Q1 2024 First Citizens BancShares Earnings Call

April 25, 2024

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Operator: Hello everyone, thank you for your patience, and the First Citizens Bancshares first quarter 2024 earnings conference call will begin shortly. During the presentation, if you'd like to ask a question, you need to press star 1 on your telephone. The conference call will begin shortly. Ladies and gentlemen, thank you for standing by and welcome to the First Citizens Bancshares First Quarter 2024 Earnings Conference Call.

Operator: Hello everyone. Thank you for your patience, and the First Citizens BancShares Q1 2024 Earnings Conference Call will begin shortly. During the presentation, if you'd like to ask a question, you need to press star 1 on your telephone. The conference call will begin shortly. Ladies and gentlemen, thank you for standing by, and welcome to the First Citizens BancShares Q1 2024 Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer section. To ask a question during the section, you need to press star 1 on your telephone. If you require operator assistance during the program, please press star then 0. As a reminder, today's conference is being recorded. I would now like to introduce the host of this conference call, Ms. Deanna Hart, Senior Vice President of Investor Relations. You may begin.

Hello, everyone. Thank you for your patience.

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First citizens Bancshares first quarter 'twenty 'twenty four earnings conference call will begin shortly during the presentation.

If you'd like to ask a question you need to press star one on your telephone.

The conference call will begin shortly.

[music].

Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the first citizens Bancshares.

Speaker Change: First quarter 'twenty 'twenty four earnings conference call at this time, all participants are in a listen only mode.

Operator: At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer section. To ask a question during the section, press star 1 on your telephone. If you require operator assistance during the program, please press star then 0. As a reminder, today's conference call is being recorded. I would now like to introduce the host of this conference call, Ms. Deanna Hart, Senior Vice President of Investment Relations. You may begin.

Speaker Change: The speaker's presentation, there will be a question and answer section.

Speaker Change: To ask a question during this section.

Speaker Change: Press Star one on your telephone.

Speaker Change: If you require operator assistance during the program. Please press Star then zero as a reminder, today's conference is being recorded I would now like to introduce the host of this conference call. Mr. Hart Senior Vice President of Investor Relations you may begin.

Deanna W. Hart: Good morning. Welcome to First Citizens' first quarter earnings call. Joining me on the call today are Chairman and Chief Executive Officer Frank Holding and Chief Financial Officer Craig Nix. They will provide first quarter business and financial updates, referencing our earnings call presentation, which you can find on our website. Our comments today will include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from expectations. We assume no obligation to update such statements.

Deanna Hart: Good morning. Welcome to First Citizens' Q4 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 Q4 business and financial updates referencing our earnings call presentation, which you can find on our website. Our comments today 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 is not responsible for and does not edit nor guarantee the accuracy of earnings transcripts provided by third parties. I'll now turn it over to Frank.

Speaker Change: Good morning, welcome to the first citizens first quarter earnings call. Joining me on the call today are our chairman and Chief Executive Officer, Frank holding and Chief Financial Officer, Craig that they will provide first quarter business and financial update referencing our earnings call presentation, which you can find on our website.

Speaker Change: Our comments today will include forward looking statements, which are subject to risks and uncertainties that may cause actual results to differ materially from expectations.

Speaker Change: We assume no obligation to update such statements.

Deanna W. Hart: These risks are outlined on page 30. We will also reference non-GAAP financial measures. Reconciliations of these measures against the most directly comparable gap measures can be found in Section 5 of the presentation. Finally, First Citizens is not responsible for and does not edit nor guarantee the accuracy of earnings transcripts provided by third parties. I'll now turn it over to Frank.

Speaker Change: These risks are outlined on page 31.

Speaker Change: We will also reference non-GAAP financial measures reconciliations of these measures against the most directly comparable GAAP measures can be found in section five of the presentation.

Speaker Change: Only first citizens is not responsible for and does not edit nor guarantee the accuracy of earnings transcript provided by third parties I will now turn it over to Frank.

Speaker Change: Yeah.

Frank Brown Holding: Thank you, Deanna, and good morning, everyone. [inaudible] I'll say that over the last 12 months, we've successfully focused on our SBB integration efforts, regulatory readiness, strategic priorities, and financial performance. During the first quarter, we delivered earnings per share of $52.92, adjusting for notable items that are on page 51.

Frank B. Holding, Jr.: Thank you, Deanna. Good morning, everyone. Let's start on page 6, and I'll say that over the last 12 months we've successfully focused on our SVB integration efforts, regulatory readiness, strategic priorities, and financial performance. During Q1 we delivered earnings per share of $52.92, adjusting for notable items that are on page 51. Return metrics were strong, reflecting a peer-leading net interest margin, an adjusted efficiency ratio of 50%, and lower net charge-offs. These results exceeded our expectations, with earnings increasing approximately 14% over the sequential quarter. We're pleased that all our segments, including SVB Commercial, grew loans during the quarter, and our liquidity and capital positions strengthened due to core deposits and earnings growth. We successfully submitted our capital plan to the Federal Reserve on 5 April. The process included a full stress test, including the acquired SVB portfolios.

Frank Holding: Thank you, Deanna. Good morning, everyone. Let's start on page 6, and I'll say that over the last 12 months we've successfully focused on our SVB integration efforts, regulatory readiness, strategic priorities, and financial performance. During Q1 we delivered earnings per share of $52.92, adjusting for notable items that are on page 51. Return metrics were strong, reflecting a peer-leading net interest margin, an adjusted efficiency ratio of 50%, and lower net charge-offs. These results exceeded our expectations, with earnings increasing approximately 14% over the sequential quarter. We're pleased that all our segments, including SVB Commercial, grew loans during the quarter, and our liquidity and capital positions strengthened due to core deposits and earnings growth. We successfully submitted our capital plan to the Federal Reserve on 5 April. The process included a full stress test, including the acquired SVB portfolios.

Frank: Thank you Danielle.

Frank: Morning, everyone.

Frank: Oh.

Frank: On page <unk>.

Speaker Change: And I'll say that over the last 12 months, we have successfully focused on our SBB integration efforts.

Speaker Change: Regulatory readiness.

Speaker Change: The key priorities.

Speaker Change: Angel performance.

Frank: During the first quarter, we delivered earnings per share of $52, 92% adjusting for notable items.

Frank: If you want.

Frank Brown Holding: Return metrics were strong, reflecting a peer-leading net interest margin, on adjusted, ratio of 50%, and a lower Net Charge-Off. These results exceeded our expectations with earnings increasing approximately 14% over the sequential quarter. We're pleased that all our segments, including SBB commercial, grew loans during the quarter, and our liquidity and capital positions strengthened due to core and EarningsGrowth. We successfully submitted our capital plan to the Federal Reserve on April 5th

Frank: Return metrics were strong, reflecting our peer leading net interest margin on adjusted basis.

Frank: The ratio of 50%.

Frank: And lower net charge offs.

Frank: These results exceeded our expectations with earnings increasing approximately 14% over the sequential core.

Frank: We're pleased that all our segments, including SBB commercial green loans during the quarter and our liquidity and capital position strengthened due to core deposits and earnings growth.

Frank: We successfully submitted our capital plan to the Federal Reserve on April the <unk>.

Frank Brown Holding: This process included a full stress test, including the acquired SVB portfolio. The submission of this plan was an important milestone in our regulatory journey, and I'd like to thank all our associates for their hard work in submitting a quality plan. Turning to page 7, it's been a year since Silicon Valley Bank became part of First Citizens, which has introduced a lot of change. But most of all, opportunities.

Frank: The process included a full stress test.

Frank: <unk> the acquired FCB portfolios.

Frank B. Holding, Jr.: Submission of this plan was an important milestone in our regulatory journey, and I'd like to thank all our associates for their hard work in submitting a quality plan. Turning to page 7, it's been a year since Silicon Valley Bank became part of First Citizens, which has introduced a lot of change, but most of all, opportunity. I want to thank our associates for their hard work over the past year stabilizing the business and taking care of our client. I also want to thank our clients for their confidence in us as we remain committed to them and the innovation economy.

Frank Holding: Submission of this plan was an important milestone in our regulatory journey, and I'd like to thank all our associates for their hard work in submitting a quality plan. Turning to page 7, it's been a year since Silicon Valley Bank became part of First Citizens, which has introduced a lot of change, but most of all, opportunity. I want to thank our associates for their hard work over the past year stabilizing the business and taking care of our client. I also want to thank our clients for their confidence in us as we remain committed to them and the innovation economy.

Frank: The mission of this plan was an important milestone in our regulatory journey.

Speaker Change: Like to thank all our associates for their hard work and submitting a quality player.

Speaker Change: Turning to page seven it's been a year since Silicon Valley Bank became part of first citizens, which is which had has introduced a lot of change, but most of all opportunity I.

Frank Brown Holding: I want to thank our associates for their hard work over the past year stabilizing the business and taking care of our clients. I also want to thank our clients for their confidence in us as we remain committed to them and the innovation economy. The SDB team continues to deliver exceptional service to our clients. This is demonstrated by the fact that 80% of the VC firms on the Forbes Midas list are served by our company and our ability to onboard over 1,000 new clients in the first year of our acquisition.

Speaker Change: I want to thank our associates for their hard work over the past year stabilizing the business and taking care of our clients.

Speaker Change: I also want to thank our clients for their for their confidence in us as we remain committed to them.

Speaker Change: The antibody from economists.

Frank B. Holding, Jr.: The SVB team continues to deliver exceptional service to our clients, and this is demonstrated by the fact that 80% of the VC firms on the Forbes Midas List are served by our company and our ability to onboard over 1,000 new clients in the first year of our acquisition. SVB also has more experience serving the innovation economy than any other financial services provider, thanks to our dedicated teams of sector experts. Their essential insights come from over 40 years of dedicated focus on innovators and investors, an average leadership tenure of over 20 years with SVB, and the deepest and most experienced bench of over 1,500 innovation bankers and relationship advisors. Our team is well-positioned despite some of the continued economic headwinds facing the innovation economy. Last year, VC fundraising hit its lowest level since 2017.

Frank Holding: The SVB team continues to deliver exceptional service to our clients, and this is demonstrated by the fact that 80% of the VC firms on the Forbes Midas List are served by our company and our ability to onboard over 1,000 new clients in the first year of our acquisition. SVB also has more experience serving the innovation economy than any other financial services provider, thanks to our dedicated teams of sector experts. Their essential insights come from over 40 years of dedicated focus on innovators and investors, an average leadership tenure of over 20 years with SVB, and the deepest and most experienced bench of over 1,500 innovation bankers and relationship advisors. Our team is well-positioned despite some of the continued economic headwinds facing the innovation economy. Last year, VC fundraising hit its lowest level since 2017.

Speaker Change: Yes, they became continues to deliver exceptional service to our clients and this is demonstrated by the fact that 80% of the VC firms on the Forbes Midas list are served by our company and our ability to onboard over 1000, new clients in the first year.

Speaker Change: <unk> acquisition.

Frank Brown Holding: FDB also has more experience serving the innovation economy than any other financial services provider, thanks to our dedicated teams of sector experts. Their essential insights come from over 40 years of dedicated focus on innovators and investors and an average leadership tenure of over 20 years with SEB and the deepest and most experienced bench of over 1,500 innovation bankers and relationship advisors. Our team is well positioned to highlight some of the continued economic headwinds facing the innovation economy.

Speaker Change: Yes, you'd be also has more experience serving the innovation economy than any other financial services provider. Thanks to our dedicated teams of sector experts.

Speaker Change: They're essential insights come from over 40 years.

Speaker Change: Dedicated focus on antibody <unk> and investors on the average leadership tenure of over 20 years.

Speaker Change: The STB and the deepest and most experienced bench of over 1500 innovation bankers and relationship advisors.

Speaker Change: Our team is well positioned despite.

Speaker Change: Some of the continued economic headwinds.

Speaker Change: Are you seeing the innovation economy.

Frank Brown Holding: Last year, VC fundraising hit its lowest level since 2017. The drawback in fundraising we witnessed in 2023 continued into the first quarter, even though there remains plenty of dry powder to invest. Despite the current environment, we're encouraged... and a number of exit-ready companies are poised to exit once the IPO market fully reopens. In fact, there is a record backlog of companies ready to exit given the current market conditions. There is fundamental demand from investors, but only at the right price and for companies with good stories.

Speaker Change: Last year VC fundraising hit its lowest level since 2017.

Frank B. Holding, Jr.: The drawback in fundraising we witnessed in 2023 continued into Q1, even though there remains plenty of dry powder to invest. Despite the current environment, we're encouraged by the number of exit-ready companies poised to exit once the IPO market fully reopens. In fact, there is a record backlog of companies ready to exit given current market conditions. There is fundamental demand from investors, but only at the right price, and for companies with good stories. We are beginning to see activity improve, and the signs that IPO activity may pick up this year. On page 8, we show that the SVB franchise has been stabilizing in terms of loans and client funds since Q2 of last year, reflecting continued support for our innovation clients.

Frank Holding: The drawback in fundraising we witnessed in 2023 continued into Q1, even though there remains plenty of dry powder to invest. Despite the current environment, we're encouraged by the number of exit-ready companies poised to exit once the IPO market fully reopens. In fact, there is a record backlog of companies ready to exit given current market conditions. There is fundamental demand from investors, but only at the right price, and for companies with good stories. We are beginning to see activity improve, and the signs that IPO activity may pick up this year. On page 8, we show that the SVB franchise has been stabilizing in terms of loans and client funds since Q2 of last year, reflecting continued support for our innovation clients.

