and the recognition of a $9.81 billion gain on acquisition - FCB acquired substantially all loans and certain other assets, and assumed all customer deposits and certain other liabilities of SVBB from the FDIC on March 27, 2023[47] - Management finalized fair value estimates for acquired assets and assumed liabilities, with no Measurement Period Adjustments recorded during the three months ended March 31, 2024[49] SVBB Acquisition Fair Value Purchase Price Allocation (dollars in millions as of March 27, 2023) | Item | Fair Value | | :------------------------------------- | :--------- | | Purchase Price Consideration: | | | Purchase Money Note | $35,808 | | Value Appreciation Instrument | $500 | | Total Purchase Price Consideration | $36,308 | | Assets Acquired: | | | Cash and due from banks | $1,310 | | Interest-earning deposits at banks | $34,001 | | Loans and leases, net of initial PCD ALLL | $68,468 | | Total assets acquired | $107,539 | | Liabilities Assumed: | | | Deposits | $56,014 | | Deferred tax liabilities | $3,364 | | Total liabilities assumed | $61,423 | | Gain on acquisition, after income taxes | $9,808 | - As consideration, FCB issued a five-year $36.07 billion Purchase Money Note to the FDIC and a $500 million Cash Settled Value Appreciation Instrument (exercised March 28, 2023)[52][53][54] - A gain on acquisition of $9.81 billion (net of income taxes) was recognized, representing the excess of the fair value of net assets acquired over the purchase price[56] NOTE 3 — INVESTMENT SECURITIES This note provides a detailed breakdown of BancShares' investment securities portfolio, including available-for-sale and held-to-maturity categories, their amortized cost, fair value, and unrealized gains and losses. It highlights a net pretax unrealized loss of $876 million for available-for-sale securities and $1,571 million for held-to-maturity securities as of March 31, 2024, with no allowance for credit loss deemed necessary Investment Securities Amortized Cost and Fair Value (dollars in millions) | Category | March 31, 2024 Amortized Cost | March 31, 2024 Fair Value | December 31, 2023 Amortized Cost | December 31, 2023 Fair Value | | :------------------------------------- | :-------------------------- | :------------------------ | :-------------------------- | :------------------------ | | Investment securities available for sale | $25,791 | $24,915 | $20,688 | $19,936 | | Investment in marketable equity securities | $75 | $79 | $75 | $84 | | Investment securities held to maturity | $10,050 | $8,479 | $9,979 | $8,503 | | Total investment securities | $35,916 | $33,473 | $30,742 | $28,523 | Gross Unrealized Losses on Investment Securities (dollars in millions) | Category | March 31, 2024 Gross Unrealized Losses | December 31, 2023 Gross Unrealized Losses | | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Investment securities available for sale | $(927) | $(867) | | Investment securities held to maturity | $(1,571) | $(1,476) | | Total gross unrealized losses | $(2,498) | $(2,343) | - No allowance for credit loss was required for available-for-sale or held-to-maturity debt securities as of March 31, 2024, due to strong credit ratings and historical performance[86][87] - Investment securities with an aggregate carrying value of $3.90 billion were pledged as collateral at March 31, 2024[88] NOTE 4 — LOANS AND LEASES This note details the composition of BancShares' loan and lease portfolio, including commercial, consumer, and SVB segments. It provides delinquency status, nonaccrual loan information, credit quality indicators, and details on loan modifications for borrowers experiencing financial difficulties. The note also outlines loans pledged as collateral for various borrowing facilities Loans and Leases by Class (dollars in millions) | Loan Class | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Commercial | $67,601 | $66,232 | | Consumer | $27,923 | $27,559 | | SVB | $39,846 | $39,511 | | Total loans and leases | $135,370 | $133,302 | Loans on Nonaccrual Status (dollars in millions) | Loan Class | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Commercial | $805 | $698 | | Consumer | $145 | $154 | | SVB | $124 | $117 | | Total nonaccrual loans | $1,074 | $969 | Amortized Cost of Loans Modified (dollars in millions, Three Months Ended March 31, 2024) | Loan Class | Term Extension | Payment Delay | Interest Rate Reduction | Extension and Interest Rate Reduction | Other Combinations | Total | | :------------------------------------- | :------------- | :------------ | :---------------------- | :------------------------------------ | :----------------- | :---- | | Commercial | $79 | $0 | $1 | $9 | $36 | $125 | | Consumer | $7 | $0 | $0 | $3 | $0 | $10 | | SVB | $18 | $30 | $0 | $0 | $19 | $67 | | Total loans and leases | $104 | $30 | $1 | $12 | $55 | $202 | Loans Pledged as Collateral (dollars in millions, March 31, 2024) | Facility | Lendable Collateral Value | Available Borrowing Capacity | | :------------------------------------- | :-------------------------- | :--------------------------- | | FHLB of Atlanta | $15,882 | $14,432 | | FRB | $5,514 | $5,514 | | FDIC | $48,921 | $12,849 | NOTE 5 — ALLOWANCE FOR LOAN AND LEASE LOSSES This note details the Allowance for Loan and Lease Losses (ALLL) activity and the components of the provision for credit losses. The ALLL decreased by $10 million to $1.74 billion at March 31, 2024, primarily due to changes in macroeconomic forecasts and a decline in specific reserves. The total provision for credit losses was $64 million for the current quarter, a significant decrease from $783 million in the prior year quarter Allowance for Loan and Lease Losses Activity (dollars in millions, Three Months Ended March 31, 2024) | Item | Commercial | Consumer | SVB | Total | | :------------------------------------- | :--------- | :------- | :---- | :---- | | Balance at beginning of period | $1,126 | $166 | $455 | $1,747 | | Provision (benefit) for loan and lease losses | $59 | $(6) | $40 | $93 | | Charge-offs | $(75) | $(7) | $(46) | $(128) | | Recoveries | $10 | $2 | $13 | $25 | | Balance at end of period | $1,120 | $155 | $462 | $1,737 | Provision for Credit Losses (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Total provision for loan and lease losses | $93 | $533 | | Total (benefit) provision for off-balance sheet credit exposure | $(29) | $246 | | Provision for investment securities available for sale credit losses | $0 | $4 | | Provision for credit losses | $64 | $783 | NOTE 6 — LEASES This note details BancShares' lease activities as both a lessee (primarily administrative offices and bank locations) and a lessor (equipment to commercial end-users). It provides supplemental balance sheet information for lease assets and liabilities, weighted-average lease terms and discount rates, and components of net lease cost and lease income Supplemental Lease Information (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Operating lease ROU assets | $355 | $354 | | Operating lease liabilities | $397 | $396 | | Weighted-average remaining operating lease terms | 7.9 years | 8.1 years | | Weighted-average operating lease discount rate | 2.76% | 2.70% | Lease Income (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Rental income on operating leases | $255 | $233 | | Interest income – Sales type and direct financing leases | $43 | $41 | | Interest income – Leveraged leases | $1 | $5 | | Total lease income | $315 | $294 | NOTE 7 — GOODWILL AND CORE DEPOSIT INTANGIBLES This note reports BancShares' goodwill balance and details the activity and expected amortization of core deposit intangibles. Goodwill remained stable at $346 million, with no impairment. Core deposit intangibles, valued at $295 million net of amortization, are being amortized over an estimated useful life of 8 years - Goodwill remained at $346 million at March 31, 2024, with no impairment during the quarter[150] Core Deposit Intangibles (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Balance, net of accumulated amortization | $295 | $312 | | Amortization for the period (Q1 2024) | $17 | N/A | | Estimated Useful Life | 8 years | 8 years | Core Deposit Intangible Expected Amortization (dollars in millions) | Period | Amount | | :------------------------------------- | :----- | | Remainder 2024 | $46 | | 2025 | $54 | | 2026 | $46 | | 2027 | $39 | | 2028 | $34 | | 2029 | $30 | | Thereafter | $46 | | Total net of accumulated amortization | $295 | NOTE 8 — VARIABLE INTEREST ENTITIES This note clarifies that BancShares had no consolidated Variable Interest Entities (VIEs) but held unconsolidated VIEs, primarily affordable housing tax credit investments. These investments, totaling $1.95 billion at March 31, 2024, are accounted for using the proportional amortization method and provide tax benefits recognized in income tax expense - BancShares had no consolidated VIEs at March 31, 2024, or December 31, 2023[155] Unconsolidated VIEs Carrying Value (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Affordable housing tax credit investments | $1,942 | $1,887 | | Other tax credit equity investments | $3 | $3 | | Other unconsolidated investments | $154 | $162 | | Total assets (maximum loss exposure) | $2,099 | $2,052 | | Liabilities for commitments to tax credit investments | $982 | $947 | Tax Credit Investments Recognized in Income Tax Expense (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Amortization of affordable housing tax credit investments | $59 | $18 | | Tax credits from affordable housing tax credit investments | $(57) | $(15) | | Other tax benefits from affordable housing tax credit investments | $(11) | $0 | | Net income tax (benefit) expense from affordable housing tax credit investments | $(9) | $3 | NOTE 9 — OTHER ASSETS This note provides a detailed breakdown of BancShares' other assets, which totaled $5.83 billion at March 31, 2024. Key components include affordable housing tax credit investments, accrued interest receivable, and fair value of derivative financial instruments Other Assets (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Affordable housing tax credit and other unconsolidated investments | $2,099 | $2,052 | | Accrued interest receivable | $914 | $832 | | Fair value of derivative financial instruments | $659 | $640 | | Pension assets | $480 | $474 | | Right of use assets for operating leases, net | $355 | $354 | | Income tax receivable | $103 | $209 | | Counterparty receivables | $79 | $114 | | Bank-owned life insurance | $106 | $105 | | Nonmarketable equity securities | $107 | $103 | | Other real estate owned | $56 | $58 | | Mortgage servicing rights | $25 | $25 | | Federal Home Loan Bank stock | $20 | $20 | | Other | $828 | $871 | | Total other assets | $5,831 | $5,857 | NOTE 10 — DEPOSITS This note details BancShares' deposit composition, which totaled $149.61 billion at March 31, 2024, an increase from December 31, 2023. It provides a breakdown by type (noninterest-bearing, checking, money market, savings, and time deposits) and the scheduled maturities for time deposits Deposit Types (dollars in millions) | Deposit Type | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Noninterest-bearing demand | $39,276 | $39,799 | | Checking with interest | $24,244 | $23,754 | | Money market | $31,393 | $30,611 | | Savings | $37,688 | $35,258 | | Time | $17,008 | $16,432 | | Total deposits | $149,609 | $145,854 | Scheduled Maturities of Time Deposits (dollars in millions, as of March 31, 2024) | Period | Amount | | :------------------------------------- | :----- | | Twelve months ended March 31, 2025 | $15,831 | | Twelve months ended March 31, 2026 | $1,065 | | Twelve months ended March 31, 2027 | $66 | | Twelve months ended March 31, 2028 | $28 | | Twelve months ended March 31, 2029 | $18 | | Thereafter | $0 | | Total time deposits | $17,008 | - Time deposits with a denomination of $250,000 or more were $4.35 billion at March 31, 2024, up from $4.16 billion at December 31, 2023[165] NOTE 11 — BORROWINGS This note details BancShares' short-term and