Q4 2024 First Citizens BancShares Inc Earnings Call

January 24, 2025

Thank you.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the First Citizens BancShares Q4 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star one on your telephone keypad. 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, Ms. Deanna Hart, Head of Investor Relations. You may begin.

Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the First Citizens Bankshare's fourth quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone keypad,

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, Ms. Deanna Hart, Head of Investor Relations. You may begin.

Bye.

Deanna Hart: Good morning, and welcome to First Citizens' Q4 earnings call. Joining me on the call today are our Chairman and Chief Executive Officer, Frank Holding, and our 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 of the presentation. 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.

Speaker Change: Good morning and welcome to First Citizens fourth quarter earnings call. Joining me on the call today are Chairman and Chief Executive Officer Frank Holdings and our Chief Financial Officer Craig Nix.

Speaker Change: They will provide fourth-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, 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 of the presentation.

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 5 of the presentation.

Speaker Change: Finally, First Citizens is not responsible for and does not edit nor guarantee the accuracy of earnings transcripts provided by third parties. I will now turn it over to Frank.

Deanna Hart: I will now turn it over to Frank.

Frank Holdings: Thank you Deanna. Good morning everyone and welcome to our call.

Frank Holding: Thank you, Deanna. Good morning, everyone, and welcome to our call. I will provide brief comments on our Q4 results as well as our 2025 strategic priorities before turning it over to Craig to review our performance in more detail and discuss the outlook for 2025. Starting on page 6, we delivered another quarter of strong results, return metrics with adjusted earnings per share of $45.10, coming in above our expectations on higher core PPNR than anticipated. We remain encouraged by the performance across all our operating segments, with each of them achieving loan and deposit growth during the quarter. As Craig will discuss later, I do want to highlight that SVB had a great quarter as VC investment activity saw modest improvements.

Speaker Change: I'll provide brief comments on our fourth quarter results as well as our 2025 strategic priorities before turning it over to Craig.

Craig Nix: to review our performance in more detail and discuss the outlook for 2025.

Craig Nix: Starting on page 6, we delivered another quarter of strong results, return metrics,

Craig Nix: with adjusted earnings per share of $45.10, coming in above our expectations on higher core PPNR than anticipated.

Craig Nix: We remain encouraged by the performance across all our operating segments with each of them achieving loan and deposit growth during the quarter.

Speaker Change: As Craig will discuss later, I do want to highlight that SBB had a great quarter as VC investment activity saw modest improvements.

Frank Holding: Q4 loans were up over the Q3 and the Q4 of last year, despite the ongoing muted pace of investment for most of the year. Deposits were also up, with total client funds registering solid annualized and actual percentage growth in the Q4 and for the full year, respectively. As we approach two years combined with SVB, we remain pleased with the stability of the franchise and particularly the competitive advantage we have in the innovation economy and in fund banking. Capital and liquidity remained strong during the quarter, providing us with capacity for balance sheet growth while continuing to optimize our capital position through share repurchases. During the Q4, we repurchased an additional 3.5% of our Class A common stock, bringing total repurchases since the inception of the repurchase plan to 6.44%.

Speaker Change: Fourth quarter loans were up over the third quarter and the fourth quarter of last year despite the ongoing muted pace of investment.

for most of the year.

Speaker Change: Deposits were also up with total client funds registering solid annualized and actual percentage growth in the fourth quarter and for the full year respectively.

Speaker Change: As we approach two years combined with SVB, we remain pleased with the stability of the franchise and particularly the competitive advantage we have in the innovation economy and in fund banking.

Capital and liquidity remain strong during.

Speaker Change: The quarter providing us with capacity for balance sheet growth while continuing to optimize our capital position through share repurchases.

Speaker Change: During the fourth quarter, we repurchased an additional 3.5% of our Class A common stock, bringing total repurchases since the inception of the repurchase plan to 6.44%.

Frank Holding: In early January, we announced the appointment of Matt Snow to our board of directors. Matt is a distinguished leader and an executive with more than 30 years financial services experience, and most recently served as chairman of the governing board of Forvis Mazars, a top 10 US accounting firm. We are excited to add him to our team and know he will provide invaluable insights, which will help us continue to successfully navigate the landscape for large financial institutions. Finally, in the wake of the recent wildfires and hurricanes, our thoughts continue to be with our affected associates, clients, and communities across the West Coast and the Southeast.

Speaker Change: In early January, we announced the appointment of Matt Snow to our Board of Directors.

Matt Snow: Matt is a distinguished leader and an executive with more than 30 years financial services experience and most recently served as Chairman of the Governing Board of Forbes Mazar's, a top 10 U.S. accounting firm.

Matt Snow: We are excited to add him to our team and know he will provide invaluable insights.

Matt Snow: which will help us continue to successfully navigate the landscape for large financial institutions.

Matt Snow: Finally, in the wake of the recent wildfires and hurricanes, our thoughts continue to be with our affected associates, clients, and communities across the West Coast and the Southeast.

following the tragic loss of life.

Frank Holding: Following the tragic loss of life and wild and widespread destruction of property, we are committed to continued support of those impacted, and we assure them that we, that they have our support now and in the days, months, and years to come. Turning to page 7, I want to highlight our strategic areas of focus this year. We have added significant scale to our organization over the past few years, while increasing our footprint and client base and expanding our products and services to support them. This transformation of our company has not changed our commitment to our clients, associates, and communities that helped us build the foundation upon which we sit today.

Matt Snow: while and widespread destruction of property we are committed to continued support of those impacted

Matt Snow: and we assure them that they have our support now and in the days, months, and years to come.

Turning to page 7.

Matt Snow: I want to highlight our strategic areas of focus this year.

Matt Snow: We have added significant scale to our organization over the past few years while increasing our footprint and client base and expanding our products and services to support them.

Matt Snow: This transformation of our company has not changed our commitment to our clients, associates, and communities that helped us build the foundation upon which we sit today.

Frank Holding: We remain steadfast in our long-term approach, our client relationship focus on clients and customers, and our commitment to strong risk management, all of which you will see pulled through in our 2025 strategic priorities. I will now discuss each of these briefly. First, with respect to our customers and clients, CIT and SVB introduced us to new strategic markets with expanded products and services, allowing us to help our customers and clients achieve their goals at every stage of their personal, business, and entrepreneurial journeys. In 2025, we will continue to expand these new capabilities throughout the organization, which will enhance our ability to provide seamless relationship management across our lines of business. Second, developing our associates and adding talent to support growth remain important priorities.

Matt Snow: We remain steadfast in our long-term approach, our relationship focus on clients and customers, and our commitment to strong risk management, all of which you will see pulled through in our 2025 strategic priorities.

I will now discuss each of these briefly.

First, with respect to our customers and clients.

CIT and SDB introduced us to

new strategic markets with expanded products and services.

Matt Snow: allowing us to help our customers and clients achieve their goals at every stage of their personal, business, and entrepreneurial journeys.

Matt Snow: In 2025, we will continue to expand these new capabilities throughout the organization.

Matt Snow: which will enhance our ability to provide seamless relationship management across our lines of business.

Second.

Matt Snow: Developing our associates and adding talent to support growth remain important priorities.

Frank Holding: Our ability to attract, retain, and develop associates is critical to our success, and ensuring we have the right talent in place to support our growth remains critical. Third, operational efficiency remains a priority. The significant growth of our company over the past three years comes with a corresponding increase in technical and operating complexity. To position the company for long-term growth, we seek to simplify our operating environment and streamline our technology platforms to enable us to capitalize on the scale. Fourth, balance sheet management will be focused on optimizing our liquidity and capital positions to support continued profitable growth. We will continue to focus on a funding remix to core deposits to support asset growth in our lines of business. Additionally, we plan to continue our share repurchase plan with the goal of optimizing our capital.