Speaker Change: The drawback in fundraising we witnessed in 2023 continued into the first quarter, even though there remains plenty of dry powder to invest.

Speaker Change: Despite the current environment, we are encouraged by the number of exit ready companies poised to exit once the IPO market fully reopens.

Speaker Change: In fact, there was a record backlog of <unk>.

Speaker Change: Companies ready to exit given current market conditions.

Speaker Change: There is fundamental demand from investors, but only at the right price and for companies with good stories.

Frank Brown Holding: We are beginning to see activity improve, and the signs that IPO activity may pick up this year, on page 8, show that the SUV franchise has been stabilizing in terms of loans and client funds, with the second quarter of last year reflecting continued support of our innovation claim. Moving to page 9, our integration efforts helped us retain clients, stabilize deposit balances, and

Speaker Change: We are beginning to see activity in Peru, and the songs that IPO activity may pick up this year.

Speaker Change: On page eight we show that the SUV franchise has been stabilizing in terms of loans on client funds.

Speaker Change: The second quarter of last year, reflecting continued support.

Speaker Change: Our innovation clients.

Frank B. Holding, Jr.: Moving to page 9, our integration efforts helped us retain clients, stabilize deposit balances, and develop strategic priorities for the combined organization. We continue to make meaningful progress on integration and remain committed to achieving our post-merger potential. While we have always focused on compliance with regulatory requirements, our growth has moved us to a significantly increased level of regulatory oversight, and we are investing and being proactive in enhancing our regulatory readiness. While there is more work to be done, we've made meaningful progress in maturing and refining our processes to support the change in our size and complexity. A few of these accomplishments include: first, implementing expanded risk management capabilities based on feedback from third-party GAAP assessment. Second, creating a dedicated regulatory remediation oversight team to manage and enhance regulatory response, as well as provide oversight, monitoring, and reporting of remediation efforts.

Frank Holding: Moving to page 9, our integration efforts helped us retain clients, stabilize deposit balances, and develop strategic priorities for the combined organization. We continue to make meaningful progress on integration and remain committed to achieving our post-merger potential. While we have always focused on compliance with regulatory requirements, our growth has moved us to a significantly increased level of regulatory oversight, and we are investing and being proactive in enhancing our regulatory readiness. While there is more work to be done, we've made meaningful progress in maturing and refining our processes to support the change in our size and complexity. A few of these accomplishments include: first, implementing expanded risk management capabilities based on feedback from third-party GAAP assessment. Second, creating a dedicated regulatory remediation oversight team to manage and enhance regulatory response, as well as provide oversight, monitoring, and reporting of remediation efforts.

Speaker Change: Moving to page nine our integration efforts helped us retain clients stabilize deposit balances and develop strategic priorities for the combined organization.

Speaker Change: We continue to make meaningful progress on integration and remain committed to achieving our post merger potential.

Speaker Change: While we have always focused on compliance with regulatory requirements. Our growth has moved us to a significantly increased level of regulatory oversight and we are investing and began and being proactive and enhancing our regulatory readiness.

Speaker Change: While there is more work to be done we've made meaningful progress in maturing and refining our processes to <unk>.

Speaker Change: Support the change in our size and complexity.

Speaker Change: A few of these accomplishments include.

Speaker Change: First implementing expanded risk management capabilities based on feedback from third party GAAP assessment.

Speaker Change: Second.

Speaker Change: Creating a dedicated regulatory remediation oversight team to manage and enhance regulatory response as well as provide oversight monitoring and reporting of remediation efforts.

Frank B. Holding, Jr.: Third, enhancing our dedicated regulatory affairs team to manage heightened regulatory activity and relationships with new examiners. And fourth, completing our first-time large financial institution regulatory filings on time. In addition, with our strong risk management culture, we will continue to invest in our capabilities here, and we're confident that over time we will effectively transform our program in accordance with new and changing regulatory requirements. Now let's look at page 10. We continue to invest in our wealth business, one of our primary key income drivers. We believe there are significant opportunities, and we've achieved remarkable organic growth here since 2013. In Q3, we announced the alignment of SVB Private and First Citizens Wealth under one leadership team to improve coordination and enhance services available to clients.

Frank Holding: Third, enhancing our dedicated regulatory affairs team to manage heightened regulatory activity and relationships with new examiners. And fourth, completing our first-time large financial institution regulatory filings on time. In addition, with our strong risk management culture, we will continue to invest in our capabilities here, and we're confident that over time we will effectively transform our program in accordance with new and changing regulatory requirements. Now let's look at page 10. We continue to invest in our wealth business, one of our primary key income drivers. We believe there are significant opportunities, and we've achieved remarkable organic growth here since 2013. In Q3, we announced the alignment of SVB Private and First Citizens Wealth under one leadership team to improve coordination and enhance services available to clients.

Speaker Change: Third.

Speaker Change: Enhancing our dedicated regulatory affairs team to manage heightened regulatory activity and relationships with move examiners.

Speaker Change: And for completing our first time large financial institution regulatory filings on time.

Speaker Change: In addition, with our strong risk management culture, we will continue to invest in our capabilities here and we're confident that overtime, we will effectively transformed our program in accordance with new and changing regulatory requirements.

Speaker Change: Now, let's look at page 10.

Speaker Change: We continue to invest in our wealth business one of our primary E comm.

Speaker Change: Drivers, we believe there are significant opportunities.

Speaker Change: And we've achieved remarkable organic growth year since 2013.

Speaker Change: In the third quarter, we announced the alignment of SPV private and first citizens well under one leadership team to improve coordination and enhanced services available to clients.

Frank B. Holding, Jr.: Wealth is beginning to see the benefits of our bringing our capabilities together under one umbrella, creating a premier private banking and wealth business. Most recently, we rebranded all of our wealth services to First Citizens Wealth. The combined First Citizens Wealth organization can help any client, business, or institution, regardless of size or complexity. We remain focused on maintaining deep client relationships, providing a boutique experience with big bank capabilities. Moving forward, we believe our combined product set, dedicated and experienced wealth professionals, and client-centric engaged model will continue to accelerate to accelerate the growth of our wealth franchise. And finally, turning to page 11, we're happy to be recognized and honored as a top 20 financial institution on Forbes' list of America's best banks and by other organizations and publications listed on the page.

Frank Holding: Wealth is beginning to see the benefits of our bringing our capabilities together under one umbrella, creating a premier private banking and wealth business. Most recently, we rebranded all of our wealth services to First Citizens Wealth. The combined First Citizens Wealth organization can help any client, business, or institution, regardless of size or complexity. We remain focused on maintaining deep client relationships, providing a boutique experience with big bank capabilities. Moving forward, we believe our combined product set, dedicated and experienced wealth professionals, and client-centric engaged model will continue to accelerate to accelerate the growth of our wealth franchise. And finally, turning to page 11, we're happy to be recognized and honored as a top 20 financial institution on Forbes' list of America's best banks and by other organizations and publications listed on the page.

Speaker Change: Wealth is beginning to see the benefits of our bringing our capabilities together under one umbrella, creating a premier private banking and wealth business.

Speaker Change: Most recently, we rebranded all of our wealth services to first citizens as well.

Speaker Change: The combined for citizens well organization can help any client business or institution, regardless of size or complexity.

Speaker Change: We remain focused on maintaining deep client relationships, providing a boutique experience with big bank capabilities movie.

Speaker Change: Moving forward, we believe our combined product set.

Speaker Change: Dedicated and experienced professionals.

Speaker Change: Client centric engaged model.

Speaker Change: We will continue to celebrate.

Speaker Change: To accelerate the growth of our wealth franchise.

Speaker Change: And finally, turning to page 11, we're happy to be recognized and honored as a pause.

Speaker Change: Top 20 financial institution on Forbes' list of America's Best banks and.

Speaker Change: By other organizations and publications listed on the page.

Frank B. Holding, Jr.: This recognition reflects our solid track record taking care of our clients and our customers. To conclude, the positive momentum we started in 2023 continues. Despite the uncertainty in the current environment and the hard work ahead of us, we continue to protect and grow customer relationships, stabilize the SVB franchise, grow core deposits and loans, and strengthen our balance sheet. Given our position of strength and dedicated associate, I'm excited about the opportunities ahead of us. With that, Craig, I'll turn it over to you.

Frank Holding: This recognition reflects our solid track record taking care of our clients and our customers. To conclude, the positive momentum we started in 2023 continues. Despite the uncertainty in the current environment and the hard work ahead of us, we continue to protect and grow customer relationships, stabilize the SVB franchise, grow core deposits and loans, and strengthen our balance sheet. Given our position of strength and dedicated associate, I'm excited about the opportunities ahead of us. With that, Craig, I'll turn it over to you.

Speaker Change: This recognition reflects our solid track record taking care of our clients and our customers.

Speaker Change: To conclude the positive momentum we started in 2023 continues.

Speaker Change: The uncertainty.

Speaker Change: The current environment.

Speaker Change: And the hard work ahead of US, we continue to protect and grow customer relationships.

Speaker Change: <unk> the FCB franchise.

Speaker Change: Grow core deposits and loans and strengthen our balance sheet.

Speaker Change: Given our position of strength and dedicated associates I am excited about the opportunities ahead of it.

Speaker Change: Ahead of us and with that Greg I'll turn it over to you.

Deanna Hart: Thank you, Frank. Appreciate everyone joining us today. I'm going to anchor my comments to the key themes outlined in the takeaways on page 14. Pages 15 through 35 provide more detail supporting our Q1 results. As Frank mentioned, our return metrics were strong and above our expectations. ROE and ROA adjusted for notable items were 15.01% and 1.46%, respectively. Compared to the Q4, these metrics benefited from a 13% increase in net income driven by lower net charge-offs and higher non-interest income, partially offset by lower accretion income and higher deposit costs. While net interest income declined from the link quarter by 5%, it was above our expectations. The decline was related to lower accretion income and higher deposit costs. These impacts were somewhat mitigated by securities and loan portfolio repricing to higher rates during the quarter.

Craig L. Nix: Thank you, Frank. Appreciate everyone joining us today. I'm going to anchor my comments to the key themes outlined in the takeaways on page 14. Pages 15 through 35 provide more detail supporting our Q1 results. As Frank mentioned, our return metrics were strong and above our expectations. ROE and ROA adjusted for notable items were 15.01% and 1.46%, respectively. Compared to the Q4, these metrics benefited from a 13% increase in net income driven by lower net charge-offs and higher non-interest income, partially offset by lower accretion income and higher deposit costs. While net interest income declined from the link quarter by 5%, it was above our expectations. The decline was related to lower accretion income and higher deposit costs. These impacts were somewhat mitigated by securities and loan portfolio repricing to higher rates during the quarter.

Greg: Thank you Frank I appreciate everyone joining us today.

Greg: I'm going to anchor my comments to the key themes outlined to the takeaways on page 14 pages 15 through 35 provides more detail supporting our first quarter results.

Greg: As Frank mentioned, our return metrics were strong and above our expectations RV and RNA adjusted for notable items were 15 point at 1% and 146% respectively.

Greg: Compared to the fourth quarter. These metrics benefited from a 13% increase in net income driven by lower net charge offs and higher noninterest income, partially offset by lower accretion income and higher deposit costs.

Greg: Well, while net interest income declined from the linked quarter by 5% it was above our expectations.

Greg: Brian was related to lower accretion income and higher deposit costs.

Greg: These impacts were somewhat mitigated by securities and loan portfolio repricing to higher rates during the quarter.

Deanna Hart: NIM contracted by 19 basis points to 3.67%, mostly due to the same factors affecting the decline in net interest income. Ex-accretion, NIM declined by 12 basis points to 3.35%. Adjusted non-interest income increased by 5% over Q4. A majority of the increase consisted of higher net rental income on rail operating lease equipment. Net rental income was aided by strong utilization rates that surpassed 99%, the highest level since Q2 2015. Also, positive repricing trends, as well as lower maintenance costs. As you will recall, we pulled forward maintenance qualification activity during Q4, which positioned us to handle the uptick in customer volume this quarter while front-loading some of the expenses. Maintenance costs also benefited from unanticipated delays in getting rail cars to maintenance facilities.

Craig L. Nix: NIM contracted by 19 basis points to 3.67%, mostly due to the same factors affecting the decline in net interest income. Ex-accretion, NIM declined by 12 basis points to 3.35%. Adjusted non-interest income increased by 5% over Q4. A majority of the increase consisted of higher net rental income on rail operating lease equipment. Net rental income was aided by strong utilization rates that surpassed 99%, the highest level since Q2 2015. Also, positive repricing trends, as well as lower maintenance costs. As you will recall, we pulled forward maintenance qualification activity during Q4, which positioned us to handle the uptick in customer volume this quarter while front-loading some of the expenses. Maintenance costs also benefited from unanticipated delays in getting rail cars to maintenance facilities.

Greg: NIM contracted by 19 basis points to 367%.

Greg: Mostly due to the same factors affecting the decline in net interest income.

Greg: Ex accretion NIM declined by 12 basis points to 335%.

