First Citizens BancShares, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the First Citizens Bank Share's fourth quarter and year-end 2022 earnings conference call. At this time, all participants are in 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 introduce the host of this conference call, Ms. Deanna Hart, Senior Vice President of Investor Relations. You may begin.

Thank you. Good morning, everyone, and thank you for joining us for First Citizens Bank's fourth quarter earnings call. It is my pleasure to introduce our Chairman and Chief Executive Officer, Frank Holding, as well as our Chief Financial Officer, Craig Nick, who will provide an update on our financial results and outlooks. We are also pleased to have several other members of our leadership team in attendance with us today who will be available to participate in the question and answer portion of the call if needed. During the call, we will be referencing our investor presentation, which you can find on our website. An agenda for today's presentation is on page two of these materials. Following the completion of our presentation, we'll happily take questions. As a reminder, our comments will include forward-looking statements, which are subject to risks and uncertainties that may cause our results to differ materially from expectations. We assume no obligation to update such statements. These risks are outlined for you on page three of the presentation. We will also reference non-GAAP financial measures in the presentation. Reconciliations of these measures against the most directly comparable GAAP measures are found in section five of the presentation. Finally, First Citizens is not responsible for and does not edit nor guarantee the accuracy of our earnings teleconference transcripts provided by third parties. With that, I'll turn it over to Frank.

Thank you, Deanna, and good morning to everyone. We appreciate all of you joining us today, and I'll make some comments about the year and then update you on our 2023 strategic priorities. And then I'll turn it over to Craig Nix to highlight our financial results for the fourth quarter and the outlook for 2023. Starting on page five, 2022 was a great year for First Citizens. In addition to the completion of our merger, we delivered solid financial results marked by strong top-line growth, low credit losses, and well-controlled expenses. We were pleased with the performance of our lines of business, achieving robust loan growth in both the general and commercial banks. Despite a challenging year for deposits driven by unprecedented quantitative tightening, we experienced modest growth in non-interest checking accounts and only a slight decline in deposits during the year. Our merger integration is substantially complete. and we're now focused on creating positive operating leverage by growing revenues and optimizing our operations. We remain on track to achieve our $250 million cost savings goal. During the third quarter, we announced a share repurchase plan to optimize our capital levels, and we completed the plan early in the fourth quarter, repurchasing 1.5 million Class A common shares. This plan allowed us to return excess capital to our shareholders while exceeding our CET1 target and is expected to be approximately 10% accretive to earnings per share in 2023. Our capital position remains strong relative to our risk profile, and we believe that we will have the ability to resume share buybacks in the second half of this year. From a profitability standpoint, we finished right in line with our guidance and are pleased with our financial results for the fourth quarter and full year. Strong loan growth and rising interest rates drove a 20% increase in net interest income over the prior year. This strong margin growth combined with solid non-interest income growth and well-controlled expenses drove a year-over-year 45.5% increase in pre-provision net revenue. Earning asset yields increased by 68 basis points, and we were able to manage rising deposit costs despite a challenging and competitive environment. The pace of rate hikes did begin to put pressure on margin as we entered the fourth quarter. During my tenure at First Citizens, we've been through several tightening cycles, and we've always been grown and prospered through them. Looking at non-interest income, our fee income producing lines of business provided continued support to our net revenue, led by growth in rental income on operating lease assets as our rail portfolio saw increased utilization and positive momentum from higher lease rates. We also saw growth in areas such as wealth and card despite a challenging market environment for wealth. You'll remember that we announced the elimination of certain NSF and OD charges that took place in the second half of 2022, reducing deposit service charge income. But we've had strong growth in commercial service charges to help offset some of this NSF OD impact. Despite inflationary headwinds, we maintained prudent expense discipline, which resulted in positive operating leverage for the full year, as well as an improvement in our efficiency ratio, which we expect to maintain in the low to mid-50s on an annualized basis moving forward. We're pleased with the growth in loans we saw in 2022, with total loans increasing by $5.6 billion, or 8.5%, over year-end 2021. We saw growth in the general bank and within the commercial bank in industry verticals and business capital. While we experienced an increase in non-accrual loans in the fourth quarter, net charge-offs remained well below historic norms. Overall credit quality remained strong. and we are not seeing broad-based signs of stress in our loan portfolio. Now, turning to page six, I'll quickly highlight a few of our strategic priorities moving forward. Investing in our core businesses to achieve profitable organic growth. We're pleased with the momentum in many of our core lines of business, including our branch network, wealth, business capital, the industry verticals, and middle market banking. And we're going to continue to add revenue producers and enhance our capabilities in these areas to remain competitive and expand market share. Optimize capital and focus on core deposit growth. A key foundation to our strategy is our focus on full long-term banking relationships, which in addition to making loans includes the deposit relationships. Our goal is to fund earning assets with low-cost stable deposits, and this remains a significant component of our go-to-market strategy. In terms of capital allocation, our number one priority is focus on our customers, but to the extent we have excess capital after funding internal growth, our strategy is to redeploy it into share repurchases at attractive prices. A focus on talent acquisition and retention. We're going to continue to be proactive in adding talent to support our continued growth. In addition to our focus on talent and our associates, we will remain focused on our customers to make sure we're aligning our products and services across all segments in ways that meet their financial needs. As we move into 2023, we will continue to work on distributing the capabilities we have as a firm across our lines of business more broadly, which will help create additional revenue synergies as clients have access to a wider variety of products. Capitalize on the benefits of shifting from merger integration to operating as a combined company to boost our operating leverage. While we are in line to achieve our cost savings goals, we're going to continue to focus on further optimization and efficiency as we believe there is an opportunity to build upon the efficiency we have recognized to date. And we'll continue to assess processes and capitalize on revenue synergies and opportunities. Manage risk effectively. We're committed to strong risk management and regulatory compliance. In 2023, we will continue to build out and execute on our new regulatory capabilities to ensure we meet the requirements of the large financial institutions framework. We have made great progress on our readiness to comply with heightened regulatory standards, and we've worked hard to develop the capabilities and planning needed to ultimately satisfy the regulatory standards. In the coming year, we will be intently focused on executing upon these plans. To conclude, while we acknowledge certain concerns in the broader economy, we enter 2023 with solid capital and liquidity positions and are well positioned to continue to build customer relationships and grow our balance sheet profitably. We will remain focused on our client-focused model and committed to delivering solid results regardless of the market conditions. I want to thank our associates across the company for working so hard to make us successful in our transformation to a large financial institution and at the same time supporting our shareholders, customers, and communities. And with that, I'll turn it over to Craig next.