Matt Snow: Our ability to attract, retain, and develop associates is critical to our success.

Matt Snow: ensuring we have the right talent in place to support our growth remains critical.

Third, operational efficiency remains a priority.

Matt Snow: The significant growth of our company over the past three years comes with a corresponding increase in technical and operating complexity.

Matt Snow: To position the company for long-term growth, we seek to simplify our operating environment and streamline our technology platforms to enable us to capitalize on the scale.

Fourth, balance sheet management.

Matt Snow: We will be focused on optimizing our liquidity and capital positions to support continued profitable growth. We will continue to focus on a funding remix to core deposits.

to support asset growth in our lines of business.

Matt Snow: Additionally, we plan to continue our share repurchase plan with the goal of optimizing our capital.

Frank Holding: Finally, prudent risk management will remain a guiding principle across all our strategic efforts, and we will continue to invest in our capabilities as we approach Category Three regulatory status. To conclude, I'm pleased with our 2024 financial performance, and it exceeded our expectations, and that we're excited about the opportunities that lay ahead for us in 2025.... I'm confident that we remain well positioned to generate long-term, sustainable value for our clients, communities, and shareholders. I'll turn it over to Craig now to review our financial results in more detail. Craig?

Finally,

Matt Snow: Prudent risk management will remain a guiding principle across all our strategic efforts, and we will continue to invest in our capabilities.

as we approach Category 3 regulatory status.

Thank you.

Matt Snow: To conclude, I'm pleased with our 2024 financial performance, and it exceeded our expectations.

Matt Snow: And that we're excited about the opportunities that lay ahead for us in 2025.

Matt Snow: I'm confident that we remain well-positioned to generate long-term, sustainable value for our clients, communities, and shareholders.

Matt Snow: I'll turn it over to Craig now to review our financial results in more detail. Craig? Thank you, Frank. I appreciate everyone joining us today. I will anchor my comments to the fourth quarter key takeaways outlined on page 9. Pages 10 through 27 provide more details underlying our results.

Craig Nix: Thank you, Frank. Appreciate everyone joining us today. I will anchor my comments to the Q4 key takeaways outlined on page 9. Pages 10 through 27 provide more details underlying our results. Our Q4 return metrics and efficiency continued to compare favorably to our peer group, with ROE and ROA adjusted for notable items of 11.51% and 1.14% respectively, and an adjusted efficiency ratio of 57%. Headline NIM was 3.32%, and NIM accretion was 3.16%. Aligned with our guidance, headline net interest income was down from the Q3 as the impact of lower yields on loans and overnight investments and lower accretion income more than offset higher investment securities income and lower deposit costs.

Matt Snow: Our fourth-quarter return metrics and efficiency continued to compare favorably to our peer group.

Matt Snow: with ROE and ROA adjusted for notable items of 11.51% and 1.14% respectively, and an adjusted efficiency ratio of 57%.

Headline NIM was 3.32% and NIM Execretion was 3.16%.

Matt Snow: Aligned with our guidance, headline net interest income was down from the third quarter as the impact of lower yields on loans and overnight investments and lower accretion income more than offset higher investment securities income and lower deposit costs.

Craig Nix: Headline NIM contracted sequentially by 21 basis points and excluding accretion by 17 basis points. The 17 basis points decline was driven primarily by the negative impact of Fed rate cuts during the last 4 months of the year on our earning asset yield, which was only partially offset by lower funding costs. Adjusted non-interest income increased 9% sequentially, beating our top-line guidance. We continue to see solid traction in the rail business, with 13 consecutive quarters of positive repricing trends and another quarter of strong utilization rates. We also benefited from strong performance in our commercial and SVB commercial segments, driven by increased deal flow, which led to higher international and lending-related syndication fees. We also had positive impacts from fair value changes in customer derivative positions and other non-marketable investments driven by changes in the rate environment.

Matt Snow: Headline NIM contracted sequentially by 21 basis points and excluding accretion by 17 basis points.

Matt Snow: The 17 basis points decline was driven primarily by the negative impact of Fed rate cuts during the last four months of the year on our earning asset yield, which was only partially offset by lower funding costs.

Adjusted non-interest income increased 9% sequentially, beating our top-line guidance.

Matt Snow: We continue to see solid traction in the rail business with 13 consecutive quarters of positive repricing trends.

another quarter of strong utilization rates.

Matt Snow: We also benefited from strong performance in our commercial and SVB commercial segments driven by increased deal flow, which led to higher international lending-related syndication fees.

Matt Snow: We also had positive impacts from fair value changes and customer derivative positions.

Matt Snow: and other non-marketable investments driven by changes in the rate environment.

Adjusted non-interest expense came in slightly above our guidance range.

Craig Nix: Adjusted non-interest expense came in slightly above our guidance range, increasing sequentially by 3.1%, driven by higher personnel, amortization, and other expense. Increased personnel costs were driven in part by net staff additions as we continue to build out our technology and risk organizations to support strategic projects and scale for future growth. The increase was also due to higher incentive compensation and related benefit expenses, driven by the strong revenue year for the bank. Equipment expense increased due to several technology projects coming online, which drove higher amortization and software licensing costs. As Frank noted, in our strategic priorities, we are making investments in our infrastructure to support scalability and future growth, which have impacted our operating expenses in recent periods.

Matt Snow: increasing sequentially by 3.1% driven by higher personnel, amortization and other expense.

Matt Snow: Increased personnel calls were driven in part by net staff additions as we continue to build out our technology and risk organizations.

to support strategic projects and scale for future growth.

Matt Snow: The increase was also due to higher incentive compensation and related benefit expenses driven by the strong revenue year for the bank.

Matt Snow: Equipment expense increased due to several technology projects coming online which drove higher amortization and software licensing costs.

As Frank noted, in our strategic priorities,

Frank Holdings: We are making investments in our infrastructure to support scalability and future growth which have impacted our operating expenses in recent periods.

Craig Nix: Other expense increased during the quarter, driven by a number of miscellaneous items, with the most significant including higher state-related non-income taxes due to our increasing asset size, as well as charitable donations provided to support relief efforts for the recent hurricanes, and other smaller increases in various operating expenses. While these expenses were expected, they pulled through at a slightly elevated level in the Q4, given accelerated hiring and increased project spend. We will continue to make investments to help us scale effectively and to support both organic and strategic growth opportunities. Moving to credit, non-accrual loans decreased sequentially, and while net charge-offs were up slightly by 4 basis points over the Q3, they were aligned with our expectations.

Frank Holdings: Other expense increased during the quarter driven by a number of miscellaneous items.

Frank Holdings: with the most significant including higher state-related non-income taxes due to our increasing asset size.

as well as charitable donations provided to support relief efforts.

for the recent hurricanes and other smaller increases.

and various operating expenses.

Frank Holdings: While these expenses were expected, they pulled through at a slightly elevated level in the fourth quarter, given accelerated hiring and increased project spend. We will continue to make investments to help us scale effectively and to support both organic and strategic growth opportunities.

Frank Holdings: Moving to credit, non-accrual loans decreased sequentially, and while net charge-offs were up slightly by four basis points over the third quarter, they were aligned with our expectations.