Greg: Adjusted noninterest income increased by 5% over the fourth quarter a majority of the increase consisted of higher net rental income on rail operating lease equipment net rental income was aided by strong utilization rates that surpassed 99% the highest level since the second quarter of 2015.

Greg: <unk>.

Greg: Also positive repricing trends as well as lower maintenance costs as you will recall, we pulled forward maintenance qualification activity during the fourth quarter, which possess enough to handle the uptick in customer volume this quarter, while frontloading some of the expenses.

Greg: Maintenance costs also benefited from unanticipated delays in getting railcars to maintenance facilities. As a result, we model higher maintenance costs for the remainder of the year as service levels return to normal.

Deanna Hart: As a result, we modeled higher maintenance costs for the remainder of the year, and service levels returned to normal. Non-interest income also benefited from an increase in the fair value of customer derivative positions due to higher interest rates. These increases were partially offset by lower capital markets income related to seasonality, as well as increased competition as regional banks continue to return to normal activity following last year's pullback. Stripping out some of the seasonality and focusing on a year-over-year comparison, capital markets income was up roughly $5 million from syndicated deals. Adjusted non-interest expense slightly beat our expectations, increasing sequentially by less than 2%. Expense growth was concentrated in salaries and benefits, as seasonal adjustments associated with our 401(k), higher payroll taxes, and annual merit adjustments took effect. Q1 expenses also reflected higher FDIC insurance expense.

Craig L. Nix: As a result, we modeled higher maintenance costs for the remainder of the year, and service levels returned to normal. Non-interest income also benefited from an increase in the fair value of customer derivative positions due to higher interest rates. These increases were partially offset by lower capital markets income related to seasonality, as well as increased competition as regional banks continue to return to normal activity following last year's pullback. Stripping out some of the seasonality and focusing on a year-over-year comparison, capital markets income was up roughly $5 million from syndicated deals. Adjusted non-interest expense slightly beat our expectations, increasing sequentially by less than 2%. Expense growth was concentrated in salaries and benefits, as seasonal adjustments associated with our 401(k), higher payroll taxes, and annual merit adjustments took effect. Q1 expenses also reflected higher FDIC insurance expense.

Greg: Noninterest income also benefited from an increase in the fair value of customer derivative positions due to higher interest rates.

Greg: These increases were partially offset by lower capital markets income related to seasonality as well as increased competition as regional banks continue to return to normal activity following last year's pullback.

Greg: Stripping out some of the seasonality and focusing on a year over year comparison capital markets income was up roughly $5 million from syndicated deals.

Greg: Adjusted noninterest expense slightly beat our expectation increasing sequentially by less than 2%.

Greg: Expense growth was concentrated in salaries and benefits.

Greg: Seasonal adjustments associated with our 401k higher payroll taxes and annual merit adjustments took effect.

Greg: First quarter expenses also reflected higher FDIC insurance expense.

Deanna Hart: Effectively managing expenses remains a top priority for us given headwinds to net interest income. We are on track to achieve the low end of our 25% to 30% synergies target for SVB by the end of this year. Focusing on credit, net charge-offs declined by $74 million from the sequential quarter to $103 million. This represents a charge-off rate net charge-off ratio of 0.31%, below our previous guidance of 50 to 60 basis points. Losses were largely in the same portfolios as previous quarters, although at a lower rate. The largest decline was in the innovation portfolio, where net charge-offs were down $30 million sequentially, led by a $19 million drop in the Investor-Dependent Portfolio. The remainder was spread between equipment finance, general office, and other loan portfolios.

Craig L. Nix: Effectively managing expenses remains a top priority for us given headwinds to net interest income. We are on track to achieve the low end of our 25% to 30% synergies target for SVB by the end of this year. Focusing on credit, net charge-offs declined by $74 million from the sequential quarter to $103 million. This represents a charge-off rate net charge-off ratio of 0.31%, below our previous guidance of 50 to 60 basis points. Losses were largely in the same portfolios as previous quarters, although at a lower rate. The largest decline was in the innovation portfolio, where net charge-offs were down $30 million sequentially, led by a $19 million drop in the Investor-Dependent Portfolio. The remainder was spread between equipment finance, general office, and other loan portfolios.

Greg: Effectively managing expenses remains a top priority for us given headwinds to net interest income we are on track to achieve the low end of our 25% to 30% synergies target for F. C. D by the end of this year.

Greg: Focusing on credit net charge offs declined by $74 million from the sequential quarter to $103 million. This.

Greg: This represents a charge off rate net charge off ratio was three 1% below our previous guidance of 50 to 60 basis points.

Greg: Losses were largely in the same portfolio as previous quarters, although at a lower rate.

Greg: The largest decline was in the innovation portfolio, where net charge offs were down $38 million sequentially led by a $19 million dropping the investor dependent portfolio.

Greg: The remainder was spread between equipment Finance General office and other loan portfolios.

Deanna Hart: At quarter end, the allowance plus purchase discount on the investor-dependent portfolio was 8.2%, covering first quarter annualized net charge-offs 2.9 times and the last four quarters 1.9 times. Consistent with prior quarters, net charge-offs within the commercial bank were concentrated in the general office and small ticket equipment leasing portfolios. As a reminder, while our total general office portfolio was $2.8 billion at the end of the quarter, the portfolio where we have seen stress and charge-offs is in Class B repositioned bridge loans within the commercial bank, which totaled $1 billion at quarter end. Portfolio net charge-offs were down sequentially, but we continue to monitor the risks here. The allowance on this portfolio was 11.1%, covering first quarter annualized net charge-offs 1.6 times and the last four quarters net charge-offs 1.4 times.

Craig L. Nix: At quarter end, the allowance plus purchase discount on the investor-dependent portfolio was 8.2%, covering first quarter annualized net charge-offs 2.9 times and the last four quarters 1.9 times. Consistent with prior quarters, net charge-offs within the commercial bank were concentrated in the general office and small ticket equipment leasing portfolios. As a reminder, while our total general office portfolio was $2.8 billion at the end of the quarter, the portfolio where we have seen stress and charge-offs is in Class B repositioned bridge loans within the commercial bank, which totaled $1 billion at quarter end. Portfolio net charge-offs were down sequentially, but we continue to monitor the risks here. The allowance on this portfolio was 11.1%, covering first quarter annualized net charge-offs 1.6 times and the last four quarters net charge-offs 1.4 times.

Greg: At quarter end, the allowance plus purchase discount on the industrial dependent portfolio was eight 2% covering first quarter annualized net charge offs to nine times in the last four quarters, one nine times.

Greg: Consistent with prior quarters net charge offs within the commercial bank were concentrated in the general office and small ticket equipment leasing portfolios.

Greg: As a reminder, while our total general office portfolio was $2 $8 billion at the end of the quarter.

Greg: Portfolio, where we are seeing stress in charge offs is in class B reposition bridge lies within the commercial bank, which totaled $1 billion at quarter end.

Greg: Portfolio net charge offs were down sequentially, but we continue to monitor the risks here.

Greg: The allowance on this portfolio was 11, 1% covering first quarter annualized net charge offs of one six times in the last four quarter net charge offs of one four times.

Deanna Hart: Overall, the allowance decreased three basis points sequentially to 1.28% due to improvement in macroeconomic forecasts, a mixed shift to higher credit quality segments, and lower specific reserves, all partially offset by increased volume and mild credit quality deterioration. While the allowance did decline this quarter, we feel good about our overall reserve coverage on the portfolios where we continue to see stress. Our credit team continually monitors our loan portfolios by reviewing delinquency trends and grading migration by industry and/or geography to identify areas of potential stress, and at this time we are not aware of other significant pockets of deterioration. Moving to the balance sheet, loans grew by more than $2 billion over the linked quarter, an annualized growth rate of 6.2%. The general and commercial segments grew loans by $900 million and $794 million, respectively, and the SVB Commercial segment was up by $335 million.

Craig L. Nix: Overall, the allowance decreased three basis points sequentially to 1.28% due to improvement in macroeconomic forecasts, a mixed shift to higher credit quality segments, and lower specific reserves, all partially offset by increased volume and mild credit quality deterioration. While the allowance did decline this quarter, we feel good about our overall reserve coverage on the portfolios where we continue to see stress. Our credit team continually monitors our loan portfolios by reviewing delinquency trends and grading migration by industry and/or geography to identify areas of potential stress, and at this time we are not aware of other significant pockets of deterioration. Moving to the balance sheet, loans grew by more than $2 billion over the linked quarter, an annualized growth rate of 6.2%. The general and commercial segments grew loans by $900 million and $794 million, respectively, and the SVB Commercial segment was up by $335 million.

Greg: Overall, the allowance decreased three basis points sequentially to $1 two 8%.

Greg: Due to the improvement in macroeconomic forecasts and mix shift to higher credit quality segments and lower specific reserves.

Greg: Partially offset by increased volume and mild credit quality deterioration.

Greg: While the allowance did decline this quarter, we feel good about our overall reserve coverage on the portfolios, where we continued to see stress.

Greg: Our credit team continually monitors our loan portfolio is not reviewing delinquency trends and grady migration by industry and geography to identify areas of potential stress and at this time, we are not aware of other significant pockets of deterioration.

Greg: Moving to the balance sheet loans grew by more than $2 billion over the linked quarter and annualized growth rate of six 2%. The general and commercial segment grew <unk> by $900 million and $794 million, respectively, and the SBB commercial segment was up by 330.

Greg: $5 million.

Deanna Hart: General bank growth was concentrated in small business and commercial loans generated in our branch network. In the commercial bank, growth was driven by strong production in our industry verticals, particularly in TMT, healthcare, and energy. Growth in our TMT vertical continues to be driven by strong demand for new data centers, while our energy vertical is benefiting from the energy transition, which is driving activity in financing renewable energy projects. Finally, the increase in SVB Commercial loans related to Global Fund Banking growth. Despite increased competition in this space, we continue to win business. To that end, our team closed more than $5 billion in deals in the first quarter. While we are excited by the positive trends in Global Fund Banking, we recognize that the macroeconomic environment still presents headwinds.

Craig L. Nix: General bank growth was concentrated in small business and commercial loans generated in our branch network. In the commercial bank, growth was driven by strong production in our industry verticals, particularly in TMT, healthcare, and energy. Growth in our TMT vertical continues to be driven by strong demand for new data centers, while our energy vertical is benefiting from the energy transition, which is driving activity in financing renewable energy projects. Finally, the increase in SVB Commercial loans related to Global Fund Banking growth. Despite increased competition in this space, we continue to win business. To that end, our team closed more than $5 billion in deals in the first quarter. While we are excited by the positive trends in Global Fund Banking, we recognize that the macroeconomic environment still presents headwinds.

Greg: General Bank growth was concentrated in small business and commercial lines generated in our branch network.

Greg: And the commercial bank growth was driven by strong production in our industry verticals, particularly in TMT healthcare and energy.

Greg: Growth in our T. N P vertical continues to be driven by strong demand for new data centers, one of our energy vertical is benefiting from the energy transition, which is driving activity and financing renewable energy projects.

Greg: Finally, the increase in FCB commercial lines related to global fund banking, Greg and despite increased increased competition in the space, we continue to win business.

Greg: And our team closed more than $5 billion in deals in the first quarter.

Greg: While we are excited about the positive trends in global fund banking, we recognize that the macroeconomic environment still present a headwind.

Deanna Hart: In Q1, VC investment came in lower than expected amid macroeconomic uncertainty and geopolitical tension. While VC Dry Powder remains elevated despite ongoing fundraising sluggishness, we expected to take time to gradually deploy those investments. However, we remain well positioned to ramp up both loans and deposits quickly when the macroeconomic environment improves, given we have the largest fund finance team in the market. Within the SVB Commercial segment, growth in Global Fund Banking was partially offset by expected declines in our technology and healthcare banking business, as paydowns outpaced new fundings due to continued headwinds in the private investment landscape. While we've seen some encouraging activity in the IPO market, we do not expect an immediate reset given continued fundraising and valuation mismatches. We are well positioned to capture business as the pendulum swings back.

Craig L. Nix: In Q1, VC investment came in lower than expected amid macroeconomic uncertainty and geopolitical tension. While VC Dry Powder remains elevated despite ongoing fundraising sluggishness, we expected to take time to gradually deploy those investments. However, we remain well positioned to ramp up both loans and deposits quickly when the macroeconomic environment improves, given we have the largest fund finance team in the market. Within the SVB Commercial segment, growth in Global Fund Banking was partially offset by expected declines in our technology and healthcare banking business, as paydowns outpaced new fundings due to continued headwinds in the private investment landscape. While we've seen some encouraging activity in the IPO market, we do not expect an immediate reset given continued fundraising and valuation mismatches. We are well positioned to capture business as the pendulum swings back.

Greg: In the first quarter of VC investment came in lower than expected amid macroeconomic uncertainty and geopolitical tension.

Greg: While VC dry powder remains elevated despite ongoing fund raising sluggishness.

Greg: We expect it to take time to gradually deployed those investments.

Greg: However, we remain well positioned to ramp up both loans and deposits quickly when the macroeconomic environment improves given we have the largest fund finance team in the market.

Greg: Within the commercial segment Rose and Global fund banking was partially offset by expected declines in our technology and health care banking business as Paydowns outpace new fundings due to continued headwinds in their private investment landscape.

Greg: We've seen some encouraging activity in the IPO market, we do not expect an immediate reset given continued fundraising evaluation mismatches.

