First Citizens BancShares Inc (Delaware)
NASDAQ:FCNCA
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First Citizens BancShares Inc (Delaware)
Earnings Call Analysis
Q2-2024 Analysis
First Citizens BancShares Inc (Delaware)
First Citizens BancShares delivered solid financial results in the second quarter of 2024. Key metrics such as return on assets, net interest margin, and loan growth were impressive, with high performance in the General Bank and Commercial Bank segments. The company's Board has authorized a substantial share repurchase plan of up to $3.5 billion, signifying strong confidence in future performance and shareholder value.
The General Bank segment continued to show resilience with positive loan growth trends, especially in business and commercial loans within the branch network. The growth was supported by strong performance in the SBA/SVB private and wealth channels. Interestingly, the company has not altered its risk appetite or client selection criteria to chase growth, emphasizing sustainable and prudent expansion. Deposit growth also surpassed expectations.
In the Commercial Bank segment, significant loan growth was primarily driven by specialized industry verticals, including project financing for energy and data centers. Although the commercial real estate (CRE) volume faced challenges due to the higher interest rate environment, other areas showed strong performance. The company expects loss rates in the equipment finance sector to decline in the latter half of 2024 and into 2025.
In the second quarter, First Citizens exceeded expectations in return on equity (ROE) and return on assets (ROA), which were 14.05% and 1.39%, respectively. While net interest income saw a slight increase, headline net interest margin (NIM) contracted by 3 basis points to 3.64%. The adjusted NIM, excluding accretion, saw a minor increase, indicating stabilization in deposit pressures. Moving forward, the company expects net interest income to remain relatively flat in the short term, with projections for the full year ranging from $7.2 billion to $7.3 billion.
Credit quality remained stable during the quarter, with net charge-offs of $132 million or 0.38% of loans, which is on the low end of their guidance range. Nonperforming loans remained stable, and the allowance ratio decreased by 6 basis points to 1.22%. The company feels confident about its overall reserve coverage, despite some stress in specific portfolios. Significantly, the segment experienced $4 billion in loan growth over the linked quarter, led by the Global Fund Banking capital call lending business.
The CET1 ratio (Common Equity Tier 1) declined slightly by 11 basis points, ending the quarter at 13.33%. The company's strategy includes methodical share repurchases aimed at managing the adjusted CET1 down to around 10.5% by the end of 2025. First Citizens remains well-positioned for future growth, with plans to continue leveraging the direct bank for core deposit growth and making strategic hires to enhance risk and technology capabilities.
Despite the positive trends, First Citizens acknowledges the challenges posed by the current macroeconomic environment, including potential margin compression due to reductions in interest rates. However, the company is proactively building strategies to mitigate these impacts, such as improving the mix of deposits and increasing noninterest income from various sources. While there are headwinds in the venture capital and private equity markets, recent trends have shown some improvement in the innovation economy.
First Citizens' leadership remains optimistic about the future, focusing on deepening customer relationships and prudent growth. Strategic priorities include maturing risk management frameworks and meeting large financial institution requirements. The company is committed to maintaining strong performance metrics and is excited about the opportunities ahead in 2024 and beyond.
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Ladies and gentlemen, thank you for standing by, and welcome to the First Citizens BancShares Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.
I would now like to introduce the host of this conference call, Ms. Deanna Hart, Head of Investor Relations. You may begin.
Good morning, and welcome to First Citizens 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 risks 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 3. We will also reference non-GAAP financial measures. Reconciliations of these measures against the most directly comparable GAAP measures can be found in Section 5 of the presentation. Finally, First Citizens does not respond 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 6, 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 7. I'll take a look at -- 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/SVB 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 SVB acquired customers. On the downside, we recognize that reductions in interest rates will cause margin compression. However, we are 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 noninterest 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 funds 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 SVB Commercial total client funds for the first time since the fourth quarter of 2021, SVB Commercial deposits increased for the first time since the first quarter of 2022. These increases were driven by a 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 VC dry powder remain a strong catalyst for future growth. We expect that positive trends -- 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 SVB team remains the bank of choice for the innovation economy.