Craig Nix: Consistent with previous quarters, net charge-offs were mostly concentrated in the general office, investor-dependent, and small-ticket leasing portfolios, but we did experience higher losses in our commercial finance business due to some idiosyncratic losses within our industry verticals. We continue to take a disciplined, measured approach to proactively reviewing our portfolios for additional stress, and maintaining vigilance on credit will remain a priority. We believe our credit losses are well contained and see no emerging problems in other portfolios outside of those previously discussed. The allowance ratio decreased by one basis point to 1.2%. We feel good about our reserve coverage as well as the coverage on the portfolios experiencing stress. Moving to the balance sheet, we experienced broad-based loan growth across our operating segments, ending the quarter up $1.5 billion, or by 1.1% sequentially.

Frank Holdings: Consistent with previous quarters, net charge-offs were mostly concentrated in the general office, investor-dependent, and small-ticket leasing portfolios.

Frank Holdings: But we did experience higher losses in our commercial finance business due to some idiosyncratic losses within our industry verticals.

Frank Holdings: We continue to take a disciplined, measured approach to proactively reviewing our portfolios for additional stress and maintaining vigilance on credit will remain a priority.

Frank Holdings: We believe our credit losses are well contained and see no emerging problems in other portfolios outside of those previously discussed.

Frank Holdings: The allowance ratio decreased by one basis point to 1.2%. We feel good about our reserve coverage as well as the coverage on the portfolios experiencing stress.

Thank you.

Frank Holdings: Moving to the balance sheet, we experience broad-based loan growth across our operating segments, ending the quarter up $1.5 billion or by 1.1% sequentially.

Craig Nix: General bank loans grew by $676 million, attributable to continued strong performance in business and commercial loans, while commercial bank loans were up $508 million, with growth concentrated in our industry verticals. SVB commercial loans grew by $342 million, driven by Global Fund Banking, as draws in new fundings outpaced paydowns and payoffs. Our team remains well positioned to serve new and existing clients, booking more than $5 billion in new business during the fourth quarter. While the tech and healthcare business was down sequentially, it was in line with our expectations as the macro environment continues to be a drag on originations....

Frank Holdings: General bank loans grew by $676 million, attributable to continued strong performance in business and commercial loans, while commercial bank loans were up $508 million with growth concentrated in our industry verticals.

Speaker Change: SVB commercial loans are about $342 million, driven by global fund banking as draws and new funding outpace paydowns and payoffs.

Speaker Change: Our team remains well-positioned to serve new and existing clients, booking more than $5 billion in new business during the fourth quarter.

Speaker Change: While the tech and healthcare business was down sequentially, it was in line with our expectations as the macro environment continues to be a drag on originations.

Speaker Change: Turning to the right-hand side of the balance sheet, deposits were up 3.7 billion or by 2.4 percent sequentially, and exceeded our guidance as we experienced strong growth across our operating segments.

Craig Nix: Turning to the right-hand side of the balance sheet, deposits were up $3.7 billion, or by 2.4% sequentially, and exceeded our guidance as we experienced strong growth, growth across our operating segments. The direct bank was the largest contributor to the increase, growing by $1.6 billion. We were measured in bringing down our rates during the quarter to ensure balance stability and to attract new clients, given a shift in strategy for one of our SVB commercial deposit products. This high-yielding deposit product will be shifting to an off-balance sheet product in Q1 and is expected to lower total deposits in this channel on balance sheet by $2.5 billion.

Speaker Change: The direct bank was the largest contributor to the increase, growing by $1.6 billion.

Speaker Change: We were measured and bringing down our rates during the quarter to ensure balanced stability and to attract new clients given a shift in strategy for one of our SVB commercial deposit products.

Speaker Change: This high-yielding deposit product will be shifting to an off-balance sheet product in the first quarter and is expected to lower total deposits in this channel on balance sheet by $2.5 billion.

Craig Nix: While this will result in an absolute reduction in on-balance sheet SVB commercial deposits, the funds will increase off-balance sheet client funds, and is expected to have a limited impact on total client fund balances in the segment. This is one step we have taken as we work to optimize our balance sheet to enhance liquidity and reduce total deposit interest expense. In the general bank, we experienced growth of $893 million as we continue to maintain strong client relationships and grow deposits organically. We expect future deposit growth in the general bank to continue, given our client-first focus and deeply rooted relationship banking model. As Frank highlighted earlier, SVB had a good quarter in terms of deposits, achieving sequential actual and average growth of $692 million and $1.2 billion, respectively.

And the general Bank, we experienced growth of $893 million as we continued to maintain strong client relationships and grow deposits organically, we expect future deposit growth in the general bank to continue given our client first focus and deeply rooted relationship banking model.

Frank Holdings: As Frank highlighted earlier FCB had a good quarter in terms of deposits achieving sequential actual an average growth of 692 million and 1.2 billion respectively. Additionally, total client funds, which include off balance sheet accounts were up over the third.

Craig Nix: Additionally, total client funds, which include off-balance sheet accounts, were up over Q3 on both a period-end and average basis, increasing by $5.3 billion and $3.9 billion, respectively. Our tech and healthcare team was the largest contributor to the total client fund growth, as higher VC investment and better market valuations acted as a tailwind for increased inflows from both existing and new clients. Moving to capital, Frank mentioned that we continue to make progress on our share repurchase plan. As of close of business on 22 January, we repurchased 6.44% of Class A common shares, or 6% of total common shares outstanding, for a total price of $1.8 billion. This represents just over 50% of our board-approved $3.5 billion repurchase.

Frank Holdings: Order on a period on both a period end and average basis, increasing by 5.3 and $3.9 billion respectively.

Frank Holdings: Our tech and health care team was the largest contributor to the total client fund growth as higher VC investment you better market valuations accurate as a tailwind or increased inflows for both existing and new clients.

Frank Holdings: Moving to capital.

Frank Holdings: Frank mentioned that we continue to make progress on our share repurchase plan.

As of the close of business on January 22nd.

Frank Holdings: We repurchased $6 four 4% of class a common shares or 6% of total common shares outstanding for a total price of $1 $8 billion. This represents just over 50% of our board approved $3.5 billion repurchase.

Frank Holdings: The CET, one capital ratio decreased by 25 basis points sequentially, ending the quarter at $12, 99%.

Craig Nix: The CET1 capital ratio decreased by 25 basis points sequentially, ending the quarter at 12.99%. Along with the impact of share repurchases, this was driven by a continued decline in the benefit provided by the Shared Loss Agreement, which added approximately 66 basis points to the ratio this quarter, down 7 basis points from Q3. CET1, excluding the benefits of the Shared Loss Agreement, decreased 18 basis points sequentially, as risk-weighted asset growth and the impact from share repurchases outpaced earnings growth. We intend to manage CET1 ex loss share towards the 10.5% to 11% range by the end of 2025, which is the level it was following the acquisition of SVB.

Along with the impact of share repurchases. This was driven by a continued decline in the benefit provided by the shared loss agreement.

Frank Holdings: Which added approximately 66 basis points to the ratio this quarter down seven basis points from the third quarter.

Frank Holdings: CET one excluding the benefits of the shared loss agreement decreased 18 basis points sequentially as risk weighted asset growth and the impact from share repurchases outpaced earnings growth.

Frank Holdings: We intend to manage CET, one ex loss share towards the 10.5% to 11% range by the end of 2025, which is the level. It was following the acquisition of S. D D.

Craig Nix: We intend to accomplish this through regular share repurchases in 2025 as we continue to assess capital needs, considering loan growth, earnings trajectories, and the economic and regulatory environments. I will close on page 29 with our Q1 and full year 2025 outlook. We anticipate loans in the $140 to 142 billion range in the first quarter, driven in part by growth in the commercial banking segment, primarily coming from our industry verticals. We also expect SVB Commercial will benefit from growth in the Global Fund Banking business, thanks to the strong pipeline it maintains, but we do remain cautious on the absolute level of growth.