Greg: We are well positioned to capture business as the pendulum swings back technology and health care banking team has a focused approach and our track record and expertise in the innovation economy will continue to help us win deals. We are encouraged by our progress in growing the new Seb commercial brand, winning new clients and bringing that.

Deanna Hart: The technology and healthcare banking team has a focused approach, and our track record and expertise in the innovation economy will continue to help us win deals. We are encouraged by our progress in growing the new SVB Commercial brand, winning new clients, and bringing those back who left. Turning to the right-hand side of the balance sheet, deposits grew at an annualized rate of 10.4%, or by $3.8 billion in Q1, due to strong core deposit growth in the general and direct banks. In the general bank, we continue to focus on growing customer deposits, and we're pleased to see these grew by $2.4 billion due to our continued emphasis on expanding relationships with current customers and attracting new accounts. Direct bank deposits increased by over $2 billion despite a decrease in marketing expense during the quarter.

Craig L. Nix: The technology and healthcare banking team has a focused approach, and our track record and expertise in the innovation economy will continue to help us win deals. We are encouraged by our progress in growing the new SVB Commercial brand, winning new clients, and bringing those back who left. Turning to the right-hand side of the balance sheet, deposits grew at an annualized rate of 10.4%, or by $3.8 billion in Q1, due to strong core deposit growth in the general and direct banks. In the general bank, we continue to focus on growing customer deposits, and we're pleased to see these grew by $2.4 billion due to our continued emphasis on expanding relationships with current customers and attracting new accounts. Direct bank deposits increased by over $2 billion despite a decrease in marketing expense during the quarter.

Greg: Back to laugh.

Greg: Turning to the right hand side of the balance sheet deposits grew at an annualized rate of 10, 4% or about $3 8 billion in the first quarter due to strong core deposit growth in the general and direct banks.

Greg: And the General Bank, we continue to focus on growing customer deposits and were pleased to see these grew at about $2 4 billion due to our continued emphasis on expanding relationships with current customers and attracting new accounts.

Greg: Direct bank deposits increased by over $2 billion. Despite a decrease in marketing expense during the quarter.

Deanna Hart: While the direct bank channel is higher cost and now accounts for 27% of our deposit base, it is an additional lever we've used to remain resilient through a turbulent environment and is a strong source of insured, low-cost consumer deposits funding our earnings base. Growth in this channel enabled us to continue to redeem some of our smaller subordinated debt issuances this quarter, given our excess capital and liquidity positions. These increases were partially offset by expected declines in the SVB Commercial segment. Deposits were down $716 million from the linked quarter, driven by continued client cash burn and muted fundraising activity. Moving to capital, our CET1 ratio increased by 8 basis points sequentially, ending the quarter at 13.44%. Our Shared Loss Agreement added approximately 107 basis points to the ratio, down from approximately 120 basis points last quarter.

Craig L. Nix: While the direct bank channel is higher cost and now accounts for 27% of our deposit base, it is an additional lever we've used to remain resilient through a turbulent environment and is a strong source of insured, low-cost consumer deposits funding our earnings base. Growth in this channel enabled us to continue to redeem some of our smaller subordinated debt issuances this quarter, given our excess capital and liquidity positions. These increases were partially offset by expected declines in the SVB Commercial segment. Deposits were down $716 million from the linked quarter, driven by continued client cash burn and muted fundraising activity. Moving to capital, our CET1 ratio increased by 8 basis points sequentially, ending the quarter at 13.44%. Our Shared Loss Agreement added approximately 107 basis points to the ratio, down from approximately 120 basis points last quarter.

Greg: While the direct bank channel is higher cost and now accounts for 27% of our deposit base is an additional lever we used to remain resilient through a turbulent environment and is a strong source of insured cuts consumer deposit funding our earnings base.

Greg: Growth in this channel enabled us to continue to redeem some of our smaller subordinated debt issuances this quarter, given our excess capital and liquidity positions.

Greg: These increases were partially offset by expected declines in the SBB commercial segment.

Greg: <unk> were down $716 million from the linked quarter, driven by continued client cash burn and muted fund raising activity.

Greg: Moving to capital our CET, one ratio increased by eight basis points sequentially ending the quarter at 13, 44% are shared loss agreement added approximately 107 basis points to the ratio down from approximately 120 basis points last quarter, we continue to use capital.

Deanna Hart: We continue to use capital to support organic growth but acknowledge that we are operating with elevated capital levels. In addition to supporting organic growth, share purchases are part of our capital distribution strategy. We assessed share purchases as part of our capital plan that was approved by our board during Q1 and was submitted to our regulators earlier this month. While we have not yet received feedback from our regulators on the plan, we remain confident that a share purchase plan will be an option for us in the second half of this year. While we don't have an approved share purchase plan at this time, I will share some general information about how we intend to manage capital moving forward. We manage our capital ratios excluding any benefit from the shared loss agreement, which we refer to internally as adjusted CET1.

Craig L. Nix: We continue to use capital to support organic growth but acknowledge that we are operating with elevated capital levels. In addition to supporting organic growth, share purchases are part of our capital distribution strategy. We assessed share purchases as part of our capital plan that was approved by our board during Q1 and was submitted to our regulators earlier this month. While we have not yet received feedback from our regulators on the plan, we remain confident that a share purchase plan will be an option for us in the second half of this year. While we don't have an approved share purchase plan at this time, I will share some general information about how we intend to manage capital moving forward. We manage our capital ratios excluding any benefit from the shared loss agreement, which we refer to internally as adjusted CET1.

Greg: To support organic growth, but acknowledged that we are operating with elevated capital levels.

Greg: In addition to supporting organic growth share repurchases are part of our capital distribution strategy.

Greg: We assessed share repurchase as part of our capital plan that was approved by our board during the first quarter. It was submitted to our regulators earlier this month.

Greg: While we have not yet received feedback from our regulators on the plan. We remain confident that a share repurchase plan will be an option for us in the second half of this year, while we don't have an approved share repurchase plan at this time I will share some general information about how we intend to manage capital moving forward.

Greg: Yes.

Greg: We manage our capital ratios, excluding any benefit from the loss share agreement, which we referred to internally as adjusted C. E. T. One all planned activities in capital levels are assessed in this context as the R. W. A benefit continues to run off at a rate of one to 2 billion.

Deanna Hart: All planned activities and capital levels are assessed in this context as the RWA benefit continues to run off at a rate of $1 to $2 billion per quarter and is expected to be mostly gone by the end of 2025. In addition to supporting organic growth and paying dividends, we intend to supplement that capital use with methodical share repurchase over time to get our adjusted CET1 ratio down to the 10.5% range by the end of 2025, which is the level it was following the acquisition of SVB. We do not intend to immediately manage capital down to this level. Instead, we intend to do it methodically and continually assess capital needs based on balance sheet growth expectations, earnings trajectories, and the economic and regulatory environments over the next couple of years.

Craig L. Nix: All planned activities and capital levels are assessed in this context as the RWA benefit continues to run off at a rate of $1 to $2 billion per quarter and is expected to be mostly gone by the end of 2025. In addition to supporting organic growth and paying dividends, we intend to supplement that capital use with methodical share repurchase over time to get our adjusted CET1 ratio down to the 10.5% range by the end of 2025, which is the level it was following the acquisition of SVB. We do not intend to immediately manage capital down to this level. Instead, we intend to do it methodically and continually assess capital needs based on balance sheet growth expectations, earnings trajectories, and the economic and regulatory environments over the next couple of years.

Greg: Per quarter and is expected to be mostly gone by the end of 2025.

Greg: In addition to supporting organic growth and paying dividend.

Greg: We intend to supplement that capital use with methodical share repurchases over time to get our sea adjusted CET, one ratio down to the 10, 5% range by the end of 2025, which is the level. It was following the acquisition of S. D D.

Greg: We do not intend to immediately manage capital down to this level instead, we intend to do it methodically continually assess capital needs based on balance sheet growth expectations earnings trajectories, and economic and regulatory environments over the next couple of years, we will reassess our capital management priorities on Iraq.

Deanna Hart: We will reassess our capital management priorities on a regular basis, including annual updates to our capital plan. I'm on page 35 discussing our Q2 and 2024 full year outlook. In summary, for the full year, we move our net interest income forecast up on the higher Q1 starting point and a reduction from 3 to 6 rate cuts to 0 to 3 rate cuts. We also move our credit loss guidance down on the lower Q1 starting point. We have not materially changed our non-interest income and expense guidance. On loans, we anticipate low single-digit percentage growth in the Q2, driven by growth in the general bank, commercial bank, and SVB Commercial. We anticipate SVB Commercial will benefit from continued growth in the Global Fund Banking business, where we continue to see success due to continued client outreach.

Craig L. Nix: We will reassess our capital management priorities on a regular basis, including annual updates to our capital plan. I'm on page 35 discussing our Q2 and 2024 full year outlook. In summary, for the full year, we move our net interest income forecast up on the higher Q1 starting point and a reduction from 3 to 6 rate cuts to 0 to 3 rate cuts. We also move our credit loss guidance down on the lower Q1 starting point. We have not materially changed our non-interest income and expense guidance. On loans, we anticipate low single-digit percentage growth in the Q2, driven by growth in the general bank, commercial bank, and SVB Commercial. We anticipate SVB Commercial will benefit from continued growth in the Global Fund Banking business, where we continue to see success due to continued client outreach.

Greg: Zero basis, including annual updates to our capital plan.

Greg: On page 35, discussing our second quarter 22, and 2020 for full year outlook.

Greg: In summary for the full year, we move our net interest income forecast up on the higher first quarter, starting point and a reduction from three years to fix rate cuts to zero to three rate cuts. We also moved our credit loss guidance down on the lower first quarter starting point.

Greg: We have not materially changed our noninterest income and expense guidance.

Greg: On loans, we anticipate low single digit percentage growth in the second quarter driven by growth in the General Bank commercial bank and SBB commercial we.

Greg: We anticipate SPD commercial will benefit from continued growth in the global fund banking business, where we continue to see success due to continued client outreach.

Deanna Hart: This growth, however, will continue to be pressured by headwinds in the private equity and venture capital markets. We also anticipate a modest decline in technology and healthcare banking business as lower levels of funding and line draws result in loan portfolio contraction. Looking at the innovation economy more broadly, we found that over time there is a correlation between public market valuations and VC investment volume. There have been some positive economic signals suggesting that capital deployment may rebound in 2024, driven by an improved IPO outlook. We therefore expect a modest increase in VC investment compared to 2023. Meanwhile, we anticipate growth in the commercial bank and our industry verticals, and increased activities in middle market banking following seasonal declines in the first quarter.

Craig L. Nix: This growth, however, will continue to be pressured by headwinds in the private equity and venture capital markets. We also anticipate a modest decline in technology and healthcare banking business as lower levels of funding and line draws result in loan portfolio contraction. Looking at the innovation economy more broadly, we found that over time there is a correlation between public market valuations and VC investment volume. There have been some positive economic signals suggesting that capital deployment may rebound in 2024, driven by an improved IPO outlook. We therefore expect a modest increase in VC investment compared to 2023. Meanwhile, we anticipate growth in the commercial bank and our industry verticals, and increased activities in middle market banking following seasonal declines in the first quarter.

Greg: This growth however will continue to be pressured by headwinds in the private equity and venture capital markets. We also anticipate a modest decline in technology and health care banking business and lower levels of funding and line draws result in loan portfolio contraction.

Greg: Looking at the innovation economy more broadly we found that over time, there is a correlation between public market valuations and <unk>.

Greg: D C investment volume.

Greg: There have been some positive economic signals.

Greg: Adjusting the capital deployment may rebound in 2024, driven by an improved IPO outlook. We therefore expect a modest increase in D C investment compared to 2023.

Greg: Meanwhile, we anticipate growth in the commercial bank in our industry verticals and increased activities in middle market banking following seasonal declines in the first quarter.

Greg: Yeah.

Deanna Hart: Looking at the full year, we continue to expect loans to end in the $139 to $143 billion range, or mid-single digit percentage growth, which is essentially unchanged from our previous guidance. We anticipate this growth to be concentrated across all three banking segments for the reasons previously discussed. We expect deposits to be flat to slightly up in Q2 as growth in the general bank is offset by a decline in SVB Commercial. Within the general bank, we anticipate growth in the branch network as we benefit from our focus on increasing our customer base by building deposits through proactive sales associate outreach, centralized marketing campaigns, and increased community connectivity. This growth will be slightly offset by seasonal declines that we expect in April due to tax payments.

Craig L. Nix: Looking at the full year, we continue to expect loans to end in the $139 to $143 billion range, or mid-single digit percentage growth, which is essentially unchanged from our previous guidance. We anticipate this growth to be concentrated across all three banking segments for the reasons previously discussed. We expect deposits to be flat to slightly up in Q2 as growth in the general bank is offset by a decline in SVB Commercial. Within the general bank, we anticipate growth in the branch network as we benefit from our focus on increasing our customer base by building deposits through proactive sales associate outreach, centralized marketing campaigns, and increased community connectivity. This growth will be slightly offset by seasonal declines that we expect in April due to tax payments.

Greg: Looking at the full year, we continue to expect loans to end in the $139 billion to $143 billion range or mid single digit percentage growth, which is essentially unchanged from our previous guidance. We anticipate this growth to be concentrated across all three banking segment for the reasons previously.

