FIRST CITIZENS BANCSHARES INC DE
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
FCNCA$2,273.74-1.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0000798941-24-000031
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000798941-24-000037
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 386 previous paragraphs and 433 current paragraphs.
237 unchanged; 109 reworded; 83 added; 39 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 50 previous and 53 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (83)
Current report
Share Repurchase Program
Current report
On July 25, 2024, BancShares announced that its Board of Directors (the “Board”) had authorized a share repurchase program, which will allow BancShares to repurchase shares of its Class A common stock in an aggregate amount up to $3.5 billion through 2025.
Current report
Under the newly authorized share repurchase program, shares of BancShares’ Class A common stock may be purchased from time to time on the open market or in privately negotiated transactions, including through a Rule 10b5-1 plan, but the Board’s action does not obligate BancShares to repurchase any minimum or particular number of shares, and repurchases may be suspended or discontinued at any time (subject to the terms of any Rule 10b5-1 plan in effect) without prior notice.
Current report
On June 20, 2024, the FDIC adopted a final rule to amend its Covered Insured Depository Institution rule (“CIDI Rule”). The CIDI Rule requires depository institutions insured by the FDIC with $50 billion or more in total consolidated assets to periodically submit resolution plans that will enable the FDIC as receiver to resolve the bank in the event of its insolvency under the Federal Deposit Insurance Act. As a result of the final rule, among other things, we will be required to submit to the FDIC full resolution plans every three years and interim targeted information between full resolution plan submissions. In addition, the final rule introduces a new credibility standard that will be used to evaluate full resolution plan submissions, which would be subject to potential FDIC enforcement action. The final rule is effective beginning October 1, 2024 and we are continuing to evaluate the impact of this final rule.
Current report
(3)Net interest margin (“NIM”), excluding purchase accounting accretion or amortization (“PAA”), is a non-GAAP financial measure. See the “Non-GAAP Financial Measures” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.
Current report
Second Quarter Income Statement Highlights
Current report
◦The decreases were mainly due to a higher provision for credit losses as a result of a lower benefit for off-balance sheet credit exposure.
Current report
◦As further discussed below, other changes in net income included slightly higher net interest income (“NII”) and higher noninterest income, which were partially offset by higher noninterest expense.
Current report
◦Acquisition-related expenses of $44 million.
Current report
•NII for the current quarter was $1.82 billion, essentially flat compared to the linked quarter, mainly due to higher interest income on loans and investment securities, which were partially offset by lower interest income on interest-earning deposits at banks and higher interest expense on deposits. The increase in interest income on loans was mostly due to loan growth and higher yields, which was partially offset by lower loan accretion income.
Current report
•Provision for credit losses, which includes the provision for loan and lease losses and the benefit for off-balance sheet credit exposure, was $95 million in the current quarter compared to $64 million in the linked quarter. The $31 million increase was mainly related to a $29 million lower benefit for off-balance sheet credit exposure as the pace of decline for unfunded commitment volumes slowed relative to the linked quarter. Additionally, the provision for loan and lease losses increased $2 million as a result of higher net charge-offs, partially offset by a mix shift to the global fund banking portfolio, which has lower loss rates relative to our other loan portfolios, lower specific reserves for individually evaluated loans, consistent credit quality, and changes in the macroeconomic forecast.
Current report
•Noninterest income for the current quarter was $639 million, an increase of $12 million or 2% from $627 million for the linked quarter. Client investment fees increased by $4 million, which was related to higher average off-balance sheet client funds in the SVB Commercial segment. The remaining increases in noninterest income were spread across various items, including a $2 million improvement from the linked quarter for the fair value adjustment on marketable equity securities and a $2 million loss on extinguishment of debt incurred in the linked quarter.
Current report
•Noninterest expensefor the current quarter was $1.39 billion, an increase of $10 million or 1% from $1.38 billion for the linked quarter. The increase was primarily attributable to increases of$15 million for maintenance and other operating lease expenses and $12 million for equipment expense, which were partially offset by a decrease of $14 million in acquisition-related expenses.
Current report
Year-to-Date Income Statement Highlights
Current report
•Net income for the current YTD was $1.44 billion, a decrease of $8.76 billion or 86% from $10.20 billion for the prior YTD. Net income available to common stockholders for the current YTD was $1.41 billion, a decrease of $8.76 billion from $10.17 billion for the prior YTD. Earnings per diluted common share for the current YTD was $96.80, a decrease from $699.53 for the prior YTD.
Current report
◦The decreases were mostly related to the SVBB Acquisition. Noninterest income was lower for the current YTD as the prior YTD included the gain on acquisition. This was partially offset by a lower provision for credit losses for the current YTD as the prior YTD included the provision for non-purchased credit deteriorated (“Non-PCD”) loans and leases and the unfunded commitments acquired in the SVBB Acquisition (collectively, the “day 2 provision for credit losses”).
Current report
◦As further discussed below, other changes in net income included higher NII, which was partially offset by higher noninterest expenses. Additionally, the acquired SVBB operations were reflected in earnings for the current YTD and the partial prior YTD.
Current report
•The current YTD included the following select items:
Current report
◦Acquisition-related expenses of $102 million, and
Current report
◦Additional FDIC insurance special assessment of $11 million.
Current report
•The prior YTD included the following select items:
Current report
◦Gain on acquisition of$9.88 billion for the SVBB Acquisition,
Current report
◦Day 2 provisions for credit losses of $716 million for the SVBB Acquisition, and
Current report
◦Acquisition-related expenses of$233 million.
Current report
•Return on average assets for the current YTD was 1.33% compared to 12.62% for the prior YTD.