Frank Holdings: We intend to accomplish this through regular share repurchases in 2025, as we continue to assess capital needs considering loan growth things trajectories, and the economic and regulatory environments.

Frank Holdings: I will close on page 29, with our first quarter and full year 2025 out.

Frank Holdings: We anticipate loans in the $140 billion to $142 billion range in the first quarter driven in part by growth in the commercial banking segment, primarily coming from our industry verticals. We also expect S. VB commercial will benefit from growth in the global fund banking business. Thanks to the strong pipe.

Frank Holdings: It maintains but we do remain cautious on.

Frank Holdings: On the absolute level of growth.

Frank Holdings: Looking at the full year, we expect wounds in the 144.

Craig Nix: Looking at the full year, we expect loans in the $144 to 147 billion range, driven by anticipated growth in SVB Commercial and the commercial bank industry verticals. We expect that SVB Commercial growth will be more concentrated in the back half of the year as the Fed's monetary easing cycle begins to take effect, and we see the benefit of higher VC investment activity as well as better capital markets activity. For the full year in the general bank, we expect continued mid-single-digit percentage growth in business and commercial loans in the branch network. We do look to move pockets of our residential and consumer production off balance sheet to create additional liquidity while generating supplemental non-interest income. We expect deposits to be in the $154 to 157 billion range in Q1.

Frank Holdings: Two $147 billion range, given driven by anticipated growth and STB commercial in the commercial bank industry verticals, we expected SVP commercial growth will be more concentrated in the back half of the year as the fed's monetary easing cycle begins to take effect and we see the benefit of higher <unk>.

Frank Holdings: D C investment activity as well as better capital markets activity.

Frank Holdings: For the full year and the General Bank. We expect continued mid single digit percentage growth in business and commercial lines in the branch network we.

Frank Holdings: We do look to move pockets of our residential and consumer production off balance sheet to create additional liquidity, while generating supplemental noninterest income.

Frank Holdings: Yeah.

Frank Holdings: We expect deposits to be in the $154 billion to $157 billion range in the first quarter. We expect overall growth in the general Bank is deposit gathering remains a top priority. Additionally, the general bank, we are projecting growth in our HOA business, given our national market share position.

Craig Nix: We expect overall growth in the general bank as deposit gathering remains a top priority. Additionally, within general bank, we are projecting growth in our HOA business, given our national market share position. There is a lot of consolidation in this industry, and we tend to be on the favorable side of it as our large customers continue to acquire smaller HOAs that may not be clients. We expect that growth in the general bank will be partially offset by a decline in SVB Commercial, as we intentionally shift the higher yielding deposit product that I mentioned earlier, off balance sheet in Q1. For the full year, we anticipate deposits in the $162 to 167 billion range. Growth in deposits will be driven primarily by the general and direct banks.

Frank Holdings: There is a lot of consolidation in this industry and we tend to be on the favorable side of it is our large customers continue to.

Frank Holdings: Acquire smaller H O as that may not be clients.

Frank Holdings: We expect the growth in the general bank will be partially offset by a decline in SVP commercial as we intentionally shift the higher yielding deposit products that I mentioned earlier off balance sheet in the first quarter.

Frank Holdings: For the full year, we anticipate deposits and $162 billion to $167 billion range.

Frank Holdings: And deposits will be driven primarily by the general indirect banks and the General Bank. We will continue to benefit from our branch network, leveraging new products and initiatives to deepen client relationships. We will also continue to focus on increasing our customer base by building deposits through proactive sales associate outreach.

Craig Nix: In the general bank, we will continue to benefit from our branch network, leveraging new products and initiatives to deepen client relationships. We will also continue to focus on increasing our customer base by building deposits through proactive sales associate outreach, centralized marketing campaigns, and increased community connectivity. We will continue to leverage the direct bank to drive growth in insured core deposits. While it is a higher cost product, we anticipate benefiting from falling interest rates and believe it will provide us with the strategic agility to pursue our balance sheet optimization efforts. Our interest rate forecast covers a range of 0 to 425 basis points rate cuts, with the effective fed funds rate range declining from 4.25 to 4.50 currently, to as low as 3.25 to 3.50 by the end of the year.

Frank Holdings: Centralized marketing campaigns and increased community connectivity.

Frank Holdings: We will continue to leverage the direct bank to drive growth in insured core deposits, while it has a higher <unk>.

Frank Holdings: <unk> product.

Frank Holdings: We anticipate benefiting from falling interest rates and believe it will provide us with the strategic agility to pursue our balance sheet optimization optimization efforts.

Frank Holdings: Our interest rate forecast covers a range of zero to 425 basis point rate cuts with the effective fed funds rate range declining from four point to five to $4 50 currently to as low as 3.25 to $3 50 by the end of the year.

Craig Nix: While our baseline forecast follows the implied forward curve, which includes two rate cuts, we believe there's the possibility that declining inflation could lead to additional cuts. However, given stubborn inflationary metrics and recent hawkish positions by the Fed, we recognize these cuts may also not occur. Therefore, we believe it is prudent to provide a range of expectations for the year. We expect Q1 headline net interest income to be relatively stable compared to Q4, as lower deposit costs are offset by lower accretion and interest on earning assets. Our guidance does include the planned impact of share repurchase activity for 2025 under our current share repurchase plan.

Frank Holdings: While our baseline forecast fall is the implied curve plod forward curve, which includes two rate cuts. We believe there is the possibility of a declining debt declining inflation could lead to additional cuts. However, given stubborn inflationary metrics and recent hawkish positions by the fed we recognize these cuts.

Frank Holdings: Also not occur therefore, we believe it is prudent to provide a range of expectations for the year.

Frank Holdings: We expect first quarter headline net interest income to be relatively stable compared to the fourth quarter as lower deposit costs are offset by lower accretion interest on earning assets are.

Frank Holdings: Our guidance does include the plan impact of share repurchase activity for 2025 under our current share repurchase plan.

Craig Nix: For the full year, we expect headline net interest income to be in the range of $6.6 to 7 billion, reflecting the impact of the 50 basis points rate cuts that occurred in the Q4, as well as any potential additional rate cuts in 2025. In either case, as expected, we project that loan accretion will be down by over $200 million for the year. On credit losses, we anticipate Q1 net charge-offs relatively in line with the Q4. While we anticipate continued stress in the investor-dependent and office portfolios, we do believe equipment finance is beginning to normalize, and we are seeing signs of improvement and trending towards longer-term expectations for this portfolio.

Frank Holdings: For the full year, we expect headline net interest income to be in the range of $6.6 billion to $7 billion, reflecting the impact of the 50 basis points rate cuts that occurred in the fourth quarter as well as any potential additional rate cuts in 2025 in either case as expected we project that loan.

Frank Holdings: <unk> will be down by over $200 million for the year.

Frank Holdings: On credit losses, we anticipate first quarter net charge offs were relatively in line with the fourth quarter. While we anticipate continued stress in the investor dependent and office portfolios. We do believe equipment finance is beginning to normalize and we are seeing signs of improvement in trending toward longer term expectations for this portfolio.

Frank Holdings: Yeah.