Greg: Scott.

Greg: We expect deposits to be flat to slightly up in the second quarter as growth in the general Bank is offset by a decline in FCB commercial within the General Bank, we anticipate growth in the branch network as we benefit from our focus on increasing our customer base that building deposits sort of proactive sales.

Greg: The outrage centralize.

Greg: Centralized marketing campaigns and increased community connectivity this growth will be slightly offset by seasonal declines that we expect in April due to tax payments.

Deanna Hart: With respect to SVB deposits, we expect the venture capital environment to remain challenging, particularly in the first half of 2024. Looking forward, we expect client funds cash burn and losses to continue to normalize over time with gradual improvement expected in the second half of the year. In addition, we expect to improve our capture rate of private market fundraising, a large percentage of which flows into on-balance sheet deposit products. Bringing this all together, we expect SVB deposits to be relatively flat in the first half of the year before growing in the second half. While we continue to raise deposits in our direct bank in Q1, we anticipate these deposits will remain fairly stable in 2024, given the excess liquidity on our balance sheet and continued strong growth in other channels, including the branch network.

Craig L. Nix: With respect to SVB deposits, we expect the venture capital environment to remain challenging, particularly in the first half of 2024. Looking forward, we expect client funds cash burn and losses to continue to normalize over time with gradual improvement expected in the second half of the year. In addition, we expect to improve our capture rate of private market fundraising, a large percentage of which flows into on-balance sheet deposit products. Bringing this all together, we expect SVB deposits to be relatively flat in the first half of the year before growing in the second half. While we continue to raise deposits in our direct bank in Q1, we anticipate these deposits will remain fairly stable in 2024, given the excess liquidity on our balance sheet and continued strong growth in other channels, including the branch network.

Greg: With respect with respect to SBB deposits, we expect the venture capital environment to remain challenging, particularly in the first half of 'twenty 'twenty four.

Greg: Looking forward, we expect client funds cash burn and losses to continue to normalize over time with gradual improvement.

Greg: Expected in the second half of the year.

Greg: In addition, we expect to improve our capture rate of private market private market Sunrise fund raising a large percentage of which flows into on balance sheet deposit products.

Greg: Bringing this all together, we expect SBB deposits to be relatively flat in the first half of the year before growing in the second half.

Greg: While we continue to raise deposits and our direct bank in the first quarter. We anticipate these deposits will remain fairly stable in 2024, given the excess liquidity on our balance sheet and continued strong growth in other channels, including the branch network.

Deanna Hart: This obviously could change if we have unexpected deposit outflows occur elsewhere. For the full year, we anticipate mid-single digit percentage growth primarily related to growth in the general bank previously discussed and low to mid-single digit percentage growth in SVB Commercial deposits. Our interest rate forecast follows the implied forward curve, which includes 3 rate cuts in 2024, with the effective Fed Funds Rate declining from 5.50% to 4.75% by the end of the year. It is our belief that we will see closer to 1 or no rate cuts, given the continued strength of the labor markets and the lumpiness we've seen in the economy fueling speculation that inflation remains untamed. Therefore, for our net interest income guidance, we provide a range with the top end assuming no rate cuts and the low end assuming 3 rate cuts.

Craig L. Nix: This obviously could change if we have unexpected deposit outflows occur elsewhere. For the full year, we anticipate mid-single digit percentage growth primarily related to growth in the general bank previously discussed and low to mid-single digit percentage growth in SVB Commercial deposits. Our interest rate forecast follows the implied forward curve, which includes 3 rate cuts in 2024, with the effective Fed Funds Rate declining from 5.50% to 4.75% by the end of the year. It is our belief that we will see closer to 1 or no rate cuts, given the continued strength of the labor markets and the lumpiness we've seen in the economy fueling speculation that inflation remains untamed. Therefore, for our net interest income guidance, we provide a range with the top end assuming no rate cuts and the low end assuming 3 rate cuts.

Greg: This obviously could change if we have unexpected deposit outflows occur elsewhere.

Greg: For the full year, we anticipate mid single digit percentage growth primarily related to growth in the general Bank previously discussed.

Greg: And low to mid single digit percentage growth in SCB commercial deposits.

Greg: Our interest rate forecast follows the implied forward curve, which includes three rate cuts in 2024 with the effective fed funds rate declining from $5, 50% to 475% by the end of the year it.

Greg: It is our belief that we will see closer to one or no rate cuts given the continued strength of the labor markets and the Lumpiness, we've seen in the economy fueling speculation that inflation remains unchanged.

Greg: Therefore for our net interest income guidance, we provided a range with a top end assuming no rate cuts and the low end assuming three rate cuts.

Deanna Hart: It is important to note that these projections do not include the impact of planned share repurchase activity in the back half of 2024 as we await final sizing and approval as part of our capital planning process. For Q2, we expect headline net interest income to be down in the low to mid-single digit percentage points range. The decline will be driven by the impact of lower accretion, higher deposit costs, and lower loan yields, assuming one rate cut, only partially offset by higher investment securities yield. With no rate cut, we expect headline net interest income to be fairly stable, with or just slightly down compared to Q1. For the full year, we expect headline net interest income in the range of $7.1 to $7.3 billion.

Craig L. Nix: It is important to note that these projections do not include the impact of planned share repurchase activity in the back half of 2024 as we await final sizing and approval as part of our capital planning process. For Q2, we expect headline net interest income to be down in the low to mid-single digit percentage points range. The decline will be driven by the impact of lower accretion, higher deposit costs, and lower loan yields, assuming one rate cut, only partially offset by higher investment securities yield. With no rate cut, we expect headline net interest income to be fairly stable, with or just slightly down compared to Q1. For the full year, we expect headline net interest income in the range of $7.1 to $7.3 billion.

Greg: It is important to note. These projections do not include the impact of planned repurchase share repurchase activity in the back half of 2024 as we await final final sizing and approval as part of our capital planning process.

Greg: For the second quarter, we expect headline net interest income to be down in the low to mid single digit percentage point range. The decline will be driven by the impact of lower accretion higher deposit costs and lower loan yield assuming one rate cut only partially offset by higher investment security yield with no rate cut.

Greg: We expect headline net interest income to be fairly stable with or just slightly down compared to the first quarter.

Greg: For the full year, we expect headline net interest income in the range of seven one to $7 $3 billion in either case, we predict accretion income.

Deanna Hart: In either case, we project accretion income just under $500 million for the year, which is a decline from $725 million in the last three quarters of 2023 as loan discounts on the shorter portfolios will have fully been recognized. We previously guided to a range of $6.9 billion to 7.1 billion. The upward revision reflects the higher-for-longer rate environment and shifting the guidance range between zero and three cuts for the remainder of 2024. On credit losses, we are reducing our net charge-offs guidance as we now anticipate it will remain in the 35 to 50 basis points range for both the second quarter and full year 2024. We are benefiting from decreased innovation economy stress.

Craig L. Nix: In either case, we project accretion income just under $500 million for the year, which is a decline from $725 million in the last three quarters of 2023 as loan discounts on the shorter portfolios will have fully been recognized. We previously guided to a range of $6.9 billion to 7.1 billion. The upward revision reflects the higher-for-longer rate environment and shifting the guidance range between zero and three cuts for the remainder of 2024. On credit losses, we are reducing our net charge-offs guidance as we now anticipate it will remain in the 35 to 50 basis points range for both the second quarter and full year 2024. We are benefiting from decreased innovation economy stress.

Greg: Just under $500 million for the year, which is a decline from $725 million in the last three quarters of 2023.

Greg: One of the discounts on the shoulder portfolios will have fully been recognized.

Greg: We previously guided to a range of $6 9 billion to $7 1 billion. The upward revision reflects the higher for longer rate environment and shifting the guidance range between zero and three cuts for the remainder of 2024.

Greg: On credit losses, we are reducing our net charge offs guidance as we now anticipate it will remain in the 35 to 50 basis points range for both the second quarter and full year 2024.

Greg: We are benefiting from the increased innovation economy stress.

Deanna Hart: While losses in this portfolio can still be lumpy, we believe the continued market optimism fueled by the revival of public markets for PE and VC-backed companies, with 2 large tech IPOs already out the door in 2024, is an encouraging sign for venture exit activity. Accordingly, we expect some of the pressure in the investor-dependent portfolio to soften in the back half of this year. It is worth noting that hold sizes on some of our portfolios are large in the commercial and SVB Commercial segments. Just as we had a favorable experience this quarter without large charge-offs in the innovation portfolio, 1 or 2 unexpected larger charge-offs can result in blips in our net charge-off ratio. Therefore, while the decline in net charge-offs during the first quarter was positive, we think it's too early to call an inflection point on credit following 1 quarter of improvement.

Craig L. Nix: While losses in this portfolio can still be lumpy, we believe the continued market optimism fueled by the revival of public markets for PE and VC-backed companies, with 2 large tech IPOs already out the door in 2024, is an encouraging sign for venture exit activity. Accordingly, we expect some of the pressure in the investor-dependent portfolio to soften in the back half of this year. It is worth noting that hold sizes on some of our portfolios are large in the commercial and SVB Commercial segments. Just as we had a favorable experience this quarter without large charge-offs in the innovation portfolio, 1 or 2 unexpected larger charge-offs can result in blips in our net charge-off ratio. Therefore, while the decline in net charge-offs during the first quarter was positive, we think it's too early to call an inflection point on credit following 1 quarter of improvement.

Greg: While losses in this portfolio can still be lumpy. We believe the continued market optimism fueled by the revival of public markets for P. E. N V feedback companies with two large tech IP P. O is already out the door in 'twenty 'twenty four is an encouraging sign for venture exit activity Accordingly, we.

Greg: Some of the pressure in the investor dependent portfolio to soften in the back half of this year.

Greg: It is worth noting that hold sizes on some of our portfolios are large in the commercial and SVP commercial segments.

Greg: And just as we had a favorable experience this quarter with less large charge off and the innovation portfolio, one or two unexpected larger charge offs can result in Blitz, and our net charge off ratio.

Greg: Therefore, while the decline in net charge offs. During the first quarter was positive we think its too early to call an inflection point on credit following one quarter of improvement.

Deanna Hart: However, we believe that credit costs remain manageable and are appropriately incorporated into our guidance. Moving to adjusted non-interest income, we expect Q2 to be down as net real income on real operating leases decreases due to expected maintenance costs that were deferred in Q1, as I previously mentioned. While we anticipate some normalization to historically high utilization levels during 2024, our outlook for rail remains positive, and we expect a continuation of healthy fundamental trends in the near term from a supply-driven recovery, which is generating strong demand for existing rail cars, resulting in a stronger-for-longer scenario. We also expect client investment fees to decrease due to anticipated lower rates. To the extent we do not receive 3 rate cuts in 2024, we could see some upside to our forecast here.

Craig L. Nix: However, we believe that credit costs remain manageable and are appropriately incorporated into our guidance. Moving to adjusted non-interest income, we expect Q2 to be down as net real income on real operating leases decreases due to expected maintenance costs that were deferred in Q1, as I previously mentioned. While we anticipate some normalization to historically high utilization levels during 2024, our outlook for rail remains positive, and we expect a continuation of healthy fundamental trends in the near term from a supply-driven recovery, which is generating strong demand for existing rail cars, resulting in a stronger-for-longer scenario. We also expect client investment fees to decrease due to anticipated lower rates. To the extent we do not receive 3 rate cuts in 2024, we could see some upside to our forecast here.

Greg: However, we believe that credit costs remain manageable.

Greg: And are appropriately incorporated into our guidance.

Greg: Moving to adjusted noninterest income, we expect the second quarter to be down in net rental income on rail operating leases decreases due to the expected maintenance costs that were deferred in the first quarter as I previously mentioned.

Greg: While we anticipate some normalization to historically high utilization levels. During 2020 for her outlook for rail remains positive and we expect the continuation of healthy fundamental trends in the near term from a supply driven recovery, which is generating strong demand for existing railcar railcars.

Greg: All thing and a stronger for longer scenario.

Greg: We also expect client investment fees to decrease due to anticipated lower rates.

Greg: To the extent, we do not perceive three rate cuts in 'twenty 'twenty four we could see some upside to our forecast here.

Deanna Hart: Nonetheless, we continue to experience growth in wealth management fees and card income, reflecting the strong consumer acquisition and growth trends from our branch network. We expect full year adjusted non-interest income to be in the $1.8 to $1.9 billion range, which is in line with our previous guidance. As Frank mentioned in his comments, we are excited for the continued build-out and momentum in our wealth platform and look forward to realizing the synergies of this combination. Moving to expenses, we expect a modest increase from Q1 due to increased marketing as well as professional and third-party servicing fees as we ramp up project spend related to a few regulatory items such as ISO payments and Dodd-Frank.

Craig L. Nix: Nonetheless, we continue to experience growth in wealth management fees and card income, reflecting the strong consumer acquisition and growth trends from our branch network. We expect full year adjusted non-interest income to be in the $1.8 to $1.9 billion range, which is in line with our previous guidance. As Frank mentioned in his comments, we are excited for the continued build-out and momentum in our wealth platform and look forward to realizing the synergies of this combination. Moving to expenses, we expect a modest increase from Q1 due to increased marketing as well as professional and third-party servicing fees as we ramp up project spend related to a few regulatory items such as ISO payments and Dodd-Frank.