Moving on to Page 8. 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 4 large financial institution requirements but to develop those capabilities in ways that are scalable through Category 3 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.
Thank you, Frank, and all of you joining us today. My comments will be anchored on key takeaways found on Page 10, pages 11 through 28 provide more details underlying our second quarter results. I will start with a $3.5 billion share repurchase plan that Frank just mentioned. Using capital to support organic growth remains our top priority that strong earnings has led to an excess capital position. Share repurchases provide an opportunity for us to return capital to our shareholders into more efficient capital levels over time. We managed capital ratios excluding any benefit from the share loss agreement and all planned capital activities are assessed in this context. We intend to supplement organic capital use with methodical share repurchases with the ultimate goal of managing our adjusted CET1 ratio down to the 10.5% range by the end of 2025. This repurchase plan puts us on that path.
Moving forward, we will assess capital management strategies based on balance sheet growth expectations, earnings trajectories and economic and regulatory environment. This will be reflected in our next capital plan, which will be completed in the first quarter of 2025. To the extent that capital accretion from earnings continues to outpace organic growth. We expect share repurchases to continue beyond this plan.
Turning to second quarter results. All of our return metrics exceeded our expectations. ROE and ROA adjusted for notable items were 14.05% and 1.39%, respectively. Headline net interest income increased slightly over the linked quarter as higher interest income was partially offset by lower accretion and higher deposit costs. While modest, the increase in headline net interest income followed 3 quarters a sequential decline or interest expense on deposits was increasing at a faster pace than interest income. During the second quarter, while interest expense on deposits increased the pace slowed. Given the likelihood of Fed rate cuts, we continue to mitigate a portion of our asset sensitivity profile by moving an additional $5 billion of cash into short duration securities in the investment portfolio.
Headline NIM contracted modestly by 3 basis points to 3.64%, ex-accretion, NIM increased by 1 basis point to 3.36% signaling that deposit pressures while still present, continue to stabilize and were more than offset by the benefit of strong loan origination. Before the second quarter, NIM ex-accretion has declined in the previous 3 quarters. Adjusted noninterest income was slightly better than expected due to higher client investment fees, aided by an increase in average balances in SVB commercial, off balance sheet client funds offsetting the expected decrease in net billing on rail operating lease equipment. Rental income was negatively impacted by a return to more normalized maintenance expenses in line with expectations we laid out last quarter. Adjusted noninterest expense came in at the lower end of our guidance range, increasing sequentially by approximately 1%. Expense growth was concentrated in equipment expenses related to accelerated depreciation on assets that will no longer be used following the SVB acquisition and favorable variances in prior periods related to reimbursement from third parties.
Second quarter expenses also reflected higher marketing expense as we increase focus on retaining clients in the direct bank channels to help offset expected maturities in their time deposits and in broker deposits. We continue to execute on cost savings from the acquisition and maintain vigilance on overall expense management. We are now close to achieving the lower end of our cost savings estimate and anticipate achieving it by the end of the year.
Credit continued to stabilize during the quarter. Net charge-offs of $132 million or 0.38% we're on the low end of our guidance range and nonperforming loans remained relatively stable. While losses increased modestly over the linked quarters, they were largely in the same portfolios in previous quarters, and we noted no emerging problems outside of those pressure points. Encouragingly, while we saw continued stress in the small ticket leasing portfolio and the investor attendant portfolio, we saw modest improvement in our general office portfolio. While this is a good sign given the continued focus on CRE, particularly CRE office, we do not believe this is indicative of any shift in current stress within that portfolio and really more of a function of 1 resolution timing.