Craig Nix: In commercial real estate, rate cuts could ease some of the pressure on borrowers in the general office sector and, over the long term, help to reduce stress in this portfolio. However, we do believe losses will remain elevated in 2025, even as market disruption may lessen as more companies begin to reinstate office attendance requirements. We also anticipate continued stress in the investor-dependent portfolio throughout 2025. While the Fed cycle is a welcome change, the catalyst for buyers to become more acquisitive and for public investors to have an improved appetite for IPOs remain elusive. And while later-stage companies in the portfolio are less dependent on fresh capital, higher interest rates and challenging macro conditions continue to impact operating performance. Encouragingly, we did see a $31 billion uptick in VC investment in Q4 compared to Q3.

Frank Holdings: And commercial real estate rate cuts could ease some of the pressure on borrowers and the general office sector and over the long term help to reduce stress in this portfolio. However, we do believe losses remain elevated in 2025, even as market disruption may lessen as more companies began to reinstate office then that's required.

Frank Holdings: <unk>.

Frank Holdings: We also anticipate continued stress in the investor dependent portfolio throughout 2025.

Frank Holdings: While the fed cycle is a welcome change the catalyst for buyers to become more acquisitive and for public investors to have an improved appetite for ipos remain elusive.

Frank Holdings: While later stage companies in the portfolio are less dependent on fresh capital higher interest rates and challenging macro conditions continue to impact operating performance.

Frank Holdings: Encouragingly, we did see a $31 billion uptick in VC investment in the fourth quarter compared to the third quarter. However, we remain guarded on the overall outlook is there were a number of outsized deals in these totals and win large deals are removed the fourth quarter total is aligned with the 'twenty 'twenty four quarterly average.

Craig Nix: However, we remain guarded on the overall outlook as there were a number of outsized deals in these totals, and when large deals are removed, the Q4 total is aligned with the 2024 quarterly average. Continued improvement here will be facilitated by a higher fundraising environment driven by both M&A and IPOs. With respect to the net charge-off ratio, we do have a couple larger deals that we expect to pull through as losses in the Q1. Therefore, the end net charge-off ratio could be more elevated in the Q1 in the range of 40 to 50 basis points. However, we expect full year, the full year net charge-off ratio to be aligned with longer-term expectations in the 35 to 45 basis points range.

Frank Holdings: Continued improvement here will be facilitated by higher fund raising environment, driven by both M&A and Ipos.

Frank Holdings: With respect to the net charge off ratio, we do have a couple of larger deals that we expect to pull through as losses in the first quarter. Therefore, the net charge off ratios could be more elevated in the first quarter range of 40 to 50 basis points. However.

Frank Holdings: We expect full year, the full year net charge off ratio to be aligned with longer term expectations in the 35 to 45 basis points range. We will continue to refine these estimates as the year progresses, but at this juncture, we are not seeing any signs of material concern.

Craig Nix: We will continue to refine these estimates as the year progresses, but at this juncture, we are not seeing any signs of material concern. Moving to adjusted non-interest income, we expect a sequential decrease in Q1 to the $475 to 500 million range, mainly due to Q4 exceeding our expectations. We saw strong net operating lease income in part due to lower maintenance expense, which can be lumpy quarter to quarter. Also, we expect typical slight seasonal declines for Q1 in areas such as card, merchant, factoring, mortgage, and capital market fees. We expect full year adjusted non-interest income up slightly into the $1.95 to 2.05 billion range.

Frank Holdings: Moving to adjusted Noninterest income, we expect a sequential decrease in the first quarter to the $475 million to $500 million range, mainly due to the fourth quarter exceeding our expectations.

We saw strong net operating lease income in part due to lower maintenance expense, which can be lumpy quarter to quarter also we expect typical slight seasonal declines.

For the first quarter in areas, such as card merchant factoring mortgage and capital market fees.

Yes.

Frank Holdings: We expect full year adjusted noninterest income up slightly into the $1 95 to two point over $5 billion range.

Craig Nix: This growth is driven by our rail outlook, which includes our balanced railcar portfolio and strategic exploration ladder, which we expect will continue to support positive repricing throughout 2025. We also expect continued momentum in our wealth business as we increase our assets under management, as well as higher international, and lending-related fees, given the healthy fundamentals supporting these businesses. Moving to adjusted non-interest expense, we expect Q1 to be flat to modestly up compared to Q4, in part driven by seasonal benefit increases, offset by lower other non-interest expense categories that were elevated at year-end, as previously discussed. We continue to invest in risk and technology capabilities and are working to better optimize our platforms. As a result, we are seeing higher third-party processing fees and expect higher equipment expense due to amortization as projects are placed into service.

Frank Holdings: This growth is driven by our rail outlook, which includes our balanced railcar portfolio.

Frank Holdings: And strategic exploration ladder, which we expect will continue this positive repricing throughout 2025.

We also expect continued momentum in our wealth business as we increase our assets under management as well as higher international and lending related fees given the healthy fundamentals supporting these businesses.

Frank Holdings: Moving to adjusted noninterest expense, we expect the first quarter to be flat to modestly up compared to the fourth quarter in part driven by seasonal benefit increases offset by lower other noninterest expense categories. There were elevated at year end as previously discussed.

Frank Holdings: We continue to invest in risk and technology capabilities and are working to better optimize our platforms. As a result, we are seeing higher third party processing fees and expect higher equipment expense due to amortization as projects are placed into service. We feel our continued investments in technology and risk will help us build towards <unk>.

Craig Nix: We feel our continued investments in technology and risk will help us build towards Category Three expectations, as well as creating a foundation for effective and scalable growth into the future. Additionally, we expect increasing marketing expenses in the direct bank as we try to hold on to and grow deposits in this channel. Looking at the full year, we anticipate adjusted non-interest expense to increase into the $5.05 to $5.2 billion dollar range as equipment expense, third-party processing fees, and marketing expense from the investments I previously mentioned take effect. Exercising disciplined expense management while making opportunistic investments is a top priority for us, giving headwinds to net interest income from lower rates.

Frank Holdings: Gory three expectations as well as creating a foundation for effective and scalable growth into the future. Additionally, we expect increasing marketing expenses and the direct bank as we try to hold on to and grow deposits in this channel.

Frank Holdings: Looking at the full year, we anticipate adjusted non interest expense to increase into the 5.05 to five point do billion $5.2 billion range ethics equipment expense third party processing fees and marketing expense for the investments that previously.

Frank Holdings: You mentioned take effect.

Frank Holdings: So sizing disciplined expense management, while making opportunistic investments as a top priority for us giving headwinds to net interest income from lower rates. We expect continued spend into 2025 and as we further enhance our risk management framework modernize our technology capabilities and consolidate our platts.

Craig Nix: We expect continued spend into 2025 as we further enhance our risk management framework, modernize our technology capabilities, and consolidate our platforms to improve client experience and better enhance collaboration across our business units. Our adjusted efficiency ratio is expected to remain in the upper 50% range in 2025, as the impact of the Fed rate cut cycle puts downward pressure on net interest margin, and we continue to make investments into areas that will help us scale to Category Three status when we cross that threshold. Longer term, our goal is to operate in a, with an efficiency ratio in the mid-fifties. Finally, we are lowering our estimated effective tax rate by approximately 1% to 25% to 26% for both Q1 and full year 2025, which is exclusive of any discrete items.

Frank Holdings: Forms to improve client experience and better enhanced collaboration across our business units.

Frank Holdings: Our adjusted efficiency ratio is expected to remain in the upper 50% range. In 2025 is the impact of the fed rate cut cycle puts downward pressure on net interest margin and we continue to make investments into areas that will help us scale to category three status when we cross that threshold.

Frank Holdings: Longer term our goal is to operate with an efficiency ratio in the mid fifties.

Frank Holdings: Finally, we are lowering our estimated effective tax rate by approximately 1%.