long-term borrowings, which totaled $37.54 billion at March 31, 2024. It highlights a decrease in total borrowings from the prior quarter, primarily due to a decline in securities sold under repurchase agreements and repayments of subordinated debt, including the call of certain junior subordinated debentures Borrowings (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Securities sold under agreements to repurchase | $395 | $485 | | Long-term borrowings | $37,145 | $37,169 | | Total borrowings | $37,540 | $37,654 | Long-term Borrowings (dollars in millions, as of March 31, 2024) | Item | Maturity | Amount | | :------------------------------------- | :------------- | :----- | | Fixed-to-Floating subordinated notes at 3.375% | March 2030 | $350 | | Senior unsecured fixed-to-floating rate notes at 2.969% | September 2025 | $315 | | Fixed senior unsecured notes at 6.00% | April 2036 | $51 | | Fixed subordinated notes at 6.125% | March 2028 | $400 | | Fixed-to-Fixed subordinated notes at 4.125% | November 2029 | $100 | | Purchase Money Note to FDIC fixed at 3.50% | March 2028 | $36,072 | | Capital lease obligations | Through May 2057 | $8 | | Unamortized purchase accounting adjustments | N/A | $(151) | | Total long-term borrowings | | $37,145 | - Junior subordinated debentures (FCB/SC Capital Trust II and SCB Capital Trust I) were called during Q1 2024, resulting in a $2 million loss on extinguishment of debt[170] NOTE 12 — DERIVATIVE FINANCIAL INSTRUMENTS This note details BancShares' derivative financial instruments, categorizing them as designated hedging instruments (interest rate swaps) and non-designated instruments (interest rate and foreign exchange contracts for client needs). It provides notional amounts and fair values, highlighting that most derivatives are valued using Level 2 inputs, with a small portion using Level 3 inputs Notional Amount and Fair Value of Derivative Financial Instruments (dollars in millions, as of March 31, 2024) | Category | Notional Amount | Asset Fair Value | Liability Fair Value | | :------------------------------------- | :-------------- | :--------------- | :------------------- | | Derivatives designated as hedging instruments | $1,149 | $0 | $0 | | Interest rate contracts – non-qualifying hedges | $25,623 | $573 | $(590) | | Foreign exchange contracts – non-qualifying hedges | $8,630 | $78 | $(63) | | Other contracts – non-qualifying hedges | $1,145 | $8 | $(1) | | Total derivatives not designated as hedging instruments | $35,398 | $659 | $(654) | | Gross derivatives fair values | | $659 | $(654) | - Gains on non-qualifying hedges recognized in the Consolidated Statements of Income totaled $19 million for the three months ended March 31, 2024[177] NOTE 13 — OTHER LIABILITIES This note details the components of BancShares' other liabilities, which totaled $7.69 billion at March 31, 2024. The largest components include deferred taxes, commitments to fund tax credit investments, and fair value of derivative financial instruments Other Liabilities (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Deferred taxes | $3,545 | $3,579 | | Commitments to fund tax credit investments | $982 | $947 | | Incentive plan liabilities | $283 | $676 | | Fair value of derivative financial instruments | $654 | $636 | | Accrued expenses and accounts payable | $549 | $351 | | Lease liabilities | $397 | $396 | | Reserve for off-balance sheet credit exposure | $287 | $316 | | Accrued interest payable | $141 | $137 | | Other | $849 | $868 | | Total other liabilities | $7,687 | $7,906 | NOTE 14 — FAIR VALUE This note outlines BancShares' fair value measurements, categorizing financial instruments into a three-level hierarchy based on input observability. It details assets and liabilities measured at fair value on both a recurring and non-recurring basis, including investment securities, marketable equity securities, loans held for sale, and derivatives, and provides quantitative information on Level 3 measurements - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[180] Assets Measured at Fair Value - Recurring Basis (dollars in millions, March 31, 2024) | Item | Total | Level 1 | Level 2 | Level 3 | | :------------------------------------- | :---- | :------ | :------ | :------ | | Investment securities available for sale | $24,915 | $0 | $24,754 | $161 | | Marketable equity securities | $79 | $32 | $47 | $0 | | Loans held for sale | $50 | $0 | $50 | $0 | | Total derivative assets | $659 | $0 | $650 | $9 | | Total Assets | $25,703 | $32 | $25,401 | $170 | Liabilities Measured at Fair Value - Recurring Basis (dollars in millions, March 31, 2024) | Item | Total | Level 1 | Level 2 | Level 3 | | :------------------------------------- | :---- | :------ | :------ | :------ | | Total derivative liabilities | $654 | $0 | $653 | $1 | | Total Liabilities | $654 | $0 | $653 | $1 | Assets Measured at Fair Value - Non-recurring Basis (dollars in millions, March 31, 2024) | Item | Total | Level 1 | Level 2 | Level 3 | | :------------------------------------- | :---- | :------ | :------ | :------ | | Assets held for sale - loans | $11 | $0 | $0 | $11 | | Loans - collateral dependent loans | $157 | $0 | $0 | $157 | | Other real estate owned | $36 | $0 | $0 | $36 | | Total | $204 | $0 | $0 | $204 | NOTE 15 — STOCKHOLDERS' EQUITY This note details the composition and activity of BancShares' common and preferred stock. As of March 31, 2024, Class A common stock outstanding increased slightly due to vested restricted stock units, while Class B common stock remained stable. It also outlines the terms and dividend rates for Series A, B, and C non-cumulative perpetual preferred stock Number of Shares of Common Stock Outstanding | Class | December 31, 2023 | Restricted Stock Units Vested, Net of Taxes | March 31, 2024 | | :------------------------------------- | :---------------- | :------------------------------------------ | :------------- | | Class A Common Stock | 13,514,933 | 9,617 | 13,524,550 | | Class B Common Stock | 