Current report
•NII for the current YTD was $3.64 billion, an increase of $827 million or 29% from $2.81 billion for the prior YTD. The increase was primarily due to the acquired SVBB operations and loan accretion income being included for the current YTD and the partial prior YTD. Additionally, interest income increased in the current YTD due to higher interest income on loans and investment securities, which was partially offset by higher interest expense on deposits and borrowings.
Current report
•NIM for the current YTD was 3.66%, a decrease of 21 bps from 3.87% for the prior YTD. The decreases in NIM from higher average balances of interest-bearing deposits and the Purchase Money Note and higher rates paid on deposits were partially offset by higher average balances and yields on loans and investment securities. NIM, excluding PAA, was 3.36% for the current YTD compared to 3.49% for the prior YTD. See the “Non-GAAP Financial Measures” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.
Current report
•Provision for credit losses for the current YTD was $159 million, a decrease of $775 million from $934 million for the prior YTD. The decrease was primarily related to the day 2 provisions for credit losses of $716 million in the prior YTD, lower reserves for individually evaluated loans, and changes in the macroeconomic forecast.
Current report
•Noninterest income for the current YTD was $1.27 billion, a decrease of $9.65 billion from $10.92 billion for the prior YTD. The decrease was mostly due to the gain on acquisition of $9.88 billion in the prior YTD, partially offset by increases in various components of noninterest income, mostly because the acquired SVBB operations were reflected in earnings for the current YTD and the partial prior YTD.
Current report
•Noninterest expensefor the current YTD was $2.76 billion, an increase of $335 million or 14% from $2.43 billion. The increase was mostly due to the acquired SVBB operations being included for the current YTD and the partial prior YTD, including higher salaries and benefits, partially offset by lower acquisition-related expenses.
Current report
•Total depositsat June 30, 2024 were $151.08 billion, an increase of $5.23 billion or 4% from $145.85 billion at December 31, 2023 and an increase of $1.47 billion or 1% from $149.61 billion at March 31, 2024. The increase from December 31, 2023 reflected deposit growth in our Branch Network, the Direct Bank, and the SVB Commercial segment. The largest increase from March 31, 2024 reflected deposit growth in the SVB Commercial segment, which was mainly due to slight improvement in the macroeconomic environment and client acquisition.
Current report
Deposit Composition and Trends
Current report
(1) The average size is reflective of the Direct Bank deposits, and excludes brokered deposits and rail.
Current report
◦Interest income earned on loans and leases for the current quarter was $2.42 billion, an increase of $68 million or 3% from $2.35 billion for the linked quarter. Loan growth and a higher yield led to an $86 million increase in loan interest income, partially offset by a decrease of $18 million in loan accretion income which was $145 million in the current quarter and $163 million in the linked quarter.
Current report
◦Interest income earned on investment securities for the current quarter was $327 million, an increase of $48 million or 17% from $279 million for the linked quarter. The increase reflected continued purchases of short duration agency mortgage-backed and U.S. Treasury investment securities, and to a lesser extent, higher yields on the more recently purchased investment securities.
Current report
NII and NIM - Current YTD compared to Prior YTD
Current report
•NII for the current YTD was $3.64 billion, an increase of $827 million or 29% from $2.81 billion for the prior YTD. The increase was primarily due to the acquired SVBB operations and loan accretion income being included for the current YTD and the partial prior YTD. Additionally, interest income increased in the current YTD due to higher interest income on loans and investment securities, which was partially offset by higher interest expense on deposits and borrowings.
Current report
◦Interest income on loans and leases for the current YTD was $4.78 billion, an increase of $1.41 billion or 42% from $3.37 billion for the prior YTD. The increase largely resulted from earning interest and accretion income on the acquired SVBB loans for the current YTD and the partial prior YTD. Loan accretion income was $308 million in the current YTD and $260 million in the prior YTD, an increase of $48 million. Additionally, organic loan growth at higher yields and the impact from floating-rate loan resets contributed to the increase in interest income on loans and leases.
Current report
◦Interest income on interest-earning deposits at banks for the current YTD was $826 million, an increase of $259 million or 46% from $567 million for the prior YTD. The increase mainly resulted from a higher average balance of interest-earning deposits at banks related to the SVBB Acquisition, which was partially offset by the purchases of investment securities discussed above.
Current report
◦Interest expense on interest-bearing deposits for the current YTD was $1.90 billion, an increase of $1.04 billion or 121% from $863 million for the prior YTD. The increase largely resulted from paying or accruing interest expense on the acquired SVBB deposits for the current YTD and the partial prior YTD. Organic interest-bearing deposit growth in our General Bank and SVB Commercial segments and higher rates paid on average interest-bearing deposits also significantly contributed to the increase.
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Removed paragraphs (39)
Previous report
Although the U.S. economy continued to grow during the first quarter of 2024, economic uncertainty remains. The FOMC reported that it will continue to monitor economic and financial market developments and the effects of their earlier rate increases in determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time. Although the FOMC has made progress combating inflation, efforts to control inflation have raised concerns over the possibility of a recession. In addition, concerns over domestic and global policy issues, trade policy in the U.S. and geopolitical events, including the ongoing conflicts in Ukraine and the Middle East, add to the global uncertainty and are likely to maintain upward pressure on inflation and weigh on economic activity. Mortgage rates have steadily increased over recent years, and mortgage demand from homebuyers has softened. In addition, there remains concern in the banking industry about the exposure to certain sectors of commercial real estate (“CRE”), and credit trends in these exposures may deteriorate. The timing and impact of inflation, volatility in the stock market, interest rate movements, and a possible recession will depend on future developments, which are highly uncertain and difficult to predict.
Previous report
First Quarter Income Statement Highlights
Previous report
◦Acquisition-related expenses of $116 million,
Previous report
◦Decrease in the gain on acquisition of$83 million, and
Previous report
◦FDIC insurance special assessment of $64 million.