Frank Holdings: 225% to 26% for both the first quarter and full year 2025, which is exclusive of any discrete items. The lower fourth quarter 2020 for an estimated 2025 tax rates were primarily the result of a lower apportionment ray and estimated on the assets acquired from <unk>.

Craig Nix: The lower Q4 2024 and estimated 2025 tax rates were primarily the result of a lower apportionment rate than estimated on the assets acquired from SVB, which occurred upon filing our first combined state tax returns. To conclude, in 2024, we delivered peer-leading returns to our shareholders and maintained strong capital and liquidity positions, all while increasing our capabilities as a large financial institution. As we enter 2025, I'm excited about the opportunities we have to drive continued long-term value for our shareholders. I will now turn it over to the operator for instructions for the question and answer portion of the call. Thank you.

Frank Holdings: S D b, which occurred upon filing our first combined state tax returns.

Frank Holdings: To conclude in 'twenty 'twenty, four we delivered peer leading returns to our shareholders and maintain strong capital and liquidity positions, all while increasing our capabilities as a large financial institution.

Frank Holdings: As we enter 2025 I'm excited about the opportunities we have to drive continued long term value for our shareholders.

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

Speaker Change: Thank you, ladies and gentlemen, get a question or comment at this time. Please press Star then the one key a no touch tone telephone that's 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 cookies. If you have additional questions.

Operator: Thank you. Ladies and gentlemen, if you have a question or comment at this time, please press star and then the one key on your touchtone 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 star followed by two. We'll pause for one moment to compile our Q&A roster. Our first question comes from Bernard Von Gizycki from Deutsche Bank. Bernard, your line is open. Please go ahead.

Speaker Change: If your question has been answered or you wish to remove yourself from the queue. Please press star followed by two pools.

Speaker Change: Also a moment to compile all Q&A roster.

Speaker Change: Our first question comes from Bernard <unk> from Deutsche Bank, but not too long is open. Please go ahead.

Speaker Change: Hey, guys good morning.

Matt O'Connor: Hey, guys, good morning. Just on the 2025 outlook, you know, the range of the $6.6 to 7 billion for net interest income, could you just walk us through the assumptions on the low and then the high end of the range? Just anything you can provide there.

Bernard Von Gizycki: Hey, guys, good morning. Just on the 2025 outlook, you know, the range of the $6.6 to 7 billion for net interest income, could you just walk us through the assumptions on the low and then the high end of the range? Just anything you can provide there.

Speaker Change: Just on that twice so I'd say that look you know the range of $6 67 billion for net interest income.

Speaker Change: Can you just walk us through the assumptions on the low end and the high end of the range I just anything you can provide there.

Speaker Change: Sure.

Craig Nix: Sure. So our net and our baseline forecast is anchored to, 2 rate cuts, but the range contemplates anywhere between 0 and 4. And obviously, the exact absolute, value or, or number for net interest income and for margin will be dependent upon the magnitude timing of those rate cuts. But if I just- if we, if we want to talk about just the trajectory, for Q1 2025 compared to Q4, we expect headline and ex accretion net interest income to be anywhere from up to down 1% sequentially, so not a lot of movement, fairly stable.

Speaker Change: So our net in our baseline forecast is anchored to.

Speaker Change: Two rate cuts, but the range contemplates anywhere between zero and four and obviously.

Absolutely.

Speaker Change: Value or a number for net interest income and for margin would be dependent on the magnitude timing of those rate cuts but.

But if I just if we if we want to talk about just the trajectory.

Speaker Change: For the first quarter 25 compared to the fourth.

Speaker Change: We expect headline is ex accretion net interest income to be anywhere from up to down 1% sequentially. So a lot of movement fairly stable for the exit in the fourth quarter of of twenty-five anchoring the two rate cuts, we expect headline net interest income.

Craig Nix: For the exit in the fourth quarter of 25, anchoring to 2 rate cuts, we expect headline net interest income to be up low single digits, ex accretion, net interest income to be up low to mid single digits, and we expect headline NIM in the low 3.20s, ex accretion NIM in the low 3.10s. So that range that you referenced does contemplate between 0 and 4. The numbers that I just mentioned, really, we're really pegging towards the 2 rate cuts in the last half of the year.

Speaker Change: <unk> to be up low single digits ex accretion.

Speaker Change: Net interest income to be up low to mid single digits.

Speaker Change: And we expect headline NIM in the low three twenties.

Speaker Change: Ex accretion NIM in the low three times.

Speaker Change: So that range that you referenced does contemplate between zero and for the numbers that I just mentioned really.

Speaker Change: We really pegging towards.

Speaker Change: We're paying towards the two rate cuts in the last half of the year.

Speaker Change: Okay, great. Thanks for that color and just my one follow up.

Matt O'Connor: Okay, great. Thanks for that color. And just my one follow-up. I think on last quarter's call, Craig, I think you noted there could be some additional acquisition-related synergies from SVB. Just wondering what that could entail and if there are any cost or revenue synergies assumed in the 25 guide?

Bernard Von Gizycki: Okay, great. Thanks for that color. And just my one follow-up. I think on last quarter's call, Craig, I think you noted there could be some additional acquisition-related synergies from SVB. Just wondering what that could entail and if there are any cost or revenue synergies assumed in the 25 guide?

Speaker Change: I think on last quarter's call. Greg I think you noted there could be some additional acquisition related synergies from is going to be just wondering what that could entail and if there are any cost or revenue synergies assumed in the 20th that guide.

Craig Nix: ... They're not material or significant. We've achieved the cost synergies estimate that we laid out at the beginning of the acquisition. So don't anticipate any material impact from further expense synergies on SVB in the guidance.

Speaker Change: We they're not material or significant we've achieved.

Speaker Change: The cost synergies estimate that we laid out.

At the beginning of the acquisition, so don't anticipate any material impact from further extent synergies on FCB and the guidance.

Speaker Change: Okay, great. Thanks for taking my question.

Matt O'Connor: Okay, great. Thanks for taking my questions.

Bernard Von Gizycki: Okay, great. Thanks for taking my questions.

Craig Nix: Thank you.

Speaker Change: Yeah.

Anthony Elian: The next question comes from Anthony Elian from J P. Morgan.

Operator: The next question comes from Anthony Elium from JP Morgan. Anthony, your line is open. Please go ahead.

Speaker Change: Please go ahead.

Anthony Elian: Hi, everyone. I was wondering if you could provide more color on the total client funds growth you saw in SPP in the fourth quarter I know a good portion of the 75 billion in venture capital investment you had on slide 22 came from large late stage deals that Craig you highlighted.

Anthony Elian: Hi, everyone. I was wondering if you could provide more color on the total client fund growth you saw in SVB in the fourth quarter. I know a good portion of the $75 billion in venture capital investment you had on slide 22 came from large, late-stage deals that Craig, you highlighted. But I think early stage was flat sequentially. I'm just curious how much of those larger deals contributed to the total client fund growth you saw in Q4? And if you think the growth in total client funds can persist even with a higher for longer rate outlook.

Anthony Elian: But I think early stage was flat sequentially I'm just curious how much of those larger deals contributed to the total client funds growth you saw in <unk> and if you think the growth in total client funds can persist even with a higher for longer rate outlook.

Craig Nix: Mark, would you like to take that question?

Mark: Mark would you like to take that question.

Anthony Elian: Yeah.

Anthony Elian: Happy to take that question, yes.