We continue to be well reserved with an allowance of 11.84% on the commercial bank office portfolio covering second quarter net charge-offs 2x. Overall, the allowance ratio decreased 6 basis points to 1.22%, with the most significant factor related to a mix shift from recent growth in the global fund banking portfolio, which carries a low reserve percentage. The decrease was also driven by lower specific reserves on individually evaluated funds reasonably consistent credit quality trends and positive changes in macroeconomic forecasts. All these factors were partially offset by an increase in loan volume. While the allowance did decline this quarter, we feel good about our overall reserve coverage as well as coverage on the portfolio experiencing stress.
Moving to the balance sheet. Loans grew by $4 billion over the linked quarter and annualized growth rate of 11.8%. Growth was led by a $2.1 million increase in SVB Commercial driven by the global fund banking capital call lending business. These increases were partially offset by expected declines in technology and health care banking given continued payoff and increased competition. The General Bank and Commercial Bank segments also grew loans by $1.5 billion and $386 million, respectively. While the broader industry continues to experience tepid loan growth, we continue to see broad-based expansion across our business segment, as Frank mentioned earlier.
Turning to the right-hand side of the balance sheet. Deposits grew at an annualized rate of 4% or about $1.4 billion -- $1.5 billion due to strong core deposit growth and SVB Commercial and in the General Bank. The SVB Commercial -- in SVB Commercial, we saw deposits grow by $1.9 billion, a $329 million increase in the General Bank was driven by our continued emphasis on expanding relationships with current customers and attracting new ones. These increases were partially offset by expected declines in broker deposits and in Direct Bank deposits of $527 million and $145 million, respectively. The decline in the direct bank is due to a $1.9 billion decrease in time deposits, partially offset by a $1.8 billion increase in savings account given pricing on CDs and the expectation that rates will decline in the second half of 2024, we made a strategic decision to let these roll off, and we'll continue to grow core deposits to offset this decline.
Moving to capital. Our CET1 ratio declined by 11 basis points sequentially, ending the quarter at 13.33%. This was driven by a continued decline in the benefit provided by the shared loss agreement, which added approximately 85 basis points to the ratio this quarter, down 22 basis points from the first quarter. The CET1 ratio, excluding the benefits of the share loss agreement increased to 11 basis points from the linked quarter as earnings growth again outpaced organic growth.
I will close on Page 28 with our third quarter 2024 and full year outlook. On loans, we move our expectations higher given the starting point at the beginning of the third quarter and solid momentum in our pipeline. We anticipate high single-digit annualized percentage growth in the third quarter driven broadly across our business segments. We anticipate SVB Commercial will benefit from growth in the global fund banking business, where we see success and client outreach.
While the second quarter benefited from increased activity in commercial real estate funds, M&A and debt activity, the market continues to be challenged and remains somewhat unpredictable. While we do expect to see a modest increase in VC investment compared to 2023, we believe our growth will continue to be pressured by headwinds in the private equity and venture capital markets. We also expect continued growth in our business and commercial loan portfolio within the General Bank. In the Commercial Bank, we anticipate our specialty vertical will be key contributors to continued loan growth. We also continue to expand our middle market banking business and expect to see positive momentum from these strategic moves.
Looking at the full year, we expect loans to begin to be $143 billion to $146 billion range or mid- to high single-digit percentage growth on a year-over-year basis. We anticipate this growth to be concentrated across all remaining segments for the reasons previously discussed. We expect deposits to be up slightly in the $152 billion to $154 billion range in the third quarter due to growth in the General Bank. We expect relatively flat balances in SVB Commercial due to continued cash burn in the still muted fundraising environment.
We anticipate growth in the branch network as we benefit from increasing our customer base by building deposits through successful execution of our organic growth and relationship banking strategy. For the full year, we anticipate deposits in the $153 billion to $155 billion range, primarily related to growth in the General Bank previously discussed flat to modestly increasing balances in SVB Commercial supplemented by growth in the Direct Bank if needed.
