First Citizens BancShares, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the First Citizens Frankshire Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a 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 one on your telephone keypad. If you require operator assistance during the programme, please press star, then zero. As a reminder, today's conference is being recorded. I would now like to introduce your host of this conference call, Ms. Deanna Hart, Senior Vice President of Investor Relations. You may begin.

Good morning, everyone. Welcome to our second quarter earnings call. Our Chairman and Chief Executive Officer Frank Holding, President Peter Bristow, and Chief Financial Officer Craig Nix will provide second quarter business and financial updates today. During the call, we will reference our investor presentation, which you can find on our website. 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 3. We will also reference non-GAAP financial measures. Reconciliations of these measures against the most directly comparable GAAP measures are found in Section 5 of the presentation. Finally, for citizens is not responsible for and does not edit nor guarantee the accuracy of earnings transcripts provided by third parties. I will now turn it over to Frank.

Thank you, Deanna, and good morning, everyone. Before we get into second quarter results, I'd like to start by saying that the SBV acquisition is going very well, and we're pleased with our progress integrating SBV's clients and associates into First Citizens. I'm also pleased to announce that we've appointed Mark Kadger, a 30-year veteran of SBV, as president of SBV's commercial banking business. Based in the San Francisco Bay Area, Mark leads a team of more than a thousand experienced and talented bankers nationwide who are dedicated to the innovation economy. And we're fortunate to have Mark as a part of the First Citizens senior leadership team. Starting on page five, we've announced another quarter of solid financial results, which were amplified by the SBB acquisition. We reported adjusted earnings per share of $52.60, exceeding our expectations. We delivered top quartile return metrics, generating an adjusted return on equity of 16.5% and return on assets of 1.5%. Our net interest margin expanded 69 basis points to 4.1%. And our adjusted efficiency ratio came in below 50% for this quarter. Deposits continued to be a huge focus for us, generated for us growing by 3.2% on an annualized basis. In addition to deposit growth, our commercial and general bank segments posted solid loan growth. We finished the second quarter with a CET1 ratio of 13.4%. Since year-end, we've accreted 228 basis points of capital from the SVB acquisition and 69 basis points from retained earnings. While we continue to build capital to support clients and drive organic growth, Our goal is to operate with efficient levels of capital defined by our target ranges. At the present time, we are operating over the top end of our target ranges for all of our risk-based capital ratios. However, we will continue to pause share repurchases this year as we focus on SVB integration, and get more clarity around the impacts of the new proposed capital rules. As for pending regulation, we are tracking the potential new requirements to ensure operational readiness. As part of this work, we've established a team whose mandate is to develop plans to expedite implementation once final rules are established. Thanks to these proactive actions, and our strong risk management framework, we are well positioned to manage through any changes and address them expediently. In addition to capital, our liquidity position remains strong and stable, driven by our focus on core deposit gathering and a conservatively managed investment portfolio. We also remain focused on managing credit prudently. While we experienced an increase in net charge-offs this quarter, the majority of the increase related to the SVD portfolio that were anticipated and reserved for in day one acquisition accounting. We remain encouraged by the resiliency of our clients in the face of elevated inflation and rising interest rates, and we look forward to continuing to supporting them. Turning to page six, we continue to make progress on SVB integration efforts and are excited by the early signs of collaboration and partnership we're seeing among our teams. Since we acquired SBB on March 27, our focus has been on stabilizing the business. And as Peter Bristow will discuss shortly, we've made excellent progress on this front. We continue to focus on providing consistent and high touch service to our clients and getting back to what SBB