First Citizens BancShares, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the first Citizens BancShares Q2 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require operator assistance during the program, please press star then 0. As a reminder, today's conference is being recorded. I would now like to do so if this conference comes to Tom Heath, Director of Investor Relations. You may begin. Thank you, Kevin.

Good morning and thank you all so much for joining us. It is my great pleasure this morning to introduce you to our chairman and chief executive officer, Frank Holding, as well as our chief financial officer, Craig Nix. The two will provide an overview of the company and our second quarter results, after which we will be happy to take any questions you may have. We are also delighted to have several other members of the senior team with us, and they too will be available for Q&A. Our remarks today will reference an earnings presentation that is available at firstcitizens.com slash earnings presentation. I should note that the statements made during the call and statements included in the presentation materials may be forward-looking statements, and that factors that could cause actual results to differ materially from those statements are listed in the earnings press release, the presentation materials, and the company's SEC filings. Thank you, Tom, and good morning, everyone. All of us have been through

Thank you for joining us today. Today represents the first time that we've conducted an earnings call. We concluded that as we've grown, have issued more securities into the market, and are getting a lot more attention for both analysts and investors, that all of our constituencies would benefit from the calls. So thank you again for joining us, and we're delighted to be here. Prior to diving into our second quarter results, We thought it would be helpful to quickly review a few pages on who we are and what we think about ourselves, so we will briefly do so and then move to the second quarter earnings commentary. While we begin on page three, I'll note that First Citizens has operated since 1898, and I've personally been or have had the good fortune to be A part of the organization since 1983. Over the past three decades, we've grown assets from approximately $3.5 billion to almost $48 billion today. With deposits of $41.5 billion as of June 30, we now rank as approximately the 38th largest U.S. bank. Our Chief Financial Officer, Craig Nix, will cover our second quarter financial performance later in the presentation, but despite a challenging environment, we've achieved a return on assets of close to 1% and a return on common equity of 11.40% in the first six months of 2020. The core of the franchise The attractive markets of the Carolinas represent 73% of our deposit base, with many adjacent markets in the greater southeast from Maryland to Florida. Beginning with my predecessor, however, we have from time to time expanded out of market as we saw opportunities. We will touch on this in more detail shortly, but we are pleased with all of our geographies and to an extent we are a national franchise. Our dense Carolinas footprint offers clients a full selection of retail, business and commercial services. Our fee-based lines of business are integrated into the client relationship and are focused on providing a holistic banking relationship We take great pride in our Forever First brand, and for over 100 years, customers have trusted First Citizens with their money and their financial futures. Outside the Carolinas markets, we operate more of a business and commercial focused model that is located in high growth MSAs that we find attractive. We have been in many of these markets now for over two decades. and have been able to bring the same brand and style of banking that distinguishes First Citizens into Carolinas. We've remained relatively profitable every year in modern history and most importantly we've remained purposefully grounded in the belief that delivering better banking helps people live better lives. We work very hard to consistently live up to this ideal. Let's move on to page I won't spend a lot of time on page four and our key drivers of long-term success, but suffice it to say that we are proud of all aspects of the organization and we believe the attributes listed on this page have enabled us to deliver very good results for all our stakeholders consistently over time and will continue to do so going forward. Advancing to page 5, our top 10 deposit markets are all within the core of our southeast footprint. Relative to the broader U.S., these markets have very good underlying demographics. Our deposit numbers are from June 30, 2020, but the rankings are from June 30, 2019 FDIC data, given that the new rankings are not yet out. You will note a lot of number four and number five market share rankings. Typically, it is the very large money center or regional banks in positions one, two, and three. And we're actually okay with this as it really distinguishes our high-touch go-to-market strategy and leaves us lots of room to grow. Now let's look at page six. As you can see from our concentration by state on page six, the core of our franchise is in North and South Carolina. However, through both organic growth and acquisitions, we have been able to expand our loan and deposit concentrations in Georgia, Virginia, Florida, and California. And each of these four states have greater than a 5% share of both our