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[209] Non-Cumulative Perpetual Preferred Stock (dollars in millions, except per share data) | Series | Issuance Date | Earliest Redemption Date | Liquidation Preference Per Share | Total Liquidation Preference | Dividend | | :------------------------------------- | :------------ | :----------------------- | :----------------------------- | :--------------------------- | :------- | | Series A | March 12, 2020 | March 15, 2025 | $1,000 | $345 | 5.375% | | Series B | January 3, 2022 | January 4, 2027 | $1,000 | $325 | SOFR + 3.972% | | Series C | January 3, 2022 | January 4, 2027 | $25 | $200 | 5.625% | NOTE 16 — ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME This note details the components and changes in Accumulated Other Comprehensive (Loss) Income (AOCI). As of March 31, 2024, total AOCI was a loss of $582 million, primarily driven by unrealized losses on securities available for sale, which increased by $91 million during the quarter Components of Accumulated Other Comprehensive (Loss) Income (dollars in millions) | Item | March 31, 2024 Net of Income Taxes | December 31, 2023 Net of Income Taxes | | :------------------------------------- | :--------------------------------- | :--------------------------------- | | Unrealized loss on securities available for sale | $(668) | $(577) | | Unrealized loss on securities available for sale transferred to held to maturity | $(5) | $(5) | | Defined benefit pension items | $91 | $91 | | Total accumulated other comprehensive loss | $(582) | $(491) | Changes in Accumulated Other Comprehensive (Loss) Income by Component (dollars in millions, Three Months Ended March 31, 2024) | Item | Unrealized loss on securities available for sale | Total accumulated other comprehensive (loss) income | | :------------------------------------- | :--------------------------------------------- | :------------------------------------------ | | Balance as of December 31, 2023 | $(577) | $(491) | | AOCI activity before reclassifications | $(91) | $(91) | | Other comprehensive loss for the period | $(91) | $(91) | | Balance as of March 31, 2024 | $(668) | $(582) | NOTE 17 — EARNINGS PER COMMON SHARE This note provides the computation of basic and diluted earnings per common share for BancShares. For the three months ended March 31, 2024, basic EPS was $49.27 and diluted EPS was $49.26, based on net income available to common stockholders of $716 million Earnings per Common Share (dollars in millions, except per share data) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income available to common stockholders | $716 | $9,504 | | Basic shares outstanding | 14,533,302 | 14,526,693 | | Diluted shares outstanding | 14,536,442 | 14,539,709 | | Basic Earnings per common share | $49.27 | $654.22 | | Diluted Earnings per common share | $49.26 | $653.64 | NOTE 18 — INCOME TAXES This note discusses BancShares' effective income tax rates (ETRs), which increased significantly to 27.2% for the three months ended March 31, 2024, from (0.5)% in the prior year quarter. This change was primarily due to the non-taxable nature of the gain on acquisition related to the SVBB Acquisition in the prior year - BancShares' effective income tax rate (ETR) was 27.2% for the three months ended March 31, 2024, a significant increase from (0.5)% in the prior year quarter[215] - The increase in ETR was primarily due to the non-taxable nature of the gain on acquisition relating to the SVBB Acquisition in the prior year quarter[215] - The ETR is based on a projection of the annual ETR and is impacted by factors such as the mix of domestic and international earnings, changes in tax laws, and valuation allowances[216] NOTE 19 — EMPLOYEE BENEFIT PLANS This note outlines the components of net periodic benefit cost for BancShares' non-contributory defined benefit pension plans. For the three months ended March 31, 2024, the net periodic benefit cost was a benefit of $6 million Components of Net Periodic Benefit Cost (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------- | :-------------------------------- | :-------------------------------- | | Service cost | $2 | $2 | | Interest cost | $15 | $15 | | Expected return on assets | $(23) | $(21) | | Net periodic benefit | $(6) | $(4) | NOTE 20 — BUSINESS SEGMENT INFORMATION This note details the changes in BancShares' segment reporting during Q1 2024, now comprising General Bank, Commercial Bank, SVB Commercial, and Rail, with unallocated financial information in 'Corporate'. It provides descriptions for each segment, outlining their products, services, and revenue generation methods - Segment reporting was updated in Q1 2024; the SVB segment was renamed SVB Commercial, private banking/wealth management from SVB integrated into General Bank, and Direct Bank moved to Corporate[221][222] - The General Bank segment serves consumers and businesses through branches and digital channels, offering deposits, loans, wealth management, and payment services[223][224] - The Commercial Bank segment provides lending, leasing, capital markets, and factoring services to small and middle-market companies across various industries[225][226][227] - The SVB Commercial segment focuses on commercial clients and investors in the innovation ecosystem, including private equity and venture capital firms, offering specialized loan and deposit products[228][229] - The Rail segment offers customized leasing and financing solutions for railcars and locomotives to railroads and shippers in North America, generating revenue primarily from rental income[230] - The Corporate segment includes centralized Treasury functions, managing investment securities, interest-earning deposits, and corporate/wholesale funding, and accounts for acquisition-related items[231][232] NOTE 21 — COMMITMENTS AND CONTINGENCIES This note details BancShares' off-balance sheet financial instruments, including financing commitments, letters of credit, and deferred purchase agreements, which involve credit, interest rate, or liquidity risk. It also