We anticipate the Direct Bank remaining flat to modestly higher through the end of the year as expiring time deposits are offset by money market and savings growth. This is in line with our strategy of reducing higher cost CDs. In the Direct Bank, we have the option to bring down rates quicker should the Fed test cycle be more aggressive than anticipated while providing a strong source of insured customer, consumer deposits and our funding base. The current implied forward curve indicates a 98% probability of 2 rate cuts in the second half of this year. Our interest rate forecast covers a range of 1 to 3 rate cuts with the effective Fed funds rate declining from 5.50% currently to a range of 4.75% to 5.25% by the end of the year. These projections do include the impact of planned share repurchase activity in the back half of 2024.
For the third quarter, if we get 1 rate cut, we expect headline net interest income to be relatively flat with the second quarter given that our forecast calls for the cut in September, we expect that lower accretion, slightly higher deposit costs and a slightly lower loan yield will be offset by higher investment securities yield. For the full year, we expect headline net interest income in the range of $7.2 billion to $7.3 billion, up from our previous guidance of $7.1 billion to $7.3 billion, reflecting the higher for longer rate environment as well as potential rate cuts and the updated forecast occurring later in 2024. In either case, we continue to project loan accretion of just over $500 million for the year over a $200 million decline for 2023 as loan discount on the shorter portfolios we have been fully recognized.
On credit losses, while we have experienced positive trends in recent quarters, we do anticipate continued elevated net charge-offs in the investor dependent, general office and equipment finance portfolios. We anticipate third quarter net charge-offs in the 35 basis point to 45 basis point range but are lowering the full year range of 35 basis point to 40 basis points given lower losses during the first half of the year. We do caution that many of our portfolios in the Commercial Bank and SVB Commercial have large hold sizes and 1 or 2 of the 1 deteriorating unexpectedly could influence this range.
In Commercial Real Estate, tire for longer rates continue to have effect on value being felt most heavily in the general office sector where market liquidity support refinancing remain scarce. We expect these market dynamics will continue to elevate losses within this portfolio for the remainder of 2024. We're seeing some green shoots in the investor-dependent portfolio, and we believe the continued market optimism and a greater consensus on valuation is an encouraging sign that should help reduce some pressure. Still, given the uncertainty in the innovation economy, we do expect continued stress throughout 2024.
Moving to adjusted noninterest income. We expect the third quarter to be materially in line to down low single digits from the linked quarter. We expect full year adjusted noninterest income to be in the range of $1.85 billion to $1.9 billion, which is slightly higher than our previous guidance. This is driven by our rail outlook as we expect a continuation of healthy fundamental trends in the near term from a supply-driven recovery, which has generated strong demand for existing railcars, resulting in a stronger for longer scenario. We are also expecting higher fee income and service charges resulting from higher lending-related fees as loan volumes continue to be strong.
Moving to expenses. We expect a modest increase from the second quarter due to marketing expenses to help replace time deposit runoff in the Direct Bank as well as professional fees and temporary manpower as we ramp up project spend related to a few regulatory items. Furthermore, as Frank mentioned earlier, we continue to focus on building out our risk and technology capabilities and continue to make some strategic hires on these things, resulting in higher salaries and benefit expenses. All of this will be partially offset by continued acquisition synergies, which I spoke to earlier. We expect to achieve a lower 25% demand in our cost saves so by the end of 2024, but these savings will be offset by continued capability build out for regulatory capability as well as costs related to the strategic priorities to maximize growth in our core lines of business and optimize our systems and processes. Our adjusted efficiency ratio is expected to remain in the low 50% range in 2024.
Longer term, especially if we enter a Fed rate cut cycle, we expected to gravitate towards the mid-50s as our net interest margin compresses, and we continue to make investments in new areas that will help us scale efficiently in the future and be ready for Category 3 status when we cross that threshold. Looking at the full year, we anticipate adjusted noninterest expense to be in the range of $4.65 billion to $4.7 billion, in line with our previous guidance. For both the third quarter and full year 2024, we expect our tax rate to be in the range of 27% to 28%, which is exclusive of any discrete items.