Marc Cadieux: Happy to take that question, yes. So as already noted on the call, the roughly $75 billion invested in Q4 did have a chunk of very large deals in it. Roughly 1/3 of that total were 3 very large financings. And then, I want to say $1 billion+ rounds were almost half of the total. So as Craig mentioned earlier, for the part of the fundraising, or the investment rather, that we tend to capture more of, is in that sub-$1 billion range. And so with that, for context, with venture investment of the sub-$1 billion, roughly flat quarter-over-quarter, we are pleased with the growth. I think it signals that we're continuing to execute well.

Anthony Elian: So as already noted on the call.

Anthony Elian: The roughly 75 billion invested in the fourth quarter did have a chunk of very large deals in it roughly a third of that total were three.

Anthony Elian: Very large financings and then.

Anthony Elian: I want to say a billion dollar plus surrounds where almost half of the total so as Craig mentioned earlier for the.

Anthony Elian: The part of the fund raising.

Anthony Elian: Or the investment rather that we tend to capture more of us in that sub $1 billion range and so with that for context with venture investment of the sub $1 billion roughly flat quarter over quarter.

We are pleased with the growth I think that signals that we're continuing to execute well. We also saw less a lower level of cash burn in the quarter relative to Q3, which which also helped a bit.

Marc Cadieux: We also saw less, lower level of cash burn in the quarter relative to Q3, which also helped a bit. And so, going into 25, I think, our expectations, as Craig already mentioned, we are cautious, about growth expectations for SVB, given the continued mixed environment for investment, IPOs, et cetera, interest rates weighing on all of it, perhaps at least until the second half of the year. And so I'll end by saying that our expectations, for TCF growth is captured in the forward guidance Craig mentioned earlier.

Anthony Elian: And so going into 25, I think our expectations as Greg already mentioned, we are cautious about growth expectations for SPP given the continued mixed environment for <unk>.

Anthony Elian: Investment Ipos et cetera interest rates weighing on all of it perhaps at least until the second half of the year.

Speaker Change: So I'll end by saying that our expectations for Tcf growth is captured in the forward guidance, Greg mentioned earlier.

Greg: Great. Thank you Mark and then my follow up maybe for Frank what today or latest thoughts on M&A just given the first citizens has been historically acquisitive right, you're getting closer to category three threshold and the regulatory backdrop with the new administration will likely be more favorable for all banks.

Anthony Elian: Great. Thank you, Mark. And then my follow-up may be for Frank. I want to get your latest thoughts on M&A, just given First Citizens has been historically acquisitive, right? You're getting close to the Category Three threshold, and the regulatory backdrop with the new administration will likely be more favorable for all banks. Thank you.

Speaker Change: Thank you.

Frank Holding: Thank you. We are not projecting any material M&A activity in 2025, but we're an opportunistic crowd, so, but we are not making any projections in that area.

Speaker Change: Thank you.

Frank Holding: Thank you. We are not projecting any material M&A activity in 2025, but we're an opportunistic crowd, so, but we are not making any projections in that area.

Speaker Change: We are not projecting any material M&A activity in 2025 Oh.

Speaker Change: But we are an opportunistic crowd so.

Speaker Change: But we're not making any projections in that area.

Speaker Change: Crystal clear thank you.

Anthony Elian: Crystal clear. Thanks. Thank you.

Speaker Change: The next question comes from Chris Mcgratty from K B W. Chris Your line is open. Please go ahead.

Operator: The next question comes from Chris McGratty from KBW. Chris, your line is open. Please go ahead.

Speaker Change: Oh, great. Thanks.

Chris McGratty: Oh, great. Thanks. Frank or Craig, if you look at the guide and I guess take rates out of it for a moment, where do you think the biggest upside potential is to the guide and also the biggest downside risk?

Speaker Change: Frank or Craig if you look at the guide and I guess, the take rates out of that for a moment.

Speaker Change: Where do you think the biggest upside potential is to the guide and also the biggest downside risk.

Craig Nix: Well, upside would be rates higher for longer. If we, if we're on the zero end of that range, that's the big- that's the biggest one, given that net interest income is over 80% of net revenues, so that certainly would be an upside. Upside could be if our net charge offs fall to the lower end of the range, which would imply less provisioning next year. Downside risk could be if the economy slows, negatively impacting both loan and deposit growth, that could certainly be on the downside. Those are the major ones. Those are the major ones that come to mind. Tom or Elliot, anything else that comes to your mind on upside or downside?

Speaker Change: Upside would be rates higher for longer.

Speaker Change: If we if we're on the zero end of that range. That's the that's the biggest one given that net interest incomes over 80% of net revenues so that certainly would.

Speaker Change: It would be an upside upside could be if our net charge offs fall to the lower end of the range, which would imply a less provisioning.

Speaker Change: First year.

Downside risk would be if the economy slows negatively impacting both loan and deposit growth.

Speaker Change: That could certainly be on the downside.

Speaker Change:

Those are the major ones those are the manager wants to come to mind.

Speaker Change: Tom or Elliot anything else that comes to your mind on a Saturday downside.

Tom Eklund: I think you hit the big ones, Craig.

Speaker Change: I think it's a big loss Greg.

Speaker Change: Yeah correct.

Frank Holding: Yeah, Craig, those are the material.

Chris McGratty: Thank you.

Speaker Change: Thank you.

Craig Nix: Yep. Thank you for that and then in terms of category three readiness, Craig I mean within the guide for expenses this year.

Craig Nix: Yep.

Chris McGratty: Thank you for that. And then in terms of Category Three readiness, Craig, I mean, within the guide for expenses this year, do you think this gets you most of the way there, or do you think 2026 is again kind of a little bit of an overinvest year?

Speaker Change: Do you think.

Speaker Change: Do you think this gets you most of the way there or do you think 2020 sick because again, it kind of a little bit of an overinvest here.

Craig Nix: I think it does. I think the expenses associated with Category Three readiness are reflected in our run rate for expenses.

Speaker Change: I think it does I think the expenses associated with category III readiness are reflected in our run rate.

Speaker Change: For expenses great. Thank you.

Chris McGratty: Great. Thank you.

Speaker Change: Yeah.

Speaker Change: Well.

Craig Nix: You're welcome.

Operator: The next next question comes from Christopher Marinac from Janney Montgomery Scott. Christopher, your line is open. Please go ahead.

Speaker Change: Next question comes from Christopher Merrimack from Janney Montgomery Scott.

Speaker Change: Your line is open. Please go ahead.

Speaker Change: Thanks, Good morning, Craig I wanted to go back to the buyback comments, you made and the impact of the loss share agreement is that loss share agreement.

Christopher Marinac: Thanks. Good morning. Craig, I want to go back to the buyback comments you made and the impact of the loss share agreement. Is that loss share agreement going to work itself to zero this year, or is that going to take longer into 2026?

Speaker Change: And to work itself to zero this year or is that going to take longer than the 26, the spread between the our capital ratios with and without loss share is going to shrink to around 10 basis points.

Craig Nix: The spread between our capital ratios with and without loss share is going to shrink to around 10 basis points. And it was 66 basis points this quarter. So yes, it's working out to a 0 impact on capital throughout the remainder of the year.

Speaker Change: And it was yeah. It was 66 basis points this quarter. So yes, it's working out too.

Speaker Change: Zero impact on capital throughout the remainder of the ear.

Speaker Change: Yeah.

Speaker Change: Great and is the is the buyback.

Christopher Marinac: Great. And is the buyback a goal for 2025, or would the reduction closer to 11 or less, you know, take longer than this year, do you think?

Speaker Change: A goal for 2025 for what they've reduction closer to 11 or less you know take longer than this year do you think.

Speaker Change: Assuming that you are managing to the 10.5% to 11% range with contemplate that we actually institute another share repurchase plan.