Greg: The last we continued to experience growth in wealth management fees and card income, reflecting the strong consumer acquisition and growth trends from our branch network.

Greg: We expect full year adjusted noninterest income to be in the one eight to $1 $9 billion range, which is in line with our previous guidance.

Greg: As Frank mentioned in his comments, we're excited for the continued build out and momentum in our wealth platform.

Greg: Look forward to realizing the synergies of this combination.

Greg: Moving to expenses, we expect a modest increase from the first quarter due to increased marketing as well as professional and third party servicing fees as we wrap up project spend related to a few regulatory items, such as ISO payments and Dodd Frank. Furthermore, as mentioned last quarter. It continued focus for us is to.

Deanna Hart: Furthermore, as mentioned last quarter, a continued focus for us is to build out the product capabilities that will keep us the premier partner in the innovation economy, continuing to enhance our offerings in cash management, FX, and payments. Additionally, we will continue the modernization of our platforms in consumer equipment finance and factoring to ensure we are well-equipped to scale in the future. As we fine-tune our regulatory capabilities, we will also continue to make strategic hires that will help reinforce the skills of the great teams we already have assembled. All of this will be partially offset by continued acquisition synergies, which I spoke to earlier.

Craig L. Nix: Furthermore, as mentioned last quarter, a continued focus for us is to build out the product capabilities that will keep us the premier partner in the innovation economy, continuing to enhance our offerings in cash management, FX, and payments. Additionally, we will continue the modernization of our platforms in consumer equipment finance and factoring to ensure we are well-equipped to scale in the future. As we fine-tune our regulatory capabilities, we will also continue to make strategic hires that will help reinforce the skills of the great teams we already have assembled. All of this will be partially offset by continued acquisition synergies, which I spoke to earlier.

Greg: Build out the product capabilities that will keep us a premier partner in the innovation economy, continuing to enhance our offerings and cash management FX and payments.

Greg: Additionally, we will continue the modernization of our platforms and consumer equipment financing factoring to ensure we are well equipped to scale in the future.

Greg:

Greg: As we fine tune, our regulatory cases capabilities. We will also continue to make strategic hires that will help reinforce the skill skills of the great teams. We already have assembled all of this will be partially offset by continued active acquisition synergies, which I spoke to earlier.

Deanna Hart: While we expect to achieve the lower 25% band of our cost saves goal by the end of 2024, these savings will be offset by continued capability build-out for heightened regulatory expectations as well as costs related to these strategic priorities I just mentioned. Our adjusted efficiency ratio is expected to be in the low 50% range in 2024, up slightly from 49% for the full year of 2023. Looking at the full year, we anticipate adjusted non-interest expense to be up low to mid-single digit percentage points, which equates to a range of $4.6 to $4.7 billion, unchanged from our previous guidance. For both Q2 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.

Craig L. Nix: While we expect to achieve the lower 25% band of our cost saves goal by the end of 2024, these savings will be offset by continued capability build-out for heightened regulatory expectations as well as costs related to these strategic priorities I just mentioned. Our adjusted efficiency ratio is expected to be in the low 50% range in 2024, up slightly from 49% for the full year of 2023. Looking at the full year, we anticipate adjusted non-interest expense to be up low to mid-single digit percentage points, which equates to a range of $4.6 to $4.7 billion, unchanged from our previous guidance. For both Q2 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.

Greg: While we expect to achieve the lower 25% band of our cost saves goal by the end of 2020 for these savings will be offset by continued capability build out for heightened regulatory expectations as well as costs related to these.

Greg: These strategic priorities I just mentioned.

Greg: Our adjusted efficiency ratio is expected to be in the low 50% range in 2024 up slightly from 49% for the full year of 2023.

Greg: Looking at the full year, we anticipate adjusted noninterest expense to be up low to mid single digit percentage points, which equates to a range of $4 60 to $4 $7 billion unchanged from our previous guidance.

Greg: For both the second quarter and full year 2024, we expect our tax rate to be in the range of 27%, 28%, which is exclusive of any discrete items.

Deanna Hart: In closing, we remain steadfast in our long-term approach, focused on our clients and customers, and committed to maintaining a strong risk management environment. I believe we have tremendous opportunity ahead of us, as demonstrated by the successful Q1, and that we are well-positioned for the future thanks to our solid financial condition. I will now turn it over to the operator for instructions for the question-and-answer portion of the call.

Craig L. Nix: In closing, we remain steadfast in our long-term approach, focused on our clients and customers, and committed to maintaining a strong risk management environment. I believe we have tremendous opportunity ahead of us, as demonstrated by the successful Q1, and that we are well-positioned for the future thanks to our solid financial condition. I will now turn it over to the operator for instructions for the question-and-answer portion of the call.

Greg: In closing we remain steadfast in our long term approach focused on our clients and customers and committed to maintaining a strong risk management environment.

Speaker Change: I believe we have tremendous opportunity ahead of us as demonstrated by the successful first quarter and that we are well positioned for the future. Thanks to our solid financial condition.

Speaker Change: I will now turn it over to the operator for instructions for the question and answer portion of the call.

Operator: Thank you, Frank. Ladies and gentlemen, if you have a question or a comment at this time, please press star and then the 1 key on your touch-tone telephone. As a courtesy to others on the call, we ask that you limit yourself to one question and one follow-up, and then return to the call queue if you have additional questions. If your question has been answered and you wish to remove yourself from the queue, please press the pound key. We'll pause for one moment to compile our Q&A roster. The first question comes from Chris McGratty with KBW. Your line is open.

Operator: Thank you Craig.

Speaker Change: Ladies and gentlemen, if you have a question or comment at this time.

Speaker Change: Press Star and then the one key on your Touchtone telephone.

Speaker Change: Courtesy to others on the call. We ask that you limit yourself to one question and one follow up and then return to the call queue. If you have additional questions.

Speaker Change: If your question has been answered and you wish to immerse yourself from the queue. Please press the pound key.

Speaker Change: Well pause for one moment to compile the Q&A roster.

Speaker Change: Does that question comes from Chris Mcgratty with <unk>.

Chris Mcgratty: Your line is open.

Frank B. Holding, Jr.: Oh, great. Good morning. Craig, maybe with the view that good morning. How are you doing? The market's obviously suggesting higher-for-longer. Can you talk about what you're doing with the cash levels and the security purchases as you've got likely a few more quarters? How do we think about the normalization process? Has anything changed since last quarter? Thanks.

Christopher McGratty: Oh, great. Good morning. Craig, maybe with the view that good morning. How are you doing? The market's obviously suggesting higher-for-longer. Can you talk about what you're doing with the cash levels and the security purchases as you've got likely a few more quarters? How do we think about the normalization process? Has anything changed since last quarter? Thanks.

Chris Mcgratty: Oh, great good morning.

Chris Mcgratty: Correct.

Chris Mcgratty: With the view that hey, good morning, how are you doing.

Speaker Change: The market's obviously.

Speaker Change: Adjusting higher for longer can you talk about.

Speaker Change: Hmm.

Speaker Change: What youre doing with the cash levels into security purchases.

Speaker Change: <unk> got a few more quarters, how do we think about the the normalization process has anything changed since.

Speaker Change: Last quarter. Thanks.

Craig L. Nix: I would say that right now, we're intentionally a little heavy on cash than the optimal level. We're around 15%. We'd like to see that normalize to 10 to 15% over time. We're sitting slightly light on investments, but you've seen us deploy cash into the investment portfolio over the last three quarters, and we would expect to continue to do that, maybe to the tune of $3 to 4 billion before the end of the year. So we're very close to optimization, high on cash, but again, a little bit of that intentional given our purchase money note in the FDIC. Tom, do you have anything to add or amplify there?

Speaker Change: I would say that right now, we're a little and intentionally a little heavy on cash the optimal level were around 15%, we'd like to see that normalized 10% to 15% over time, we're sitting a little slightly light on investments, but you've seen us.

Speaker Change: Deploy cash into the investment portfolio over the last three quarters, and we would expect to continue to do that and maybe to the tune of three to four more billion dollars.

Speaker Change: Before the end of the year, so we're very close to optimization.

Speaker Change: Hi on cash, but again, a little bit about intentional given our purchase money.

FDIC: The FDIC, Tom do you have anything to add or amplify there no no I think you hit it I mean, if you look at the last three quarters, we've grown enough $40 billion range and I think you can expect that to continue in the short term and to Craig's point.

[Company Representative] (First Citizens BancShares): No. No, I think you hit it. I mean, if you look at the last three quarters, we've grown in that $4-ish billion range, and I think you can expect that to continue in the short term. And to Craig's point, as cash comes down, it will eventually normalize and sort of slow down that investment portfolio growth.

Speaker Change: Cash comes down we'll eventually normalize in sort of a slowdown in that investment portfolio growth.

Frank B. Holding, Jr.: Okay. Great. And then as my follow-up, the improvement in credit, totally understand not wanting to declare victory yet, but given the marks that you have on the acquired portfolios and how stable credit was, how do we think about the reserve level? I mean, you released about $10 million in the quarter. How do we think, in light of the charge-off guidance, where reserves are trending? Thanks.

Christopher McGratty: Okay. Great. And then as my follow-up, the improvement in credit, totally understand not wanting to declare victory yet, but given the marks that you have on the acquired portfolios and how stable credit was, how do we think about the reserve level? I mean, you released about $10 million in the quarter. How do we think, in light of the charge-off guidance, where reserves are trending? Thanks.

Speaker Change: Okay, Great and then as my follow up the the improvement in credit totally understand not wanting to declare victory yet, but given the the marks that you have on the acquired portfolios and how stable credit was how do we think about the reserve level. I mean, you released about $10 million and of course.

Speaker Change: How do we think in light of the charge off guidance.

Speaker Change: Our reserves are trending thanks.

Craig L. Nix: Are you referring to the overall reserve coverage, Chris? Okay. I'll answer it both ways then. In terms of just overall coverage, we feel really good about where our reserves are. We covered quarter-to-date net charge-offs 4 times, this quarter about 2.5 times last quarter. The allowance as it sits now covers 2023 charge-offs almost 2.9 times, and non-accrual loans 1.6 times. On non-accrual loans, what gives us comfort here too with respect to reserves is that we have analyzed over 70% of those loans for impairment on the individual basis, and our reserve ratio sits at around 30% on those. In terms of our stress portfolios, which I alluded to, overall, we covered Q1 net charge-offs 2.8 times, and last quarter 1.8 times. That portfolio represents about 8% of loans but 61% of charge-offs.

Speaker Change: Are you referring to the overall reserve coverage.

Speaker Change: Chris.

Speaker Change: Yeah.

Chris: Okay, I'm going to answer it I'll answer it both ways and.

Speaker Change: In terms of just overall coverage, we feel really good about where our reserves are.

Speaker Change: We covered quarter to date net charge offs four times this quarter about two and a half times last quarter. We cover the allowance as it sits now covers 2023 charge offs is two nine times.

Speaker Change: And nonaccrual loans, one six times.

Speaker Change: Non accrual loans, what gives us comfort here too with respect to reserves that we have analyzed over 70% of those loans for impairment on an individual basis and a reserve ratio sits at around 30%.

Speaker Change: In terms of our stress portfolios, which I alluded to overall, we have recovered first quarter net charge offs two eight times in the last quarter to one eight times.

Speaker Change: And that portfolio.

Speaker Change: It represents about 8% of loans was 61% of charge off so we're feeling like we're prudently and conservatively reserved bode for the specific loan portfolios.

Craig L. Nix: So we're feeling like we're prudently and conservatively reserved both for the specific loan portfolios exhibiting stress, and on the overall ACL.

Speaker Change: Exhibiting stress and on the overall ACL.

Speaker Change: Okay.

Operator: Thank you. The next question comes from Brian Foran with Autonomous Research. Your line is open.

Speaker Change: Thank you. The next question comes from Brian Foran with Autonomous your line is open.

Brian Foran: Hi. Good morning. Just on the NII outlook this quarter versus what you gave last, is it just the move to 0 to 3 rate cuts that moved the range up, or was it, I guess, is it just the move in rate cuts? And if it's not just the move in rate cuts, what else got better in that?

Brian Foran: Hi, good morning.

Brian Foran: Just on the NII outlook.

Brian Foran: This quarter versus what you gave last.

Brian Foran: Is it just the move to zero to three rate cuts that moved the range up.

Brian Foran: Was it I guess is it just the moving in recon and if it is not just the move in rate cuts what else.

Speaker Change: Hey, Matt.

Matt: It is the shift in the rate cuts.

Craig L. Nix: It is the shift in the rate cuts.

Brian Foran: Okay. And then on the capital commentary, and I apologize because at least my line cut slightly as you were talking. A, I just want to clarify the go-to capital ratio. Did you say 10? And then B, I was trying to compare what you said now versus last time. Was the spirit just kind of reiterating what you've said before, or was there any more caution implied with the methodical comment and the ex-FDIC as the core ratio you're managing?

Matt: Okay.

Matt: And then on the capital commentary and I apologize because at least in my mind.

Matt: Lately as you were talking.

Speaker Change: Hey, I just wanted to clarify.

Speaker Change: The go to capital ratio did you say 10.

Speaker Change: And then B I.

Speaker Change: Just trying to compare what you said now versus last time.

Speaker Change: With the spirit, just kind of reiterating what <unk> said before or was there anymore.