In summary, we are very pleased with our performance this quarter, and we'll begin our share repurchase plan shortly. As Frank's comments earlier indicated, we will continue to grow in a prudent manner and allocate capital and alignment with our long-term focus and strong risk management framework.
I will now turn it over to the operator for instructions for the Q&A portion of the call.
[Operator Instructions] Our first question comes from Steven Alexopoulos from JPMorgan.
I want to start on the stock buyback. And I heard you that you want to get to the 10.5% CET1 target by the end of '25. By our math, $3.5 billion in 2025 -- through 2025 would leave you above 10.5%. Just curious by your math, is $3.5 billion of buybacks through the end of '25 get you to 10.5% CET1.
Steve, this plan puts us on a path of CET1 in the 10.5% range by the end of 2025 and we anticipate the plan will be executed over the next 4 to 5 quarters, and we will be updating our capital plan in the first half of next year. So you're right and the ratios would be elevated, all things being equal right now. But to the extent that earnings accretion continues to outpace organic growth, we do contemplate another share repurchase plan in the back half of 2025. So yes, they would be -- we stopped here and they would be there, but we are giving ourselves room for organic growth. We will assess our cash flow plan. And if we are, again, accretive earnings faster than organic growth, we've contemplated another plan to guide us down to that 10.5% range by the end of 2025.
Got it. And just given the valuation of the stock here, how do you think about front-loading the buybacks? Like do you think it will be pretty even? I mean, I know your -- the incentive system is tangible book value growth based. What are your thoughts on that?
Well, we would obviously plan to front-load obviously, given that essentially we anticipate the stock price to continue to increase over time as our tangible book value increases. So our plan is methodical, but does have a heavier emphasis on the last half of '24. So it's really not a streamlined, but it is expected to occur over the next 4 to 5 quarters.
Okay. And then for my follow-up question, I'm curious, so the NII outlook, and we know there's positives and negatives right, growth and -- loan growth is helping NII, and you have purchase accounting accretion and now we have rate cuts in the forecast. But if I look, so your $1.8 billion NII for 2Q '24, basically implying the same for 3Q and 4Q. And Craig, if I look at consensus, for 2025, it basically has the $1.8 billion sort of being the run rate for the next, call it, 6 quarters or so. I'm just curious, given the strategies you're looking at, you talked about maybe mitigating some of the asset sensitivity given all the puts and takes, do you see that as reasonable that NII sort of trends just flattish over the next several quarters? Just curious directionally what you see -- how you see this playing out?
If we're looking at the exit margin in the fourth quarter, with 0 rate cuts, we would be -- and this is net interest on ex-accretion we'd be up low to mid-single digits with 0 rate cuts to 1. We're going to be up low single digits and the 3, we would be up low single digits. Fast forward to '25 assets with 0 cuts, we will be up mid to high single digits with 1 cut and 4 next year will be up low single digits and then if we have 3 this year and 4 next year, we would be down low to mid-single digits in terms of net interest income.
Got it. So just so I understand, so if we get to follow the forward curve, which is 2 this year and 4 next year, where does that leave NII?
It leaves NII down low mid-single digits from the fourth quarter '24 exit for the fourth quarter '25 exit. And that's ex-accretion -- with accretion, it would be down mid-single digits.
The next question comes from Christopher Marinac from Janney Montgomery Scott.
So I just wanted to talk about the capital levels and kind of what the lower bound may be as the buyback is executed and would you revisit that as next year unfolds.
So if we -- what we would anticipate if we just executed this plan, CET1 ratio in the mid-11% ex loss share but we would intend to invest the case and our capital plan holds, we would intend to execute another plan and manage those ratios down to the 10.5% level at the end of '25.
