Showing its ability to navigate challenging economic conditions and make progress in integrating its purchase of Silicon Valley Bank, Raleigh-based First Citizens BancShares posted a solid first quarter on Thursday (April 25) marked by an optimistic take on consumer spending.
The company reported a substantial net income jump of $731 million for Q1, up from $514 million in Q4 2023. This growth in net income reflects a robust increase in adjusted net income as well, with figures reaching $784 million compared to $693 million in the prior quarter. The drag on those financial results were influenced by Silicon Valley Bank (SVB) acquisition-related expenses and adjustments in the valuation of marketable equity securities.
First Citizens is under the microscope in the aftermath of the March 2023 SVB purchase and that topic took center stage during the company’s earnings call. Several times, CEO Frank Holding told analysts that SVB would be positioned as the bank for the “innovation economy.” He detailed the strides First Citizens has made in aligning SVB’s operations with its broader goals, evident from the renaming of its SVB segment to SVB Commercial, which now focuses on serving commercial clients in “innovative markets.” The company has reported that the restructuring has enhanced the clarity its financial reporting and operational focus. The integration has influenced the company’s segment reporting, with private banking and wealth management operations previously under SVB now being incorporated into the General Bank segment.
Holding noted early in the call that First Citizens successfully submitted its capital plan to the Federal Reserve for the SVB integration on April 5. He said the process included the full stress test, including the acquired SVB portfolios mission, which he termed “an important milestone in our regulatory journey.” He stressed that SVB is focused on the continued delivery of “exceptional” services to clients. He emphasized that the company now serves 80% of the venture capital firms listed on the Forbes Midas List, which he called a testament to its robust client acquisition strategy, which has successfully onboarded over 1,000 new clients within the first post-acquisition year.
“Our dedicated team of sector experts brings indispensable insights, backed by over 40 years of concentrated focus on serving innovators and investors,” Holding said. He underscored the depth of experience within the team, saying, “Our leadership has an average tenure of over 20 years at SVB, supported by a highly seasoned team of over 1,500 innovation bankers and relationship advisors.”
Holding said the bank is also on the lookout for potential further M&A activity, saying the bank had plenty of “dry powder left” for acquisitions.
By the numbers the bank’s results showed strength in consumer-facing metrics despite inflation and high interest rates. It reported a slight decrease in net interest income, which totaled $1.82 billion, down from $1.91 billion in the previous quarter. This decline was primarily due to increased interest expenses and a slight drop in interest income from loans and deposits. The SVB acquisition played a role in reshaping the loan portfolio dynamics, leading to the slight decrease. Despite these changes, the net interest margin remained strong at 3.67%, although slightly down from the previous quarter.
Credit quality remained stable, with the provision for credit losses significantly decreasing to $64 million from $249 million in the previous quarter. The continued low rate of nonaccrual loans, which stand at 0.79% of total loans, underscored the risk management strategies necessitated by the integration of SVB. The company’s liquid assets total $59.33 billion.