Speaker Change: Caution implied with the methodically.

Speaker Change: Comment and the ex FDIC.

Speaker Change: Core ratio Youre managing.

Craig L. Nix: No, I think we're just reinforcing what we've said previously for sharing purchases. And I would point out that over this two-year period, we would intend to manage the CET1 down to the 10.5% range.

Speaker Change: No I think I think we're just reinforcing what we have said previously for share repurchases and I would point out that over this two year period, we would intend to manage the CET, one down to 10 and a half per cent range.

Brian Foran: Okay. Is 9 to 10 still kind of a longer-term target, or given the shift in the world, is kind of 10.5 now more kind of beyond 2025 landing point?

Speaker Change: Okay and is nine to 10 is still kind of a longer term target or given the shift in the world is kind of turn and a half now more kind of Dr.

Speaker Change: Beyond 2025 landing point.

Craig L. Nix: Well, the 9 to 10 was our previous target. We have proposed a new target range that we're not going to disclose today in our capital plan. But I can tell you that you shouldn't expect it to significantly change from the previous. We want to give our regulators time to give us feedback on our capital plan that we just submitted a couple of weeks ago. But I would not expect a significant change in that.

Speaker Change: Well the nine to 10 was our previous target we have proposed a new target range that we're not going to disclose today and our capital plan.

Speaker Change: But I can tell you that you shouldn't expect it to significantly change from the previous don't Wanna get our regulators time to give us feedback on our capital plan that we just submitted a couple of weeks ago.

Speaker Change: But I would not.

Brian Foran: Okay. Thanks. Making one link. Not expect a significant change from 9 to 10 long-term, or?

Speaker Change: One linked to changes in that.

Speaker Change: Yeah.

Speaker Change: Not expect a significant change from 9% to 10 long term or.

Craig L. Nix: That's correct.

Speaker Change: That's correct.

Brian Foran: Okay. Great. The last one, just very quickly, I'm looking at page 44 in your deck. I definitely hear and appreciate all the commentary on the SVB credit. A lot of the decline in provision dollars really came from the commercial legacy CIT book. Can you just kind of give us the next round of color? I know there's a couple of comments on the slide as well, but what drove the provision expense on legacy CIT down so much?

Speaker Change: Okay great.

Speaker Change: The last one just very quickly I'm looking at page 44 in your deck.

Speaker Change: I definitely hear you appreciate all the commentary on the FCB credit.

Speaker Change: A lot of the decline in provision dollars really came from the commercial legacy <unk> book.

Speaker Change: Can you just kind of give us the next round of color I know Theres a couple of comments on.

Speaker Change: The slide as well, but you know what.

Speaker Change: What drove the provision expense on legacy <unk> down so much.

Craig L. Nix: Well, I mean, their charge-off ratios declined. Is it the same as the other portfolios? Really, the biggest move in 80% of the variance in our charge-offs was in the Investor-Dependent Portfolio. And there were four major factors there. We had no real large dollar charge-offs during the quarter. We had the fact that charge-offs on smaller loans were down, and the number of charge-offs were also down. And we had a good recovery quarter. So most of the drop in, at least the net charge-off guidance and consequently the provision, really related to that Investor-Dependent Portfolio.

Speaker Change: Well they they had I mean their charge off ratios declined is it the same as the other portfolio is really the biggest news and 80% of the variance in our charge offs were in the investor dependent portfolio.

Speaker Change: And there are four major factors there we had no real large dollar charge offs during the quarter we had the.

Speaker Change: The fact that charge offs on smaller ones were down and the number of charge offs were also down and we had a good recovery quarter. So.

Frank Brown Holding: Most of that most of the drop in at least the net charge off guidance and consequently in the provision really related to that Investor day.

Speaker Change: Dependent portfolio.

Operator: Thank you. The next question comes from Stephen Alexopoulos with JP Morgan. Your line is open.

Speaker Change: Thank you. The next question comes from Steven Alexopoulos with Jpmorgan. Your line is open.

Steven Alexopoulos: Hey. Good morning, everybody. I want to start on the SVB portion. I don't know if Mark's on the line, but I want to start on the SVB side. The Q1 VC investment was very weak, and I thought tied to that we would see deposits decline at SVB. And also, I thought capital calls might come down a bit. Could you give some color on how you're able to maintain stable balances just given this not great backdrop?

Speaker Change: Hey, good morning, everybody.

Steven Alexopoulos: Good morning or on the ESP.

Steven Alexopoulos: I don't know if Mark's on the line, but I want to start on the SB beside the one Q VC investment was very weak and I bought tied to that we would see deposits declined at S. P. B and also capital calls might come down a bit could you give some color on how you're able to maintain stable balances just given the stock rate backdrop.

Steven Alexopoulos: Okay.

Craig L. Nix: Well, I'll let Mark amplify, but I think it's Mark. Are you on the line, Mark? Can I hear you?

Speaker Change: Well I'll, let Mark Hi, four five I think.

Steven Alexopoulos: Mark.

Mark: Mark I hear you.

Frank B. Holding, Jr.: I am here. Go ahead and start, Craig. I will.

Frank Holding: I am here. Go ahead and start, Craig. I will.

Mark: I am here go ahead and start correct.

Craig L. Nix: Yeah. I was just going to set the backdrop, Mark, and let you amplify. But we were encouraged in Q1. New money coming into SVB did increase over Q1. And while cash burn and losses to competitors remained fairly consistent, new cash flows did come in. They went disproportionately off-balance sheet, but this was the first quarter since the acquisition where the cash position remained neutral. First time it had not been negative since we merged last year. And Mark, I would let you give some color around that, how we're doing that. But again, we're pretty encouraged by what we're seeing there.

Mark: Yeah, I was just kind of set the backdrop Mark I'll, let you amplify but we were encouraged in the first quarter, new money coming into STB did increase over the first first quarter and while cash burn and losses to competitors remained fairly consistent new cash flows did come in a disproportionate.

Mark: Off balance sheet, but this was the first quarter since the acquisition, where the cash position remained neutral.

Mark: First time it has not been negative since we merged last year and Mark outlets you give some color around that.

Mark: How we are doing that but.

Mark: Again, we're pretty encouraged by what we're seeing there.

Mark: Yeah.

Frank B. Holding, Jr.: Yeah. So Steve, good morning. It's Mark. And we'll follow on. I think that was a great overview. And I think ultimately, to your point, what sounds like better-than-expected deposits in the quarter compared to what you would have expected is a function, I think, of our continued momentum in the marketplace, the continued success we're having both in winning new business and bringing back clients as well. And as you see, that's really helping, and I think bodes well for the future if we can keep it up.

Frank Holding: Yeah. So Steve, good morning. It's Mark. And we'll follow on. I think that was a great overview. And I think ultimately, to your point, what sounds like better-than-expected deposits in the quarter compared to what you would have expected is a function, I think, of our continued momentum in the marketplace, the continued success we're having both in winning new business and bringing back clients as well. And as you see, that's really helping, and I think bodes well for the future if we can keep it up.

Mark: Yeah, So Steve good morning, it's Mark and well follow on I think that was a great overview and I think ultimately to your point B.

Mark: Sounds like better than expected deposits in the quarter.

Mark: Compared to what you would have expected is a function I think of our continued momentum in the marketplace.

Mark: Continued success, we're having both in winning new business and bringing back clients as well and as you see that is.

Speaker Change: It's really helping and I think bodes well for the future if we can keep it up.

Steven Alexopoulos: Got it. That's good color. For follow-up, there's a lot of excitement in your stock about the potential for you guys to buy back stock. But I'm curious, given that tangible book value growth is a key performance metric for you guys, how price-sensitive are you as it relates to buybacks moving forward? Is there a certain valuation where you're unlikely to buy back stock, or are you pretty much committed to get down to that 10.5% range?

Speaker Change: Got it that's good color.

Speaker Change: For follow up.

Speaker Change: But there's a lot of excitement that you're talking about the potential for you guys to buy back stock, but I'm curious given that tangible book value growth as a key performance metric for you guys. How price sensitive are you as it relates to buybacks moving forward is there a certain valuation where you're unlikely to buyback stock or are you.

Frank Brown Holding: Pretty much committed to get down to that tenant out per cent range.

Mark: We don't buy at that blindly.

Craig L. Nix: We don't buy it back blindly. So we do approach it similar to an approach on an open-market acquisition, although there are obvious differences there with respect to risk. So we don't just blindly buy. Right now, we do see the stock at an attractive price. So we would anticipate repurchasing at that price. I'm not going to share at what levels we would trigger where we wouldn't, but we do consider that in our internal models. And it is our goal to manage down to that 10.5% range over the next two years on CET1. Tom, do you want to say anything else about that?

Mark: So we do we do approach it similar too.

Mark: And approach on that.

Mark: Open market acquisition, although there are differences obvious differences there with respect to risk. So we don't just blindly buy right now we do see the stock as an attractive price.

Mark: So we would anticipate.

Mark: We would anticipate repurchasing at that price I'm not going to share what levels, we would trigger where we wouldn't but we do consider that in our internal models.

Speaker Change: And it is our goal to manage down to that 10, 5% range over the next two years, let's see D. One Tom do you want to say anything else about that no I mean, obviously you know from.

[Company Representative] (First Citizens BancShares): No. I mean, obviously, from a buyback and capital perspective, the cheaper the stock, the more sense it makes. But no. I mean, to Craig's point, we look at it similar to open-market transactions, making sure we can get payback periods and everything to line up for us.

Speaker Change: From a buyback or capital perspective, the cheaper the stocks with more sense. It makes but no I mean to Craig's point you look at it similar to open market transactions, making sure we can get payback payback periods and everything lined up for it.

Speaker Change: Okay.

Operator: Thank you. The next question comes from Stephen Scouten with Piper Sandler. Your line is open.

Thank you. The next question comes from Stephen Scouten with Piper Sandler Your line is open.

Frank B. Holding, Jr.: Yeah. Thanks a lot. And just a follow-up kind of around that repurchase. I just want to make sure I'm thinking about this excess capital correctly. So if I think about the 107 basis points you're kind of adjusting for the loss share, we're talking about like 1,237, I guess, on CET1. So about 190 basis points of excess today. Is that right? Okay.

Stephen Scouten: Yeah. Thanks a lot. And just a follow-up kind of around that repurchase. I just want to make sure I'm thinking about this excess capital correctly. So if I think about the 107 basis points you're kind of adjusting for the loss share, we're talking about like 1,237, I guess, on CET1. So about 190 basis points of excess today. Is that right? Okay.

Speaker Change: Yeah, Thanks, a lot.

Deanna W. Hart: Just a follow up kind of around that.

Frank Brown Holding: So I just want to make sure I'm thinking about this excess capital correctly. So if I think about the 107 basis points youre kind of adjusting for the.

Frank Brown Holding: Sure we're talking about like 12, 37, I guess on the E. T. One so about 190 basis points of access today is that right.

Craig L. Nix: That's correct.

Speaker Change: That's correct.

Frank B. Holding, Jr.: Okay. Great. Perfect. Thank you, Craig. And then going back to SVB, I mean, it really does, and I think you used the word stability in the presentation a couple of times. It feels like you guys have really stabilized kind of that brand and that footprint. Is it now time for you guys to go even more on the offensive, or how do you think about the longer-term push in those segments today?

Stephen Scouten: Okay. Great. Perfect. Thank you, Craig. And then going back to SVB, I mean, it really does, and I think you used the word stability in the presentation a couple of times. It feels like you guys have really stabilized kind of that brand and that footprint. Is it now time for you guys to go even more on the offensive, or how do you think about the longer-term push in those segments today?

Speaker Change: Okay great.

Speaker Change: Perfect. Thank you Craig and then going back to SBB I mean, it really does I think he used the word stability in the in the presentation. A couple of times. It feels like you guys have really stabilized kind of that that brand and that footprint is is it now time for you guys to go even more on the offensive or how do you think about the longer term push in those segments.

Frank Brown Holding: Right.

Craig L. Nix: Mark, why don't you take that one?

Speaker Change: Mark why don't you take that one.

Frank B. Holding, Jr.: Yep. So I think the environment is the challenge here, right? As noted earlier in our discussion, our target markets remain challenged. We expect those challenges to continue through 2024, although we have some optimism around IPOs coming back and potentially deposits picking up in the second half, as we've talked about. And so the trick, right, is as long as venture investment remains diminished, there is, you can only step on it to such a degree. Similarly, on the lending side and on tech healthcare banking in particular, we need to continue to be careful and choosy and manage the loans we have diligently by virtue of the heightened asset quality concerns that you get from a market downturn like this where the investors aren't investing as much.

Frank Holding: Yep. So I think the environment is the challenge here, right? As noted earlier in our discussion, our target markets remain challenged. We expect those challenges to continue through 2024, although we have some optimism around IPOs coming back and potentially deposits picking up in the second half, as we've talked about. And so the trick, right, is as long as venture investment remains diminished, there is, you can only step on it to such a degree. Similarly, on the lending side and on tech healthcare banking in particular, we need to continue to be careful and choosy and manage the loans we have diligently by virtue of the heightened asset quality concerns that you get from a market downturn like this where the investors aren't investing as much.

Mark: Yes, so I think the.

Frank Brown Holding: The environment is the challenge here right.

Frank Brown Holding: Got it earlier in our discussion our target markets remain challenged we expect those challenges to continue through 'twenty four, allowing we have some optimism.