Previous report
•NII for the current quarter was $1.82 billion, a decrease of $94 million or 5% from $1.91 billion for the linked quarter. The decrease was primarily due to higher interest expense on deposits and lower loan discount accretion on loans acquired in the SVBB Acquisition.
Previous report
•Provision for credit losses for the current quarter was $64 million, a decrease of $185 million or 75% from $249 million for the linked quarter.
Previous report
◦The provision for loan and lease losses decreased$158 million, primarily related tochanges in the macroeconomic forecast, a decline in specific reserves on individually evaluated loans, and lower net charge-offs.
Previous report
◦The benefit from off-balance sheet credit exposure increased $27 million, primarily due to a continued decline in unfunded commitments during the current quarter.
Previous report
•Noninterest income for the current quarter was $627 million, an increase of $84 million or 16% from $543 million for the linked quarter. The increase was primarily due to an adjustment to the gain on acquisition of $83 million in the linked quarter aswe further refined income tax estimates related to the SVBB Acquisition.
Previous report
•Noninterest expensefor the current quarter was $1.38 billion, a decrease of $116 million or 8% from $1.49 billion for the linked quarter. The decrease was largely due to lower acquisition-related expense in the current quarter and a higher FDIC insurance special assessment in the linked quarter, partially offset by higher salaries and benefits in the current quarter.
Previous report
•Total depositsat March 31, 2024 were $149.61 billion, an increase of $3.76 billion or 3% from $145.85 billion at December 31, 2023. The increase from December 31, 2023 mainly reflected deposit growth in our branch network and in the Direct Bank.
Previous report
Deposit Composition
Previous report
Deposit Trends
Previous report
Average Balances and Rates
Previous report
(2)The balance and rate presented is calculated net of average credit balances and deposits of factoring clients.
Previous report
◦Interest income earned on loans and leases for the current quarter was $2.35 billion, a decrease of $37 million or 2% from $2.39 billion for the linked quarter. The decrease was primarily due to a decline of $35 million in loan discount accretion, which was $163 million in the current quarter and $198 million in the linked quarter.
Previous report
Average Balances and Rates
Previous report
(2)The balance and rate presented is calculated net of average credit balances and deposits of factoring clients.
Previous report
PROVISION FOR CREDIT LOSSES
Previous report
The provision for credit losses for the current quarter was $64 million, a decrease of $185 million or 75% from $249 million for the linked quarter.
Previous report
The benefit from off-balance sheet credit exposure was $29 million in the current quarter compared to $2 million in the linked quarter. The change was primarily due to a continued decline in unfunded commitments.
Previous report
Provision for Credit Losses
Previous report
•The $30 million increase in salaries and benefits reflected seasonal adjustments associated with the employee 401(k) plan, payroll taxes, and annual merit adjustments.
Previous report
Asset impairment includes the following: (i) impairment of right of use assets for operating leases assumed in business combinations for the leased office space we subsequently vacated; and (ii) impairment of information technology systems and software acquired in business combinations that we subsequently determined would not be utilized.
Previous report
The effective tax rate (“ETR”) was 27.2% for the current quarter compared to 27.9% in the linked quarter. The decrease in the ETR for the current quarter compared to the linked quarter was primarily due to the impact of the return to provision adjustments recorded.
Previous report
The increase in loans and leases during the current quarter reflected continued demand in our branch network. Growth was primarily concentrated in commercial and business loans, as well as from the small business lending and wealth channels. Our consumer mortgage loans were relatively unchanged, as we increased the amount originated and sold.
Previous report
Commercial Bank segment net income for the current quarter increased from the linked quarter, primarily due to a lower provision for credit losses, partially offset by higher noninterest expenses and lower noninterest income. Segment NII was relatively flat compared to the linked quarter as higher interest expense for deposits offset higher interest income from loan growth. The decline in the provision for credit losses was primarily due to a release in the ALLL in the current quarter as further discussed in the sections entitled “Provision for Credit Losses” and “Risk Management—Credit Risk—Allowance for Loan and Lease Losses” in this MD&A. Noninterest income decreased, mostly due to lower capital market fees and factoring commissions. Noninterest expenses increased, mainly due to increases in salaries and benefits and FDIC insurance expense. Noninterest income and noninterest expense are discussed in the sections entitled “Noninterest Income” and “Noninterest Expense” of this MD&A.
Previous report
The increase in loans and leases during the current quarter reflected growth in a number of industry verticals, including healthcare, technology, media and telecommunications and energy.
Previous report
SVB Commercial segment net income for the current quarter increased from the linked quarter reflecting higher NII and lower provision for credit losses. NII increased, due to increases in loan balances and decreases in deposit balances, partially offset by higher deposit costs as customers shifted deposits to higher cost products. The provision for credit losses decreased mainly due to lower net charge-offs and an increase in the benefit from off-balance sheet credit exposure as further discussed in the sections entitled “Provision for Credit Losses” and “Risk Management—Credit Risk—Allowance for Loan and Lease Losses” in this MD&A.
Previous report
Deposits totaled $34.01 billion at March 31, 2024, a decline from $34.73 billion at December 31, 2023, as cash usage by clients offset new funding activity. For additional information on deposit trends, refer to the “Funding, Liquidity and Capital Overview” discussion in the “Executive Overview” section of this MD&A.
Previous report
Current quarter net income for Corporate increased from the linked quarter, as the linked quarter included the previously discussed $83 million adjustment to the gain on acquisition and FDIC insurance special assessment of $64 million.
Previous report
Noninterest expenses were down from the linked quarter, mainly from decreases in acquisition-related expenses and the FDIC insurance special assessment. Acquisition-related expenses were$58 million in the current quarter compared to$116 million in the linked quarter. FDIC insurance special assessment expense accruals were$9 million in the current quarter and$64 million in the linked quarter. Refer to the “Noninterest Expense” section of this MD&A for further discussion.