total loan and deposit portfolios. Now turning to page 7. When you look at our loan book from on high with regulatory data, it may look like we're a concentrated CRE lender. What we'd like to point out is that really we're a small to mid-sized C&I lender. As one-third of our book and close to three-fourths of our commercial real estate portfolio are actually loans secured by owner-occupied real estate that is essentially CMI in nature and supported by underlying cash flows from these businesses. As you can see from the credit quality metrics on the right-hand side of the page, our credit quality is very good with low non-performing asset and charge-off ratios and that our allowance for credit losses covered the second quarter annualized charge-offs over eight times. Moving on to page eight. We know our business well and have been successful credit risk managers over time. This page gives you a 20-year snapshot of credit performance and comparative results. Suffice it to say that we are very confident in our credit risk management skills and our ability to weather economic downturns. Our net charge-off ratio has remained well below the average of U.S. banks during good economic times, and in the last crisis, our peak was significantly less than the industry. Please turn to page 9. A significant benefit of our strategy is the exceptional deposit base that comes with it. It is low cost relative to the industry and has proven stable over time. Our recent deposit growth relative to peers is a testament to the success of our strategy. Moreover, many of our top customers have been with us 20 plus years, which is a further testament to the fact that our strategy works longer term and over the cycles. We believe we have a very attractive portfolio of fee businesses, and importantly, they are very much built around our core customer base and consistent with our strategy to serve them. Our wealth and mortgage businesses serve primarily our Carolinas and surrounding markets, whereas our merchant and card capabilities serve customers across our entire footprint. We are always considering ways to efficiently expand the full range of our products and services we offer to clients across our footprint, and we have recently expanded our wealth platform into Atlanta. In the quarterly discussion, we'll touch on the fact that some of these businesses saw lower volumes in Q2 with the shutdown, similar to the rest of the market. They are now rebounding, and each of these businesses are ones that we really like, are core to our strategy, and are integrated into our core relationship-based approach. And now to page 11. While our day-to-day strategy and culture focuses on organic growth, M&A has been an important component of growth for First Citizens. In the past decade alone, we've done more than 25 acquisitions. We believe this experience has given us a strong core competency, muscle memory, if you will, and has enhanced our company in many ways. We've had great consistency and tenure in our operational conversion team throughout these acquisitions, which has only reinforced our methodic and disciplined approach to converting acquired institutions. This team is second to none. And with the conversion of Integra next month, they will have just a three-branch conversion left to do in November, and I believe that they're delighted to have a break. The majority of what we've done have been open market acquisitions, but we were also quite active in the FDIC space. On these transactions, we believe we not only stepped in and assisted our regulatory partners, but we estimate that the net impact of these transactions for our shareholders resulted in over a billion dollars in capital creation. Going to page 12, our capital levels have been consistent and strong over time. While we have worked down our tier one common levels, via acquisitions and buybacks to levels more in line with our peers, we have added capital via our March issuance of both preferred stock and subordinated debt. If you will, we balanced the capital stack as a means to optimize returns to our shareholders moving forward. We will continue to utilize our capital on opportunities that provide the best long-term value for our shareholders which might come in the form of organic growth, M&A, and continued share repurchases. Please advance to page 13. We wanted to simply give you a snapshot of part of our team being myself and five of my key partners. We all work exceptionally well together, and on average, we've been with First Citizens more than 26 years. In short, I believe we have a very successful partnership. Now moving to page 14. I would be remiss if I didn't touch on how our strategy, culture, and financial goals all really become one. We revisit our goals each year, but in short, it revolves around our people and customers delivering our best to each other. When we do it right, it's a win-win for all. And while we pay attention to all the metrics indicative of how we're performing, in its simplest form, we focus on growing tangible book value, and we watch it with vigilance. And finally, turning to page 15, And as I've mentioned, we very much believe if you do it right, it's a win-win for all, and that the market will see this. Over time, the efforts of all our First Citizens Associates have consistently translated into market-leading returns for our shareholders. And I hope this overview was helpful, and now I'd like to turn it over to Craig to walk you through our second quarter. Craig?