Frank Brown Holding: Around ipos coming back in and essentially deposits picking up in the second half as we've talked about.

Frank Brown Holding: So.

Mark: The trick right now is as long as venture investment remain diminished.

Frank Brown Holding: There is again you can only step on it to such a degree similarly on the lending side, but on tech healthcare banking.

Frank Brown Holding: Particularly we need to be.

Frank Brown Holding: We need to be careful and choosy and manage the loans we have.

Frank Brown Holding: Diligently by virtue of the heightened asset quality concerns that you get from a market downturn like this where the investors aren't investing as much and so with all of that for context.

Frank B. Holding, Jr.: And so with all of that for context, and I think following on my earlier answer to Steve, we are going to continue to focus on doing what we do, executing as best we can. And I think trying to accelerate, I think, would be the kind of thing you might see when we have more confidence that our target markets are coming back and we see that pickup in venture investment. And until then, I think we're going to continue to compete effectively but carefully at the same time. I'll stop there.

Frank Holding: And so with all of that for context, and I think following on my earlier answer to Steve, we are going to continue to focus on doing what we do, executing as best we can. And I think trying to accelerate, I think, would be the kind of thing you might see when we have more confidence that our target markets are coming back and we see that pickup in venture investment. And until then, I think we're going to continue to compete effectively but carefully at the same time. I'll stop there.

Frank Brown Holding: And I think following on my earlier answer to Steve.

Frank Brown Holding: We are going to continue to focus on doing what we do are executing as best we can and I think.

Frank Brown Holding: Going to accelerate.

Frank Brown Holding: It would be.

Frank Brown Holding: The kind of thing you might.

Frank Brown Holding: Let's see when we have more confidence that our target markets are coming back and we see that pick up and venture investments.

Frank Brown Holding: Till then I think we're going to continue into.

Frank Brown Holding: Compete effectively but carefully at the same time.

Speaker Change: I'll stop there.

Operator: Thank you. The next question comes from Christopher Marinac with Janney Montgomery Scott. Your line is open.

Speaker Change: Thank you. The next question comes from Christopher <unk> with Janney Montgomery Scott.

Speaker Change: Your line is open.

Christopher Marinac: Thanks. Good morning. I wanted to ask about originating loans kind of in the legacy First Citizens footprint from the perspective of possibly having lower charge-offs there, and therefore, the guide on charge-offs could even be better down the road. I mean, Craig, is that a plausible scenario that you may originate less in some of the CIT and SVB areas and more at the old First Citizens, and that drives different charge-off outcomes?

Speaker Change: Thanks, Good morning, I wanted to ask about originating loans kind of in the legacy first citizens footprint from the perspective of possibly having lower charge offs, there and therefore the guide on charge offs could even be better down the road I mean, Craig is that a plausible scenario that you may originate lessen some of the <unk>.

Frank Brown Holding: I T and STB areas and more at the old for citizens and that drives different charge off outcomes.

Craig L. Nix: No, I don't think that's the case. I'll let Elliot talk about our loan forecast across the business segment.

Speaker Change: No I don't I don't think that's the case I'll ask Elliot to talk about our forecast.

Speaker Change: The business segment, yes, we really see good growth across the segments. I think you know from the General Bank really the branch network driving you to leave.

Frank B. Holding, Jr.: Yeah. We really see good growth really across the segments. I think for the general bank, really, the branch network driving it. And we've continued to have good growth there. I mean, I think it's a testament to kind of the go-to-market strategy, the 10-year-over-sales teams. So we've seen that up meaningfully this quarter. And I mean, you're right that that book has really kind of sub-15 basis points type charge-offs. So we see that seem to be a benefit. CIT as well, I think we called out some of our industry-leading verticals, TMT, Energy, and Healthcare. So we see growth there. And then with SVB, I think Mark elaborated on that.

Frank Holding: Yeah. We really see good growth really across the segments. I think for the general bank, really, the branch network driving it. And we've continued to have good growth there. I mean, I think it's a testament to kind of the go-to-market strategy, the 10-year-over-sales teams. So we've seen that up meaningfully this quarter. And I mean, you're right that that book has really kind of sub-15 basis points type charge-offs. So we see that seem to be a benefit. CIT as well, I think we called out some of our industry-leading verticals, TMT, Energy, and Healthcare. So we see growth there. And then with SVB, I think Mark elaborated on that.

Frank Brown Holding: We continue to have good growth there I mean, I think is testament to that.

Frank Brown Holding: Good market strategy. The tenure of our sales teams. So we've seen that up meaningfully this quarter and I mean, you're right that the book is really kind of sub 15 basis points charge offs. So we see that seem to be a bit of the CFT as well you know I think we caught up on all of our industry verticals, you know TMT energy health care, So we see growth there.

Frank Brown Holding: And then with SUV market elaborated on that.

Frank B. Holding, Jr.: As we look at GFB, that's the capital call business that has really no charge-off history. We see continued growth there for the rest of the year as kind of some of the recent originations that we have pull through. So I don't necessarily see us pulling back on any of those segments. But to the extent that we keep having good growth in the general bank, that's certainly helpful to the charge-off ratio.

Frank Holding: As we look at GFB, that's the capital call business that has really no charge-off history. We see continued growth there for the rest of the year as kind of some of the recent originations that we have pull through. So I don't necessarily see us pulling back on any of those segments. But to the extent that we keep having good growth in the general bank, that's certainly helpful to the charge-off ratio.

Frank Brown Holding: As we look at.

Frank Brown Holding: <unk> the chemical business.

Frank Brown Holding: Really no charge off history, we see continued growth there for the rest of the year as some of the routes recent originations that we have over it.

Frank Brown Holding: So I don't necessarily feel pulling back linear those segments, but it shows that we keep having good growth in digital bank Thats certainly helpful to the charge off ratio.

Frank Brown Holding: Yes.

Christopher Marinac: Got it. Thanks for that clarification. I appreciate it. Any other criticized trends for the general bank outside of what was called out in the slides this morning?

Speaker Change: Got it thanks for that clarification I appreciate it and any other criticized trends for the general bank outside of what was called out in the slides this morning.

Frank Brown Holding: No.

Craig L. Nix: No.

Frank Brown Holding: Yeah.

Christopher Marinac: Would you see the criticized kind of rise slightly from here, or what would be the outlook if there is any?

Speaker Change: Would you see criticized kind of rise slightly from here or what would be the outlook. If there is any.

Craig L. Nix: Are you speaking to the general bank?

Speaker Change: Are you speaking to the general Bank.

Christopher Marinac: Correct. I'm just looking beyond what you called out on SVB and some of the other areas.

Speaker Change: Correct I'm, just looking beyond what you called out on SCB and some of the other areas.

Craig L. Nix: We don't see any rise there. We anticipate it'll be fairly stable.

Speaker Change: We don't see any rise there.

Frank Brown Holding: We anticipate it would be fairly stable.

Frank Brown Holding: Yes.

Christopher Marinac: Great. Thank you for taking my questions.

Speaker Change: Great. Thank you for taking my questions.

Craig L. Nix: Yeah. Thank you.

Speaker Change: Thank you.

Frank Brown Holding: Yeah.

Operator: Thank you. The next question is from Erika Najarian with UBS. Your line is open.

Speaker Change: Thank you.

Speaker Change: The next question is from Sac question, then with UBS. Your line is open.

Erika Najarian: Hi. My question is just around the trajectory of loan yields. I saw that it ticked down quarter-over-quarter. Is that just a function of lower Accretion Income, or is there another driver there? And any color you could provide on the trajectory going forward would be great. Thank you.

Speaker Change: Hi, My question is just around the trajectory of loan yields I saw that it ticked down quarter over quarter is that just a function of lower accretion income or is there.

Frank Brown Holding: Another driver there and any color you could provide on on the trajectory going forward would be great. Thank you.

Craig L. Nix: Yes. It was a decline due to accretion declining in the quarter. We were down about $40 million on a sequential basis in accretion income. So that had an impact. As far as trajectory, it really depends on the rate cut scenarios. If we look at just no cuts, we would look at sort of the headline yield remaining fairly stable with Q1 and ex-accretion actually bumping around where it was at the end of Q1. But with three cuts, we would start to see some decline in the yield to the low 7s in Q2 and to the high 6.70s or the mid-6.70s at the end of Q4. So we would certainly start to feel that impact going forward if we had three rate cuts.

Frank Brown Holding: Yes.

Frank Brown Holding: The decline due to accretion.

Frank Brown Holding: Accretion declining in the quarter, we were down.

Frank Brown Holding: About $40 million on a sequential basis and accretion income so that has an impact as far as trajectory. It really depends on the rate cut scenarios. If we look at just no cuts.

Frank Brown Holding: We would look at the sort of the headline yield remaining fairly stable with the first quarter.

Frank Brown Holding: And ex accretion actually bumping.

Frank Brown Holding: Bumping around.

Frank Brown Holding: Where it was at the end of the first quarter.

Frank Brown Holding: We would start to see.

Frank Brown Holding: Tom.

Frank Brown Holding: A decline in the yield.

Frank Brown Holding: To the low sevens in the second quarter and to the high 70 or the mid <unk> 70 at the end of the fourth quarter. So we would certainly start to feel that impact going forward. If we had three rate cuts and what our projections the way we projected this.

Craig L. Nix: What our projection, the way we've projected this, is we have one rate cut in Q2, one rate cut in Q3, and one in Q4. So obviously, timing of those rate cuts could impact that as well. But Accretion Income added 45 basis points to the margin last year, and we expect that to be down 24 this year. So a fairly substantial reduction in Accretion Income.

Frank Brown Holding: One rate cut in the second quarter, one rate kind of a third one in the fourth so obviously timing of those rate cuts can impact that as well.

Frank Brown Holding: And accretion.

Frank Brown Holding: Income added 45 basis points to the margin.

Frank Brown Holding: Last year, and we expect that to be down 24 this year.

Frank Brown Holding: So fairly substantial reduction in accretion income.

Frank Brown Holding: Okay.

Erika Najarian: Understood. Thanks for taking my question.

Speaker Change: Understood. Thanks for taking my question.

Craig L. Nix: Yep. Thank you.

Speaker Change: Yep. Thank you.

Operator: Thank you. We have a follow-up question from Brian Foran with Autonomous Research. Your line is open.

Frank Brown Holding: Thank you we have a follow up question from Brian Foran with autonomous your line is open.

Brian Foran: Just two quick ones. Can you remind us where you want to get the loan-to-deposit ratio or range over time or on a normalized basis?

Frank Brown Holding: Just two quick ones can you remind us where you want to get the loan to deposit ratio.

Frank Brown Holding: <unk> overtime or were on a normalized basis.

Craig L. Nix: Yeah. On a more normalized basis, we see that loan-to-deposit ratio getting back to the mid-80s.

Frank Brown Holding: Yeah on a more normalized basis, we see that loan to deposit ratio getting back to the mid eighties.

Brian Foran: Perfect. And then as we start thinking about 2025 and maybe putting the rate cuts in 2025 as opposed to 2024, if the Fed is cutting a few times in 2025, would kind of the sensitivities be similar to what we're seeing now? If you took 3 rate cuts out of the guide and it moved up $200 million, is the sensitivity if we put those rate cuts into 2025, is the sensitivity kind of similar, or is it different for any reason as the balance sheet moves around?

Frank Brown Holding: Perfect.

Frank Brown Holding: And then as we start thinking about 25, and maybe putting the rate cuts in 'twenty five as opposed to 24.

Frank Brown Holding: The fed is cutting a few times in 25 with kind of the.

Frank Brown Holding: Sensitivities be similar to what we're seeing now.

Frank Brown Holding: You took three rate cuts out of the guide and it moved up $200 million.

Frank Brown Holding: Is there a sensitivity if.

Frank Brown Holding: If we put those rate cuts into 'twenty five as a sensitivity kind of similar.

Frank Brown Holding: Is it different for any reason as the balance sheet moves around.

Craig L. Nix: It would be similar. It would just push the trough out further. But yes, similar trends. We would expect similar trends at this setting.

Frank Brown Holding: It would be similar or even just pushed the trough out.

Frank Brown Holding: Further.

Frank Brown Holding: But yes, similar trends, we would expect similar trends in the city.

Frank Brown Holding: Yeah.

Operator: Thank you. I'm not hearing any further questions at this time. I'd like to turn the call back over to our host, Deanna Hart, for any closing remarks.

Speaker Change: Thank you I'm not showing any further questions at this time I'd like to turn the call back over here.

Speaker Change: Yes, Dana Guiana Hart for any closing remarks.

Deanna Hart: Great. Thank you. And thank you, everyone, for joining our earnings call today. We appreciate your ongoing interest in our company. And if you have further questions or need additional information, please feel free to reach out to our investor relations team. We hope you have a great rest of your day.

Speaker Change: Great. Thank you and thank you to everyone for joining our earnings call. Today. We appreciate your ongoing interest in our company and if you have further questions or need additional information. Please feel free to reach out to our Investor Relations team. We had do you have a great rest of your day.

Frank Brown Holding: Yes.

Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Have a wonderful day.

Speaker Change: Ladies and gentlemen. This concludes today's conference call. You may now disconnect have a wonderful day.

Frank Brown Holding: [music].

Q1 2024 First Citizens BancShares Earnings Call

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