Previous report
Total deposits at March 31, 2024 were $149.61 billion, an increase of $3.76 billion or 3% from $145.85 billion at December 31, 2023. The increase from December 31, 2023 is mainly attributable to savings deposit growth in our Direct Bank.
Previous report
The SVB portfolio is focused on two primary markets, Global Fund Banking and Technology and Life Science/Healthcare.
Previous report
Technology and Life Science/Healthcare
Previous report
The following table presents the EVE profile as of March 31, 2024 and December 31, 2023:
Previous report
The EVE metrics at March 31, 2024 compared to December 31, 2023 were primarily affected by the balance sheet and market rate changes.
Previous report
The following table details activities that caused the change in outstanding Class A common stock during 2024:
Reworded paragraphs (109)
Previous wording
Management uses certain non-GAAP financial measures in its analysis of the financial condition and results of operations of BancShares. See the "Non-GAAP Financial Measurements" section of this MD&A for a reconciliation of these financial measures to the most directly comparable financial measures in accordance with GAAP.
Current wording
Management uses certain financial measures that are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in its analysis of the financial condition and results of operations of BancShares. See the "Non-GAAP Financial Measurements" section of this MD&A for a reconciliation of these financial measures to the most directly comparable financial measures in accordance with GAAP.
Previous wording
In addition to our banking operations, we provide various investment products and services through FCB’s wholly owned subsidiaries, including First Citizens Investor Services, Inc. (“FCIS”) and First Citizens Asset Management, Inc. (“FCAM”), and a non-bank subsidiary First Citizens Capital Securities, LLC (“FCCS”). As a registered broker-dealer, FCIS provides a full range of investment products, including annuities, brokerage services and third-party mutual funds. As registered investment advisors, FCIS and FCAM provide investment management services and advice. FCCS is a broker-dealer that also provides underwriting and private placement services.
Current wording
In addition to our banking operations, we provide various investment products and services through FCB’s wholly owned subsidiaries, including First Citizens Investor Services, Inc. (“FCIS”) and First Citizens Asset Management, Inc. (“FCAM”), and a non-bank subsidiary First Citizens Capital Securities, LLC (“FCCS”). As a registered broker-dealer, FCIS provides a full range of investment products, including annuities, brokerage services and third-party mutual funds. As registered investment advisers, FCIS and FCAM provide investment management services and advice. FCCS is a broker-dealer that also provides underwriting and private placement services. We also have other wholly owned subsidiaries, including SVB Wealth LLC, SVB Asset Management, and First Citizens Institutional Asset Management, LLC, which are active investment advisers.
Previous wording
The SVBB Acquisition expanded our client base to serve private equity and venture capital clients and also complimented our existing wealth management business by adding enhanced digital capabilities. The SVBB Acquisition further diversified our loan portfolio and business mix, particularly across technology and life sciences/healthcare industries, and wealth clients.
Current wording
The SVBB Acquisition (defined below) expanded our client base to serve private equity and venture capital clients and also complimented our existing wealth management business by adding enhanced digital capabilities. The SVBB Acquisition further diversified our loan portfolio and business mix, particularly across technology, life science and healthcare industries, and wealth clients.
Previous wording
In addition, BancShares owns a fleet of railcars and locomotives that are leased to railroads and shippers.
Current wording
BancShares also owns a fleet of railcars and locomotives that are leased to railroads and shippers.
Previous wording
BancShares’ segments at March 31, 2024 include General Bank, Commercial Bank, SVB Commercial, and Rail. All other financial information not allocated to the segments is included in the “Corporate” section of the segment disclosures. Refer to Note 20—Business Segment Information for the segment descriptions, which reflect the segment reporting changes made during the first quarter of 2024.
Current wording
We made changes to our segment reporting during the first quarter of 2024 as further discussed in Note 1—Significant Accounting Policies and Basis of Presentation. Segment disclosures for 2023 periods included in this Form 10-Q were recast to reflect the segment reporting changes. BancShares’ segments include General Bank, Commercial Bank, SVB Commercial, and Rail. All other financial information not allocated to the segments is included in the “Corporate” section of the segment disclosures. Refer to Note 20—Business Segment Information for the segment descriptions.
Previous wording
The Federal Reserve’s Federal Open Market Committee (“FOMC”) maintained benchmark federal funds rate at a range between 5.25% - 5.50% at its most recent meeting in May 2024. Although future rate hikes are possible, the FOMC’s interest rate could be at or near its peak for this tightening cycle, and the FRB has signaled it may cut rates during 2024, depending on future economic conditions.
Current wording
During its July 2024 meeting, the Federal Reserve’s Federal Open Market Committee (“FOMC”) maintained benchmark federal funds rate at a range between 5.25% - 5.50%, where it has remained since July 2023. The FOMC has stated that it does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%. While future rate increases are possible, the FOMC’s interest rate is likely at its peak for this tightening cycle, and the FRB has signaled it may lower the rate once during 2024, potentially as early as September, depending on future economic conditions and other relevant considerations.
Previous wording
The federal banking agencies issued several notices of proposed rulemaking (“NPR”) in 2023 that if and/or when finalized, may impact BancShares and FCB. The FDIC finalized an NPR covering a special assessment to recover losses associated with protecting uninsured depositors following the closures of Silicon Valley Bank, Signature Bank, and First Republic Bank. We accrued a FDIC insurance special assessment charge of $64 million in 2023 that will be paid in eight quarterly installments beginning in 2024. In February 2024, the FDIC indicated that it expects a larger loss to the deposit insurance fund than originally estimated. As a result, we accrued an additional FDIC insurance special assessment charge of $9 million in the first quarter of 2024.