addresses legal proceedings, stating that no current actions are material to the consolidated financial statements, but estimates a reasonably possible loss range of up to $10 million for certain matters Credit-Related Commitments (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Financing assets (excluding leases) | $56,685 | $57,567 | | Standby letters of credit | $2,224 | $2,412 | | Other letters of credit | $104 | $103 | | Deferred Purchase Agreements | $1,742 | $2,076 | | Purchase and Funding Commitments | $551 | $685 | - Financing commitments, letters of credit, and deferred purchase agreements involve elements of credit, interest rate, or liquidity risk, with commitment amounts not necessarily reflecting actual future cash flow requirements[235][239][241][242] - Management estimates an aggregate range of reasonably possible losses of up to $10 million in excess of established reserves and insurance for certain litigation matters, but this does not represent maximum loss exposure[247][248] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on First Citizens BancShares' financial condition and results of operations, covering an executive overview, detailed analysis of operating results, balance sheet changes, risk management strategies, capital position, critical accounting estimates, recent accounting pronouncements, and non-GAAP financial measures EXECUTIVE OVERVIEW This overview describes BancShares' business, regulatory environment, and significant events, including the SVBB acquisition and recent segment/loan class updates. It also discusses economic and regulatory developments, such as the Federal Reserve's interest rate policy and proposed capital requirements, and summarizes key financial performance and balance sheet highlights for Q1 2024 - BancShares provides diverse financial services, including retail, mortgage, wealth management, small and middle market banking, factoring, and leasing, through an extensive branch network and a nationwide digital banking platform (Direct Bank)[255][256] - The SVBB Acquisition expanded the client base to private equity and venture capital, diversified the loan portfolio across technology and life sciences/healthcare, and enhanced wealth management capabilities[258] - Segment reporting was updated in Q1 2024, renaming SVB to SVB Commercial, integrating SVB private banking/wealth into General Bank, and moving Direct Bank to Corporate[264][265] - The Federal Reserve maintained benchmark federal funds rate at 5.25%-5.50% in May 2024, with potential rate cuts later in the year, while economic uncertainty and concerns over commercial real estate (CRE) credit trends persist[268][269] - BancShares accrued an additional $9 million FDIC insurance special assessment in Q1 2024, following a $64 million charge in 2023, due to expected larger losses to the deposit insurance fund[270] Selected Financial Data Highlights (dollars in millions, except per share data) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Net income | $731 | $514 | +$217 (42%) | | Net income available to common stockholders | $716 | $499 | +$217 (44%) | | Earnings per diluted common share | $49.26 | $34.33 | +$14.93 | | Net interest income | $1,817 | $1,911 | $(94) (5%) | | Net interest margin | 3.67% | 3.86% | -19 bps | | Provision for credit losses | $64 | $249 | $(185) (75%) | | Noninterest income | $627 | $543 | +$84 (16%) | | Noninterest expense | $1,376 | $1,492 | $(116) (8%) | | Total loans and leases (ending balance) | $135,370 | $133,302 | +$2,068 (2%) | | Total investment securities (ending balance) | $35,044 | $29,999 | +$5,045 (17%) | | Total deposits (ending balance) | $149,609 | $145,854 | +$3,755 (3%) | | Total borrowings (ending balance) | $37,540 | $37,654 | $(114) | | Common equity Tier 1 ratio | 13.44% | 13.36% | +0.08% | | Ratio of nonaccrual loans to total loans | 0.79% | 0.73% | +0.06% | | Allowance for loan and lease losses to loans ratio | 1.28% | 1.31% | -0.03% | | Net charge off ratio | 0.31% | 0.53% | -0.22% | RESULTS OF OPERATIONS This section analyzes BancShares' operating results, focusing on net interest income and margin, provision for credit losses, noninterest income, noninterest expense, and income taxes. It highlights the drivers of changes in these financial metrics for the current quarter compared to the linked and prior year quarters NET INTEREST INCOME AND NET INTEREST MARGIN Net interest income (NII) for Q1 2024 decreased by $94 million (5%) to $1.82 billion from the linked quarter, primarily due to a $61 million increase in interest expense and a $33 million decrease in interest income. Net interest margin (NIM) also decreased by 19 basis points to 3.67% Net Interest Income and Margin (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Net interest income | $1,817 | $1,911 | $(94) | | Net interest margin | 3.67% | 3.86% | -19 bps | | Yield on total interest-earning assets | 6.23% | 6.30% | -7 bps | | Rate on total interest-bearing liabilities | 3.49% | 3.37% | +12 bps | Interest Income Components (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Interest and fees on loans | $2,354 | $2,391 | $(37) | | Interest on investment securities | $279 | $239 | +$40 | | Interest on deposits at banks | $448 | $485 | $(37) | Interest Expense Components (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Deposits | $928 | $865 | +$63 | | Borrowings | $339 | $341 | $(2) | - The decrease in loan interest income was primarily due to a $35 million decline in loan discount accretion from the SVBB Acquisition[292] - The increase in interest expense on deposits was driven by higher average balances in the Direct Bank and increased deposit rates[292] PROVISION FOR CREDIT LOSSES The provision for credit losses for Q1 2024 significantly decreased by $185 million (75%) to $64 million from the linked quarter. This reduction was mainly due to a $158 million decrease in the provision for loan and lease losses, driven by changes in macroeconomic forecasts, lower specific reserves, and reduced net charge-offs, alongside