Great. And the timing for now to today's authorization is to do this in the next 12 months, Craig? Or would it be really 18?
Well, we're looking at 4 to 5 quarters in our pro forma. Tom, do you want to comment on that?
Yes. No, and Craig mentioned, we're slightly front-loaded than the plan, but still trying to space it out over sort of the next 4 to 5 quarters and wrap it up and really get on that large bank capital planning cycle and sort of reassess against first half of next year and then hope we'll go back with the new plan.
Great. And just a quick follow-up on the venture capital space and do you see any improvement there as you look to the next few quarters?
Marc Cadieux, did you hear that question?
Sure. Happy to take that. This is Marc Cadieux. As we've alluded to, it remains a bit mixed in terms of the outlook for venture investment. We saw a nice uptick this quarter. It's $55.6 billion, which was initially encouraging. You peel that number apart. There were 2 very big ones, big investments in there that net of those makes for a quarter that looks a lot like '23 and the first quarter of '24. And so there's certainly a lot of optimism out there have not yet seen it translate and it's really unclear if we'll see that over the next couple of quarters at this time.
The next question comes from Casey Haire from Jefferies.
Wanted to touch on the loan-to-deposit ratio. It did tick up here a little bit in the quarter on some pretty nice loan growth. Just -- I know you guys have a long-term goal to drive that lower. If you -- if SVB kind of returned to form from the 165% level currently. Obviously, that would go a long way. Just wondering, can you comment on how the SVB depositors are behaving like your ability to drive that loan-to-deposit ratio back to what was a very deposit-rich vertical and help you achieve these targets?
Yes. I'll start and let Tom maybe amplify it here. We started the acquisition around 99% loan-to-deposit. It did tick up from 90% to 92%. So we're making really good program, getting it to our sort of mid-80s target range, and we feel confident that over the next 3.5 years, as we work down this purchase money note from the FDIC that we can achieve that range.
Tom, do you have any comment on that?
Yes. Only thing I'd add on sort of the SVB side. I mean we're obviously encouraged we saw deposit growth during the quarter. That being said, we're looking holistically at the client relationship there, making sure we put them in the right products, use the off-balance sheet products when they're better suited for the clients. So we're not binarily focused on the deposit growth there and also looking to, as Craig mentioned earlier, General Bank drive a portion of that deposit growth needed as well.
Keep in mind, given that SVB deposits can be sort of transitory, especially in this environment, a Direct Bank is a level we can pull as well.
Got it. And then just my follow-up. On the -- you guys mentioned that you've moved $5 billion into the bond portfolio to sort of dampen the asset sensitivity profile. Is there anything more that you can do on that front to mitigate the impact from Fed cuts?
Our asset sensitivity, we embarked on this 4 quarters ago, our asset sensitivity was around 20% and a 200 basis point rate cut. We guided that down around 14% of impact and that's about 2/3 of the past to where we'd like to be, which is somewhere in the 10% to 12% range. So we're very close to that as we sit here today. And that 10% to 12% range is where we were pre SVB. I think we're making good progress there. And as you know, we're TBV focused. So what happens there rates go down 200 basis points, about $1 billion shot to net interest income. However, on the AOCI side, it was more than compensated with increased value of the investment portfolio to TBV where our balance sheet position would be neutral.
Tom, is there anything else you want to add to that?
The only thing I'd add is tactically, we did add some hedges during the quarter as well. We put on $2.5 billion of the cash flow hedging on the variable rate loan book at moving some of that pricing out over the next 12 to 18 months.
So that brings us to $4 billion.
Yes, total hedges.
Their interest rate hedges, cash flow and fair value interest rate hedges.
Yes.
[Operator Instructions] As we have no further questions, I'll hand the call back to Deanna Hart for any concluding remarks.
Thank you, everyone, for joining us today, and we hope you have a great day. Thanks.