Current wording
During 2023, the FDIC finalized a notice of proposed rulemaking (“NPR”) covering an industry-wide special assessment to recover losses associated with protecting uninsured depositors following the closures of Silicon Valley Bank, Signature Bank, and First Republic Bank. We accrued a FDIC insurance special assessment charge of $64 million in 2023 that will be paid in eight quarterly installments beginning in 2024. In March 2024, the FDIC revised its loss estimate, indicating higher losses than originally estimated to the deposit insurance fund. As a result, we accrued an additional FDIC insurance special assessment charge of $11 million in 2024 that will be paid in two quarterly installments beginning in 2026.
Previous wording
Also in 2023, the federal banking agencies issued NPRs related to enhanced capital and long-term debt requirements for banking organizations with $100 billion or more in total assets. These NPRs were discussed in Item 1. Businessof our 2023 Form 10-K, in the section entitled “Regulatory Considerations.” We are in the process of evaluating the proposals and the potential impacts, but we expect we would need to raise additional long-term debt to satisfy the requirements if the NPR is finalized.
Current wording
Also in 2023, the federal banking agencies issued NPRs related to enhanced capital and long-term debt requirements for banking organizations with $100 billion or more in total assets. These NPRs were discussed in Item 1. Businessof our 2023 Form 10-K, in the section entitled “Regulatory Considerations.” We are in the process of evaluating the proposals and the potential impacts. If the NPRs are finalized, we expect we would need to raise additional long-term debt to satisfy the requirements.
Previous wording
The following tables in this MD&A include financial data for the three months ended March 31, 2024 (the “current quarter”), December 31, 2023 (the “linked quarter”), and March 31, 2023 (the “prior year quarter”). Our results of operations include acquired operations from the SVBB Acquisition, which was consummated on March 27, 2023, and therefore, many comparisons in the tables below will highlight the impact of including acquired operations for the entire current quarter compared to five days in the prior year quarter.
Current wording
The following tables in this MD&A include financial data for the three months ended June 30, 2024 (the “current quarter”), the three months ended March 31, 2024 (the “linked quarter”), the three months ended June 30, 2023 (the “prior year quarter”), the six months ended June 30, 2024 (“current YTD”), and the six months ended June 30, 2023 (“prior YTD”). The operations acquired in the SVBB Acquisition (the “acquired SVBB operations”) were included in our results of operations for the current YTD, but only from the SVBB Acquisition Date through June 30, 2023 (the “partial prior YTD”) in the prior YTD. Many year-to-date comparisons in this MD&A highlight the impact of including the acquired SVBB operations for the current YTD and the partial prior YTD.
Previous wording
In accordance with Item 303(c) of Regulation S-K, we focus on changes compared to the linked quarter for the narrative discussion and analysis of our results of operations as we believe this provides investors and other users of our data with the most relevant information.
Current wording
In accordance with Item 303(c) of Regulation S-K, we focus on changes compared to the linked quarter and year-to-date periods for the narrative discussion and analysis of our results of operations as we believe this provides investors and other users of our data with the most relevant information.
Previous wording
We focus the discussion of our financial position by comparing balances as of March 31, 2024 to December 31, 2023.
Current wording
We primarily focus the discussion of our financial position by comparing balances as of June 30, 2024 to December 31, 2023, but the tables also provide the linked quarter balances.
Previous wording
Refer to the “Results of Operations” section of this MD&A for further discussion.
Current wording
Financial highlights are summarized below. Further details are discussed in the “Results of Operations” section of this MD&A.
Previous wording
•Net income for the current quarter was $731 million, an increase of $217 million or 42% from $514 million for the linked quarter. Net income available to common stockholders for the current quarter was $716 million, an increase of $217 million or 44% from $499 million for the linked quarter. The increases, as detailed below, were related to lower provision for credit losses and noninterest expenses, along with higher noninterest income, partially offset by lower net interest income (“NII”). Earnings per diluted common share for the current quarter was $49.26, an increase from $34.33 for the linked quarter.
Current wording
•Net income for the current quarter was $707 million, a decrease of $24 million or 3% from $731 million for the linked quarter. Net income available to common stockholders for the current quarter was $691 million, a decrease of $25 million or 4% from $716 million for the linked quarter. Earnings per diluted common share for the current quarter was $47.54, a decrease from $49.26 for the linked quarter.
Previous wording
•The current quarter included the following select items:
Current wording
•The current quarter included the following select item:
Previous wording
•Return on average assets for the current quarter was 1.36% compared to 0.95% for the linked quarter.
Current wording
•Return on average assets for the current quarter was 1.30% compared to 1.36% for the linked quarter.
Previous wording
•Net interest margin(“NIM”) for the current quarter was 3.67%, a decrease of 19 basis points (“bps”) from 3.86% for the linked quarter, primarily related to the items discussed above for NII.
Current wording
•NIM for the current quarter was 3.64%, a decrease of 3 basis points (“bps”) from 3.67% for the linked quarter, primarily related to the items discussed above for NII. NIM, excluding PAA, was 3.36% compared to 3.35% in the linked quarter. See the “Non-GAAP Financial Measures” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.
Previous wording
•Total loans and leases at March 31, 2024 were $135.37 billion, an increase of $2.07 billion or 2% from $133.30 billion at December 31, 2023. There was loan growth in each of our segments. The increase of $900 million in the General Bank segment was primarily related to business and commercial loan growth, while growth of $794 million in the Commercial Bank segment was across various industry verticals. In addition, global fund banking loans in the SVB Commercial segment increased, partially offset by decreases in the technology and life science/healthcare portfolios.