an increased benefit from off-balance sheet credit exposure Provision for Credit Losses (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Provision for loan and lease losses | $93 | $251 | $(158) | | (Benefit) provision for off-balance sheet credit exposure | $(29) | $(2) | $(27) | | Provision for investment securities available for sale credit losses | $0 | $0 | $0 | | Total provision for credit losses | $64 | $249 | $(185) | - The decrease in provision for loan and lease losses was primarily related to changes in macroeconomic forecasts, a decline in specific reserves on individually evaluated loans, and lower net charge-offs[297] - The benefit from off-balance sheet credit exposure increased due to a continued decline in unfunded commitments[298] NONINTEREST INCOME Noninterest income for Q1 2024 increased by $84 million (16%) to $627 million from the linked quarter. This rise was primarily driven by an $83 million adjustment to the gain on acquisition in the linked quarter. Rental income on operating lease equipment saw a modest increase, while factoring commissions and capital markets fees decreased Noninterest Income (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Rental income on operating lease equipment | $255 | $252 | +$3 | | Fee income and other service charges | $75 | $80 | $(5) | | Client investment fees | $50 | $51 | $(1) | | Wealth management services | $51 | $48 | +$3 | | International fees | $28 | $30 | $(2) | | Service charges on deposit accounts | $44 | $44 | $0 | | Factoring commissions | $17 | $22 | $(5) | | Cardholder services, net | $40 | $36 | +$4 | | Merchant services, net | $12 | $12 | $0 | | Insurance commissions | $15 | $14 | +$1 | | Fair value adjustment on marketable equity securities, net | $(4) | $9 | $(13) | | Gain on sale of leasing equipment, net | $10 | $2 | +$8 | | Gain on acquisition | $0 | $(83) | +$83 | | Loss on extinguishment of debt | $(2) | $0 | $(2) | | Other noninterest income | $36 | $26 | +$10 | | Total noninterest income | $627 | $543 | +$84 | - The increase in total noninterest income was primarily due to an $83 million adjustment to the gain on acquisition in the linked quarter, as income tax estimates related to the SVBB Acquisition were refined[303] - Rental income on operating lease equipment increased due to a higher operating lease equipment balance, improved utilization, and re-pricing in the rail portfolio[302] - Factoring commissions decreased by $5 million, mostly due to lower volume following seasonal holiday retail activity[303] NONINTEREST EXPENSE Noninterest expense for Q1 2024 decreased by $116 million (8%) to $1.38 billion from the linked quarter. This reduction was largely driven by lower acquisition-related expenses and a smaller FDIC insurance special assessment, partially offset by higher salaries and benefits due to seasonal adjustments and annual merit increases Noninterest Expense (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Depreciation on operating lease equipment | $96 | $96 | $0 | | Maintenance and other operating lease expenses | $45 | $59 | $(14) | | Salaries and benefits | $744 | $714 | +$30 | | Net occupancy expense | $62 | $65 | $(3) | | Equipment expense | $114 | $114 | $0 | | Professional fees | $25 | $28 | $(3) | | Third-party processing fees | $60 | $66 | $(6) | | FDIC insurance expense | $41 | $82 | $(41) | | Marketing expense | $14 | $24 | $(10) | | Acquisition-related expenses | $58 | $116 | $(58) | | Intangible asset amortization | $17 | $17 | $0 | | Other noninterest expense | $100 | $111 | $(11) | | Total noninterest expense | $1,376 | $1,492 | $(116) | - Salaries and benefits increased by $30 million due to seasonal adjustments for the 401(k) plan, payroll taxes, and annual merit adjustments[308] - FDIC insurance expense decreased by $41 million, primarily because the special assessment declined from $64 million in the linked quarter to $9 million in the current quarter[308] - Acquisition-related expenses decreased by $58 million, reflecting lower severance, retention costs, and professional fees[309][310] INCOME TAXES The effective tax rate (ETR) for Q1 2024 was 27.2%, a slight decrease from 27.9% in the linked quarter, primarily due to the impact of return to provision adjustments. The ETR is influenced by various factors, including domestic/international earnings mix and changes in tax laws Income Tax Data (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Income before income taxes | $1,004 | $713 | +$291 | | Income tax expense | $273 | $199 | +$74 | | Effective tax rate | 27.2% | 27.9% | -0.7% | - The decrease in ETR for the current quarter compared to the linked quarter was primarily due to the impact of return to provision adjustments recorded[313] RESULTS BY BUSINESS SEGMENT This section presents the financial performance of BancShares' updated business segments: General Bank, Commercial Bank, SVB Commercial, Rail, and Corporate. It highlights key income statement and balance sheet trends for each segment, reflecting the impact of strategic reclassifications and market dynamics General Bank The General Bank segment's net income increased from the linked quarter, driven by lower taxes, reduced provision for credit losses, and higher noninterest income, despite increased noninterest expenses. Loan growth was concentrated in commercial and business loans, while deposits increased, particularly in time deposit and money market products General Bank: Financial Data (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Net interest income | $691 | $692 | $(1) | | Provision for credit losses | $28 | $37 | $(9) | | Noninterest income | $145 | $137 | +$8 | | Noninterest expense | $520 | $490 | +$30 | | Segment net income | $210 | $205 | +$5 | | Loans and leases (period end) | $63,732 | $62,832 | +$900 | | Deposits (period end) | $71,150 | $68,729 | +$2,421 | - Segment NII was relatively flat as higher interest expense for deposits offset higher interest income from loan growth[317] - Loan growth was primarily in commercial and business