Craig Nix: Assuming that, you know, managing to the 10.5 to 11% range, we contemplate that we actually institute another share repurchase plan, in the second half of this year. The current one would be completed over the next 2 to 3 quarters. So we're in the midst of our capital plan now, and depending on projected, you know, earnings trajectories and the results of the stress testing, we would contemplate another plan in the second half of the year. Tom, you want to talk about anything? Did I miss anything there?

Speaker Change: In the second half of this year the current one.

Speaker Change: It would be.

Speaker Change: Uh huh.

Speaker Change: It would be completed over the next two to three quarters.

Speaker Change: So we're in the midst of our capital plan now.

Speaker Change: And depending on projected earnings trajectories in the results of the stress testing we would contemplate.

Speaker Change: Another plan.

Speaker Change: Second half of the year, Tom you want to talk about anything I Miss anything there no I mean, I I'd like to repurchases no I think you hit it I mean earnings accretion would still be strong and outpaced ought to be a growth and you know well.

Tom Eklund: No, I mean, I-

Craig Nix: Back to repurchases.

Tom Eklund: No, I think you hit it. I mean, earnings accretion will still be strong and outpace RWA growth, and you know, we'll continue to work our capital ratios down is really the plan over the coming quarters.

Speaker Change: We will continue to work our capital ratios are down it's really the plan over the coming quarters.

Speaker Change: Great. Thank you for that background and just a quick one on Friday.

Christopher Marinac: Great. Thank you for that background. And just a quick one on credit. You know, beyond the information you gave us about the HDB criticized, any other general trend, trends on clip criticized and classified for the general bank?

Speaker Change: All of the information you gave us about the STB criticized any other general credit trends on club criticized and classified for the General Bank.

Speaker Change: No nothing nothing material again, I think credit is well contained Andy would you like to.

Craig Nix: No, nothing, nothing material. Again, I think credit is well contained. Andy, do you, would you like to elaborate on any of that, or is that pretty much where you see it?

Speaker Change: Elaborate on any of that or is that pretty much where you see it.

Speaker Change: No I agree I think no discernible trends obviously.

Andrew Giangrave: No, I agree. I think no discernible trends, obviously. You know, seeing a slight uptick, but nothing of concern.

Speaker Change: Being a slight uptick but nothing of nothing of concern.

Speaker Change: Great. Thank you all very much I appreciate the information.

Christopher Marinac: Great. Thank you all very much. Appreciate the information.

Speaker Change: Yes.

Craig Nix: Thanks.

Speaker Change: That's where I'm under that star followed by one on your telephone keypad.

Operator: As a reminder, that's star followed by one on your telephone keypad. Next question is from Nick Holowko from UBS. Nick, your line is open. Please go ahead.

Speaker Change: The next question is from Nick <unk> from UBS. Your line is open. Please go ahead.

Nick: Hi, good morning.

Nicholas Holowko: Hi, good morning.

Nick Holowko: Hi, good morning.

Craig Nix: Morning.

Nick: Good morning, just coming back to the expense outlook for the year.

Nicholas Holowko: Just coming back to the expense outlook for the year. I just thinking about the investments you're making on the regulatory readiness front, and sounds like it's those expenses are built into the run rate at this point. But would potential changes to the regulatory backdrop change how you're thinking about those investments over the next couple of years?

Nick Holowko: Just coming back to the expense outlook for the year. I just thinking about the investments you're making on the regulatory readiness front, and sounds like it's those expenses are built into the run rate at this point. But would potential changes to the regulatory backdrop change how you're thinking about those investments over the next couple of years?

Nick: I, just thinking about the investments you're making on the regulatory readiness fraud on it sounds like it's those expenses are built into the run rate at this point, but what potential changes to the regulatory backdrop change about change how youre thinking about those investments over the next couple of years.

Nick: You know we recognize that.

Craig Nix: You know, we recognize that, you know, prioritization of regulatory policy initiatives could change, but we are remaining steadfast in our goal to become, to meet regulatory expectations for Category Three, Category Four, Category Three. So we do not see significant changes, regulatorily, at least in the near term, and certainly where we would be focused going into 2025, 2026.

Nick: Prioritization of regulatory policy initiatives could change, but we are where our remaining steadfast in our AR and our goal to become to meet regulatory expectations for category three cats.

Nick: Category for category three so we do not see significant changes are regular torelli at least in the near term.

Nick: And certainly where.

Nick: Where we would be focused.

Nick: Going into 'twenty 'twenty, five 'twenty 'twenty six.

Speaker Change: Got it and then you noted a your goal for operating with an adjusted efficiency ratio.

Nicholas Holowko: Got it. And then you noted your goal for operating with an adjusted efficiency ratio in the mid-50s versus the upper 50s range for 2025, and you laid out your strategic priorities for the year, including focus on improving operational efficiency and optimizing the balance sheet. So as you think about the progress that you're making on those fronts, do you have a view on how you're thinking about the sustainable ROE of the bank over the medium term?

Nick Holowko: Got it. And then you noted your goal for operating with an adjusted efficiency ratio in the mid-50s versus the upper 50s range for 2025, and you laid out your strategic priorities for the year, including focus on improving operational efficiency and optimizing the balance sheet. So as you think about the progress that you're making on those fronts, do you have a view on how you're thinking about the sustainable ROE of the bank over the medium term?

Speaker Change: Mid fifteens versus the upper 50 range for 2025, and you laid out our strategic priorities for the year include Oh.

Speaker Change: So on improving operational efficiency and optimizing the balance sheet.

Speaker Change: Think about the progress on those fronts.

Speaker Change: Are you on how youre thinking about sustainable ROTC power of the bank over the medium term.

Speaker Change: I mean, I think I think in the in the short term, we've obviously quadrupled in size over the last three years, so with that comps.

Craig Nix: I mean, I think, I think in the, in the short term, we've obviously quadrupled in size over the last three years. So with that comes significant investment in both technology and our risk management capabilities. Our goal with the operational efficiency is to, over time, improve our processes, simplify our processes, so that we are better able to meet regulatory expectations and also improve our customer experience. So that's not something that will happen in the short term. Obviously, you know, rates have a lot to do with us operating right now in that upper fifties range, so rate help would, would, would certainly be the case. But our goal through operational efficiency would be, over the long term, to operate in the mid-fifties.

Speaker Change: Significant investment in both technology, and our risk management capabilities.

Speaker Change: Our goal with the operational efficiency is to over time.

Speaker Change: Improve our processes simplify our processes.

Speaker Change: So that we are better able to meet regulatory expectations and also.

Improve our customer experience. So that's not something that will happen in the short term. Obviously, you know rates have a lot to do with its operating right now in that upper Fifty's range the rate help but would certainly be case, but our goal through operational efficiency would be over the long term.

Speaker Change: To operate in the mid fifties.

Speaker Change: Yeah.

Speaker Change:

Speaker Change: Understood. Thank you.

Nicholas Holowko: Understood. Thank you.

Nick Holowko: Understood. Thank you.

Speaker Change: I'm not showing any further questions at this time, so I'd like to turn the call back over to our husbands danaher for any closing remarks.

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

Speaker Change: Thank you and thanks, 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 the Investor relations team through our website. We hope you have a great rest of your day.

Christopher Marinac: Thank you, and thanks 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 the investor relations team through our website. We hope you have a great rest of your day.

Deanna Hart: Thank you, and thanks 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 the investor relations team through our website. We hope you have a great rest of your day.

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

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

Q4 2024 First Citizens BancShares Inc Earnings Call

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