Current wording
•Total loans and leases at June 30, 2024 were $139.34 billion, an increase of $6.04 billion or 5% from $133.30 billion at December 31, 2023 and an increase of $3.97 billion or 3% from $135.37 billion at March 31, 2024. Compared to December 31, 2023 and March 31, 2024, there was loan growth in each of our business segments. Loan growth in the General Bank segment was primarily related to business and commercial loans in our Branch Network. Loan growth in the Commercial Bank segment was mainly due to the technology media and telecommunications (“TMT”) industry and the Healthcare industry. Loan growth in the SVB Commercial segment was concentrated in global fund banking loans.
Previous wording
•Total investment securities at March 31, 2024 were $35.04 billion, an increase of $5.05 billion or 17% from $30.00 billion at December 31, 2023. The increase was primarily due to purchases of short-duration U.S. agency mortgage-backed and U.S. Treasury investment securities available for sale.
Current wording
•Total investment securities at June 30, 2024 were $37.67 billion, an increase of $7.67 billion or 26% from $30.00 billion at December 31, 2023 and an increase of $2.62 billion or 8% from $35.04 billion at March 31, 2024. Compared to December 31, 2023 and March 31, 2024, the increases were primarily due to purchases of short-duration U.S. agency mortgage-backed and U.S. Treasury investment securities.
Previous wording
•Total borrowingsat March 31, 2024 were $37.54 billion, a decrease of $114 million from $37.65 billion at December 31, 2023. The decrease was due to repayments of subordinated debt and a decline in securities sold under customer purchase agreements.
Current wording
•Total borrowingsat June 30, 2024 were $37.46 billion, a decrease of $196 million from $37.65 billion at December 31, 2023 and a decrease of $82 million from $37.54 billion at March 31, 2024. The decreases from December 31, 2023 and March 31, 2024 were mostly due to declines in securities sold under customer purchase agreements and the Purchase Money Note.
Previous wording
•At March 31, 2024, BancShares remained well capitalized with a total risk-based capital ratio of 15.66%, a Tier 1 risk-based capital ratio of 14.00%, a common equity Tier 1 ratio of 13.44% and a Tier 1 leverage ratio of 10.11%.
Current wording
•At June 30, 2024, BancShares remained well capitalized with a total risk-based capital ratio of 15.45%, a Tier 1 risk-based capital ratio of 13.87%, a common equity Tier 1 ratio of 13.33% and a Tier 1 leverage ratio of 10.29%.
Previous wording
We fund our business primarily through deposits. Deposits represented approximately 80.0% of total funding at March 31, 2024. The following table summarizes the composition, average size and uninsured percentages of our deposits:
Current wording
We fund our business primarily through deposits. Deposits represented approximately 80% of total funding at June 30, 2024. The following table summarizes the composition, average size and uninsured percentages of our deposits:
Previous wording
The General Bank segment includes deposits from our branch network, which deploys a relationship-based approach to deposit gathering. The Commercial Bank segment includes deposits of commercial customers, and the SVB Commercial segment includes deposits related to its commercial customer base. Deposits in Corporate primarily were comprised of $39.81 billion in our Direct Bank. There were also $14 million of deposits in the Rail segment.
Current wording
The General Bank segment includes deposits from our branch network, which deploys a relationship-based approach to deposit gathering. The Commercial Bank segment includes deposits of commercial customers, and the SVB Commercial segment includes deposits related to its commercial customer base. Deposits in Corporate were primarily comprised of $39.67 billion in our Direct Bank and brokered deposits.
Previous wording
As displayed in the table above, the average size of deposits varies across our business segments. The uninsured data represents the percentage of such deposits in the respective segments and Corporate. At March 31, 2024, total uninsured deposits were approximately $54.85 billion or 37% of total deposits. Uninsured deposits were $54.15 billion or 37% of total deposits at December 31, 2023.
Current wording
As displayed in the table above, the average size of deposits varies across our business segments. The uninsured data represents the percentage of such deposits in the respective segments and Corporate. At June 30, 2024, total uninsured deposits were approximately $57.15 billion or 38% of total deposits. Uninsured deposits were $54.15 billion or 37% of total deposits at December 31, 2023.
Previous wording
SVB Commercial segment deposits declined from $34.73 billion at December 31, 2023 to $34.01 billion at March 31, 2024. The table above also indicates that aggregate deposits for the General Bank, Commercial Bank and Rail segments and Corporate increased during the current quarter, primarily from deposit growth in the Direct Bank, which is included in Corporate, and in the branch network in the General Bank segment.
Current wording
SVB Commercial segment deposits increased from $34.73 billion at December 31, 2023 to $35.89 billion at June 30, 2024. The table above also indicates that aggregate deposits for our business segments and Corporate increased during the current quarter and current YTD, primarily from deposit growth in the Direct Bank, which is included in Corporate, and in the Branch Network in the General Bank segment.
Previous wording
We strive to maintain a strong liquidity position, and our risk appetite for liquidity is low. At March 31, 2024, liquidity metrics remained solid as we had $59.33 billion in liquid assets consisting of $30.03 billion in cash and interest-earning deposits at banks (primarily held at the FRB) and $29.30 billion in high-quality liquid securities. We have unused borrowing capacity with the FHLB and FRB of $14.43 billion and $5.51 billion, respectively.
Current wording
We strive to maintain a strong liquidity position, and our risk appetite for liquidity is low. At June 30, 2024, liquidity metrics remained solid as we had $56.91 billion in high-quality liquid assets consisting of $24.48 billion in cash and interest-earning deposits at banks (primarily held at the FRB) and $32.43 billion in high-quality liquid securities (“HQLS”). We have unused borrowing capacity with the Federal Home Loan Bank (“FHLB”) and FRB of $14.68 billion and $5.53 billion, respectively.