loans, as well as from small business lending and wealth channels[318] - Deposit growth was mainly in the branch network, largely in time deposit and money market products[319] Commercial Bank The Commercial Bank segment's net income increased significantly from the linked quarter, primarily due to a lower provision for credit losses, despite higher noninterest expenses and slightly lower noninterest income. Loan growth was observed across various industry verticals, while deposits saw a modest decline Commercial Bank: Financial Data (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Net interest income | $270 | $271 | $(1) | | Provision for credit losses | $14 | $164 | $(150) | | Noninterest income | $136 | $139 | $(3) | | Noninterest expense | $228 | $208 | +$20 | | Segment net income | $122 | $24 | +$98 | | Loans and leases (period end) | $31,730 | $30,936 | +$794 | | Operating lease equipment, net (period end) | $763 | $780 | $(17) | | Deposits (period end) | $3,023 | $3,228 | $(205) | - The decline in the provision for credit losses was primarily due to a release in the ALLL[322] - Loan growth was driven by increases in healthcare, technology, media and telecommunications, and energy industry verticals[323] SVB Commercial The SVB Commercial segment's net income increased from the linked quarter, driven by higher net interest income and a lower provision for credit losses. Loan balances increased due to global fund banking, partially offset by declines in technology and life science/healthcare. Deposits declined as client cash usage outpaced new funding SVB Commercial: Financial Data (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Net interest income | $546 | $519 | +$27 | | Provision for credit losses | $22 | $48 | $(26) | | Noninterest income | $137 | $135 | +$2 | | Noninterest expense | $384 | $384 | $0 | | Segment net income | $202 | $174 | +$28 | | Loans and leases (period end) | $39,846 | $39,511 | +$335 | | Deposits (period end) | $34,014 | $34,730 | $(716) | - Net interest income increased due to higher loan balances and decreases in deposit balances, partially offset by higher deposit costs[324] - Loan growth was primarily in global fund banking loans, partially offset by declines in technology and life science/healthcare portfolios[325] - Deposits declined as cash usage by clients offset new funding activity[326] Rail The Rail segment's net income increased from the linked quarter, primarily due to lower maintenance expenses and higher rental income on operating lease equipment. Rental income benefited from improved utilization, strong re-pricing, and a larger fleet. The segment's fleet consists of approximately 122,900 railcars and locomotives, with a diverse composition Rail: Financial Data (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Rental income on operating leases | $198 | $195 | +$3 | | Depreciation on operating lease equipment | $50 | $49 | +$1 | | Maintenance and other operating lease expenses | $45 | $59 | $(14) | | Adjusted rental income on operating lease equipment (non-GAAP) | $103 | $87 | +$16 | | Segment net income | $33 | $22 | +$11 | | Operating lease equipment, net (period end) | $8,048 | $7,966 | +$82 | - Rental income on operating leases increased due to higher utilization, strong re-pricing (125.0% of prior lease rate), and a higher number of rail cars owned and leased[328][329] - Maintenance and other operating lease expenses were lower due to reduced repairs and freight charges, as these expenses tend to be variable[328] - The total operating lease fleet at March 31, 2024, consisted of approximately 122,900 railcars and locomotives, with 99.2% utilization[330][329] Corporate The Corporate segment's net income increased from the linked quarter, primarily due to lower acquisition-related expenses and a reduced FDIC insurance special assessment. Net interest income decreased due to lower loan discount accretion and higher interest expense on Direct Bank deposits. The prior year quarter included significant impacts from the SVBB acquisition gain and related credit loss provisions Corporate: Financial Data (dollars in millions) | Item | Three Months Ended March 31, 2024 | Three Months Ended December 31, 2023 | Change (QoQ) | | :------------------------------------- | :-------------------------------- | :----------------------------------- | :----------- | | Net interest income | $353 | $471 | $(118) | | Provision for credit losses | $0 | $0 | $0 | | Noninterest income | $7 | $(65) | +$72 | | Noninterest expense | $129 | $286 | $(157) | | Segment net income | $164 | $89 | +$75 | | Deposits (period end) | $41,408 | $39,154 | +$2,254 | - Net interest income decreased mainly from lower loan discount accretion income related to the SVBB Acquisition and higher interest expense on Direct Bank interest-bearing deposits[334] - Noninterest expenses were down due to decreases in acquisition-related expenses ($58 million in Q1 2024 vs. $116 million in Q4 2023) and the FDIC insurance special assessment ($9 million in Q1 2024 vs. $64 million in Q4 2023)[335] - The prior year quarter (Q1 2023) included a $9.82 billion gain on acquisition and $716 million in day 2 provisions for credit losses related to the SVBB Acquisition[336] BALANCE SHEET ANALYSIS This section analyzes BancShares' balance sheet, focusing on interest-earning assets, operating lease equipment, and interest-bearing liabilities. It details changes in deposits at banks, investment securities, loans, and borrowings, highlighting growth trends and composition shifts INTEREST-EARNING ASSETS Interest-earning assets totaled $198.59 billion at March 31, 2024. Interest-earning deposits at banks decreased by $2.82 billion to $30.79 billion, while investment securities increased by $5.05 billion to $35.04 billion, primarily due to purchases of short-duration U.S. agency mortgage-backed and U.S. Treasury securities. Loans and leases increased by $2.07 billion to $135.37 billion - Interest-earning deposits at banks decreased by $2.82 billion to $30.79 billion at