First Citizens BancShares, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the First Citizens Bankshare's second quarter 2024 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 followed by one on your telephone keypad. If you require operator assistance during the program, please press star followed by zero. As a reminder, today's conference is being recorded. I would now like to introduce the host of this conference call, Mr. Anna Hart. Head of Investor Relations, you may begin.

Good morning, and welcome to First Citizen's second quarter earnings call. Joining me on the call today are our Chairman and Chief Executive Officer, Frank Holding, and Chief Financial Officer, Craig Nix. They will provide second quarter business and financial updates, referencing our earnings presentation, which you can find on our website. Our comments will include forward-looking statements, which are subject to risk and uncertainties that may cause actual results to differ materially from expectations. We assume no obligation to update such statements. These risks are outlined on page three. We will also reference non-GAAP financial measures. Reconciliations of these measures against the most directly comparable GAAP measures can be found in section five 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. Good morning, everyone, and welcome to our earnings call. Starting on page six, and this is the second quarter snapshot slide, we delivered another quarter of solid financial results, including peer-leading return on assets, net interest margin, adjusted efficiency ratio, loan growth, CET1 ratio, and loan portfolio yield. Our board has approved a share repurchase plan allowing us to repurchase shares in an aggregate amount up to $3.5 billion, and Craig will speak to those details later. And I'd like to point out that we were recently included in the Fortune 500 list for the first time. Continuing on to page seven, I'll take a look at, well, I'll take a moment to focus on our business segment performance as well as their outlooks moving forward. Starting with the general bank, we saw positive loan trends as growth remained particularly resilient in business and commercial loans within our branch network. We also experienced strong growth in our SBA, SBB private and wealth channels, importantly We have not made any significant changes in our risk appetite or client selection to chase growth as we feel our expertise and deep client relationships position us well to continue to grow prudently. Deposit growth in our branch network during the first half of the year exceeded our expectations. Looking forward, we see new production and client acquisition contributing to further balance sheet growth. We also see growth coming from deepening our relationships with existing customers, including SBB acquired customers. On the downside, we recognize that reductions in interest rates will cause margin compression. However, we're building strategies to mitigate the expected negative impact, including a focus on the mix of our deposits by targeting operating accounts, growing quality loans, and improving non-interest income from all sources. Our commercial bank segment continued to deliver strong loan growth driven by several of our specialized industry verticals, primarily in project financing for energy and data centers. CRE volume remains challenged driven by the higher for longer interest rate environment Deal volume is expected to remain muted during the second half of the year. While portfolio stress is expected to remain above historic levels in equipment finance, we expect loss rates to decline in the second half of the year and into 2025. From a production standpoint, we expect this segment to continue to benefit first from liquidity concerns bringing the market rates on a greater number of transactions into our target range, and second, from a focus on originating larger, higher quality transactions. Funding for the commercial bank is aided by our nationwide online direct bank with more than 700,000 core deposit accounts. We plan to continue to use the direct bank as a lever to grow core deposits in the current environment where pricing pressure and competition remain high. Turning to SVB commercial, we achieved quarter-over-quarter loan growth driven by high-quality loans in our global fund banking or capital call lending business. The uptick in loans reflects both the increased level of investment activity driving up utilization and Global Fund Banking's continued success in winning the fund banking business of active VC and PC investors. Encouragingly, we also witnessed a quarter-over-quarter increase in SDB commercial total client funds for the first time since the fourth quarter of 2021. SDB commercial deposits increased for the first time since the first quarter of 2022. These increases were driven by slight improvement in the macroeconomic environment and client acquisition. As we look ahead, it's too early to call an innovation economy turnaround despite increasing deal counts and encouraging investment trends. We are encouraged that the rebound will be significant as high levels of DC dry powder remain a strong catalyst for future growth. We expect that the positive trends that we saw in the second quarter could continue to result in gradual improvement in the second half of this year, but remain guarded about the absolute levels of deposit growth given the continued headwinds in the environment. Our SBB team remains the bank of choice for the innovation economy. Moving on to page eight, our strategic priorities have not changed. Given our growth over the past few years, we have been focused on maturing our risk management framework and overall regulatory environment. We have made significant enhancements, not only to meet category four large financial institution requirements, but to develop those capabilities in ways that are scalable through category three expectations. To conclude, we're continuing to see positive momentum in our businesses. While we recognize uncertainty remains in the current macroeconomic environment, we are committed to deepening customer relationships, prudently growing core deposits and loans, and allocating capital. We remain in a position of strength, and I'm excited about the opportunities ahead of us in 2024 and beyond. Craig, I'll turn it over to you.