Previous wording
FCB and the FDIC, as lender and as collateral agent, also entered into the Advance Facility Agreement, dated as of March 27, 2023, and effective as of November 20, 2023, providing total advances available through March 27, 2025 of up to $70 billion, subject to limits subsequently described in this MD&A as referenced below, solely to provide liquidity to offset deposit withdrawal or runoff of former SVBB deposit accounts and to fund the unfunded commercial lending commitments acquired in the SVBB Acquisition. The immediate available capacity of the Advance Facility Agreement was $12.85 billion at March 31, 2024. Refer to the “Liquidity Risk” section of this MD&A for further discussion.
Current wording
In connection with the SVBB Acquisition, FCB and the FDIC, as lender and as collateral agent, entered into the Advance Facility Agreement, dated as of March 27, 2023, and effective as of November 20, 2023, providing total advances available through March 27, 2025 of up to $70 billion, subject to limits subsequently described in this MD&A as referenced below, solely to provide liquidity to offset deposit withdrawal or runoff of former SVBB deposit accounts and to fund the unfunded commercial lending commitments acquired in the SVBB Acquisition. The immediate available capacity of the Advance Facility Agreement was $11.34 billion at June 30, 2024. Refer to the “Liquidity Risk” section of this MD&A for further discussion.
Previous wording
At March 31, 2024, our investment securities portfolio primarily consisted of debt securities available for sale and held to maturity as summarized below. The duration of our investment securities was approximately 2.8 years at March 31, 2024. The investment securities available for sale portfolio had an average duration of 2.2 years and the held to maturity portfolio had an average duration of 4.6 years. Refer to the “Interest-earning Assets—Investment securities” section of this MD&A and Note 3—Investment Securities for further information.
Current wording
At June 30, 2024, our investment securities portfolio primarily consisted of debt securities available for sale and held to maturity as summarized below. The duration of our investment securities was approximately 2.8 years at June 30, 2024. The investment securities available for sale portfolio had an average duration of 2.3 years and the held to maturity portfolio had an average duration of 4.5 years. Refer to the “Interest-earning Assets—Investment securities” section of this MD&A and Note 3—Investment Securities for further information.
Previous wording
(1)Loans and leases include Non-PCD and Purchase Credit Deteriorated (“PCD”) loans, nonaccrual loans, and loans held for sale. Interest income on loans and leases includes accretion income and loan fees.
Current wording
(1)Loans and leases include Non-PCD and Purchased Credit Deteriorated (“PCD”) loans, nonaccrual loans, and loans held for sale. Interest income on loans and leases includes accretion income and loan fees.
Previous wording
•NII for the current quarter was $1.82 billion, a decrease of $94 million or 5% from $1.91 billion for the linked quarter. This decrease was due to a $61 million increase in interest expense and a $33 million decrease in interest income.
Current wording
•NII for the current quarter was $1.82 billion, an increase of $4 million from the linked quarter. This increase was due to a $46 million increase in interest income, partially offset by a $42 million increase in interest expense.
Previous wording
◦Interest income earned on interest-earning deposits at banks for the current quarter was $448 million, a decrease of $37 million or 8% from $485 million for the linked quarter. The decrease reflected a lower average balance, mostly due to purchases of investment securities noted above.
Current wording
◦Interest income on interest-earning deposits at banks for the current quarter was $378 million, a decrease of $70 million or 16% from $448 million for the linked quarter. The decrease was due to a lower average balance of interest-earning deposits at banks resulting from the purchases of investment securities described above.
Previous wording
◦Interest expense on interest-bearing deposits for the current quarter was $928 million, an increase of $63 million or 7% from $865 million for the linked quarter. The increase was due to higher average balances of deposits in our Direct Bank and higher deposit rates as we remain competitive and optimize our funding strategy through deposit growth.
Current wording
◦Interest expense on interest-bearing deposits for the current quarter was $975 million, an increase of $47 million or 5% from $928 million for the linked quarter. The increase was primarily from growth in interest-bearing deposits in the General Bank and SVB Commercial segments and higher average rates paid as we remain competitive and optimize our funding strategy through deposit growth.
Previous wording
◦Interest expense on borrowings for the current quarter was $339 million, down $2 million or 1% from $341 million for the linked quarter. The decrease was mainly due to repayments of subordinated debt.
Current wording
◦Interest expense on borrowings for the current quarter was $334 million, a decrease of $5 million or 1% from $339 million for the linked quarter as a result of slightly lower average balances.
Previous wording
•NIM for the current quarter was 3.67%, a decrease of 19 bps from 3.86% for the linked quarter due to the reasons noted above for NII.
Current wording
•NIM for the current quarter was 3.64%, a decrease of 3 bps from 3.67% for the linked quarter, due to the reasons noted above for NII. NIM, excluding PAA, was 3.36% compared to 3.35% in the linked quarter. See the “Non-GAAP Financial Measures” section of this MD&A for a reconciliation from the most comparable GAAP measure to the non-GAAP measure.
Previous wording
•Average interest-earning assets for the current quarter were $198.59 billion, an increase of $2.33 billion or 1% from $196.25 billion for the linked quarter. The increase mainly reflected higher average balances for investment securities. The yield on average interest-earning assets was 6.23%, a decrease of 7 bps from the linked quarter, primarily due to lower loan accretion.
Current wording
•Average interest-earning assets for the current quarter were $200.71 billion, an increase of $2.12 billion or 1% from $198.59 billion for the linked quarter. The increase mainly reflected higher average balances for investment securities and loans. The yield on average interest-earning assets was 6.26%, an increase of 3 bps from the linked quarter, primarily due to higher average balances and yields on investment securities and loans, partially offset by lower average balances of interest-earning deposits at banks and lower loan accretion income.