March 31, 2024, due to liquidity and funding management, including purchases of investment securities[338] - The carrying value of investment securities increased by $5.05 billion (17%) to $35.04 billion at March 31, 2024, primarily driven by $6.47 billion in purchases of U.S. agency residential mortgage-backed and short-duration U.S. Treasury investment securities[341] - Investment securities available for sale had a net pretax unrealized loss of $876 million at March 31, 2024, reflecting market interest rate impacts[342] Investment Securities Composition (dollars in millions, as of March 31, 2024) | Category | Amortized Cost | Fair Value | | :------------------------------------- | :------------- | :--------- | | Investment securities available for sale | $25,791 | $24,915 | | Investment in marketable equity securities | $75 | $79 | | Investment securities held to maturity | $10,050 | $8,479 | | Total investment securities | $35,916 | $33,473 | Loans and Leases (dollars in millions) | Category | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Commercial | $67,601 | $66,232 | | Consumer | $27,923 | $27,559 | | SVB | $39,846 | $39,511 | | Total loans and leases | $135,370 | $133,302 | - Loan growth was primarily in commercial and business loans in the General Bank, various industry verticals in the Commercial Bank, and global fund banking in SVB, partially offset by declines in SVB technology and life science/healthcare portfolios[351] OPERATING LEASE EQUIPMENT, NET Operating lease equipment, net, totaled $8.81 billion at March 31, 2024, a slight increase from December 31, 2023. This portfolio is predominantly comprised of railcars and locomotives within the Rail segment, with the remainder in the Commercial Bank segment Operating Lease Equipment (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Railcars and locomotives | $8,048 | $7,966 | | Other equipment | $763 | $780 | | Total | $8,811 | $8,746 | INTEREST-BEARING LIABILITIES Total interest-bearing liabilities increased by $4.16 billion (3%) to $147.87 billion at March 31, 2024, primarily driven by deposit growth. Total deposits rose by $3.76 billion to $149.61 billion, mainly from savings deposit growth in the Direct Bank. Total borrowings decreased by $114 million to $37.54 billion due to declines in short-term borrowings and subordinated debt redemptions - Total interest-bearing liabilities increased by $4.16 billion (3%) to $147.87 billion at March 31, 2024, primarily due to deposit growth[356] Deposits by Type (dollars in millions) | Deposit Type | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Noninterest-bearing demand | $39,276 | $39,799 | | Interest-bearing deposits | $110,333 | $106,055 | | Total deposits | $149,609 | $145,854 | - The increase in deposits was mainly attributable to savings deposit growth in the Direct Bank[357][361] - Uninsured deposits were estimated at $54.85 billion (36.7% of total deposits) at March 31, 2024[363] Borrowings (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Securities sold under customer repurchase agreements | $395 | $485 | | FDIC 3.500% fixed rate note due March 2028 | $35,858 | $35,846 | | Senior Unsecured Borrowings | $376 | $377 | | Subordinated debt | $903 | $938 | | Other borrowings | $8 | $8 | | Total borrowings | $37,540 | $37,654 | - The decrease in total borrowings was primarily due to declines in short-term borrowings and redemptions of Capital Trust debentures[366] RISK MANAGEMENT BancShares maintains a comprehensive Risk Management Framework and Risk Appetite Framework to manage various risks, including credit, counterparty, asset, market, and liquidity risks. The Board's Risk Committee oversees these functions, ensuring adherence to risk tolerances and monitoring potential impacts from economic conditions and geopolitical events - BancShares operates with a moderate risk appetite, utilizing a comprehensive Risk Management Framework and Risk Appetite Framework and Statement, with oversight from the Board's Risk Committee[369][370] - Enterprise-wide stress testing activities are conducted for various risks to ensure continued operations during stressed periods[371] - Ongoing assessments monitor potential impacts from international tensions, elevated market volatility, global supply chain disruptions, and recessionary pressures, particularly concerning commercial real estate (CRE) properties[373] CREDIT RISK BancShares manages credit risk through underwriting, periodic reviews, and maintaining an Allowance for Loan and Lease Losses (ALLL). The ALLL decreased by $10 million to $1.74 billion at March 31, 2024, with a ratio of 1.28% to total loans. Nonaccrual loans increased to $1.07 billion, primarily in commercial and SVB portfolios. The CRE portfolio is diversified, but general office loans show elevated non-performing metrics - The ALLL at March 31, 2024, was $1.74 billion, a decrease of $10 million from December 31, 2023, primarily due to changes in macroeconomic forecasts and a decline in specific reserves[381][382] ALLL Ratios | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | ALLL to total loans and leases | 1.28% | 1.31% | | Commercial ALLL to commercial loans and leases | 1.66% | 1.70% | | Consumer ALLL to consumer loans | 0.56% | 0.60% | | SVB ALLL to SVB loans | 1.16% | 1.15% | - Net charge-offs during Q1 2024 were $103 million, a decrease of $74 million from the linked quarter, with a net charge-off ratio of 0.31%[384] Non-Performing Assets (dollars in millions) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------- | :------------- | :---------------- | | Total nonaccrual loans | $1,074 | $969 | | Other real estate owned and repossessed assets | $58 | $62 | | Total nonperforming assets | $1,132 | $1,031 | | Ratio of total nonperforming assets to total loans, leases, OREO and repossessed assets | 0.84% | 0.77% | | Ratio of nonaccrual loans and leases to total loans and leases | 0.79% | 0.73% | - Nonaccrual loans increased by $105 million, primarily in commercial and industrial, non-owner occupied commercial