Previous wording
•Average interest-bearing liabilities for the current quarter were $145.64 billion, an increase of $3.21 billion or 2% from $142.43 billion in the linked quarter. The increase mostly reflected higher average deposit balances. The rate paid on average interest-bearing liabilities increased by 12 bps, primarily due to a higher rate paid on average interest-bearing deposits.
Current wording
•Average interest-bearing liabilities for the current quarter were $148.38 billion, an increase of $2.74 billion or 2% from $145.64 billion in the linked quarter. The increase reflected higher average interest-bearing deposit balances. The rate paid on average interest-bearing liabilities increased by 5 bps from the linked quarter, primarily due to a higher rate paid on average interest-bearing deposits. While the rate paid on average interest-bearing deposits increased 9 bps from the linked quarter, the pace slowed relative to the 17 bps increase in the linked quarter compared to the fourth quarter of 2023.
Previous wording
◦Interest income earned on investment securities for the current quarter was $279 million, an increase of $40 million or 17% from $239 million for the linked quarter. The increase reflected a higher average balance due to purchases of short duration agency mortgage-backed and U.S. Treasury investment securities available for sale, and to a lesser extent, a higher yield.
Current wording
◦Interest income on investment securities for the current YTD was $612 million, an increase of $385 million or 170% from $227 million for the prior YTD. The increase reflected continued purchases of short duration agency mortgage-backed and U.S. Treasury investment securities available for sale, and to a lesser extent, a higher yield.
Previous wording
The provision for loan and lease losses decreased$158 million, primarily related tochanges in the macroeconomic forecasts, a decline in specific reserves on individually evaluated loans, and lower net charge-offs. The ALLL and net charge-offs are further discussed in the “Risk Management—Credit Risk—Allowance for Loan and Lease Losses” and “Credit Metrics” in this MD&A and in Note 5—Allowance for Loan and Lease Losses.
Current wording
The ALLL and net charge-offs are further discussed in the “Risk Management—Credit Risk—Allowance for Loan and Lease Losses” and “Credit Metrics” in this MD&A and in Note 5—Allowance for Loan and Lease Losses.
Previous wording
Rental income on operating lease equipment was $255 million for the current quarter, an increase of $3 million or 1% from $252 million for the linked quarter. The increase reflects a higher operating lease equipment balance, along with improved utilization and re-pricing in the rail portfolio. Rental income is generated primarily in the Rail segment and, to a lesser extent, in the Commercial Bank segment. Revenue is generally dictated by the size of the portfolio, utilization of the railcars, re-pricing of equipment renewed upon lease maturities, and pricing on new leases. Re-pricing refers to the rental rate in the renewed equipment contract compared to the prior contract. Refer to the Rail segment discussion in the “Results by Business Segment” section of this MD&A for further details.
Current wording
Rental income on operating lease equipment was $259 million for the current quarter, an increase of $4 million or 1% from $255 million for the linked quarter. Rental income on operating lease equipment was $514 million for the current YTD, an increase of $43 million or 9% from $471 million for the prior YTD. Both current quarter and current YTD periods benefited from growth in operating lease equipment, as well as strong re-pricing and utilization rates in the rail portfolio. Rental income is generated primarily in the Rail segment and, to a lesser extent, in the Commercial Bank segment. Revenue is generally dictated by the size of the portfolio, utilization of the railcars, re-pricing of equipment renewed upon lease maturities, and pricing on new leases. Re-pricing refers to the rental rate in the renewed equipment contract compared to the prior contract. Refer to the Rail segment discussion in the “Results by Business Segment” section of this MD&A for further details.
Previous wording
Other noninterest income for the current quarter was $372 million, an increase of $81 million from $291 million for the linked quarter. The increase was primarily due to the previously discussed adjustment to the gain on acquisition in the linked quarter. The remaining changes compared to the linked quarter reflect increases and decreases among the various noninterest income categories, with the main items described as follows:
Current wording
Other noninterest income for the current quarter was $380 million, an increase of $8 million from $372 million for the linked quarter. The changes compared to the linked quarter reflect increases and decreases among the various noninterest income categories, with the main items described as follows:
Previous wording
•Fee income and other service charges, consisting of items such as capital market-related fees, fees for lines and letters of credit, and servicing fees, decreased by $5 million, mainly due to lower capital markets fees.
Current wording
•Fee income and other service charges, consisting of items such as capital market-related fees, fees for lines and letters of credit, and servicing fees, increased by $2 million, mainly due to higher fees on lines and letters of credit.
Showing the first 40 of 109 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
(1)Loans and leases include Non-PCD and PCD loans, nonaccrual loans, and loans held for sale. Interest income on loans and leases includes accretion income and loan fees.
Current report — wording carried from elsewhere
The below simulations assume an immediate 100 and 200 bps parallel increase and decrease from current interest rates and the estimated impact on our EVE profile:
Current report — wording carried from elsewhere
We fund our operations through deposits and borrowings. Our primary source of liquidity is derived from our various deposit channels, including our Branch Network and Direct Bank. Total deposits at June 30, 2024 were $151.08 billion, an increase of $5.23 billion or 4% from $145.85 billion at December 31, 2023 and an increase of $1.47 billion or 1% from $149.61 billion at March 31, 2024. The increase from December 31, 2023 is mainly attributable to deposit growth in our Branch Network, the Direct Bank, and the SVB Commercial segment. Deposit growth in the SVB Commercial segment was mainly due to slight improvement in the macroeconomic environment and increases in client acquisitions.
Current report — wording carried from elsewhere
Refer to the respective “Deposits” and “Borrowings” subsections in the “Interest-Bearing Liabilities” section of this MD&A for further details.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We made changes to our segment reporting during the first quarter of 2024 as further discussed in Note 1—Significant Accounting Policies and Basis of Presentation. Segment disclosures for 2023 periods included in this Form 10-Q were recast to reflect the segment reporting changes.