Q1 2025 First Citizens BancShares Inc Earnings Call

April 24, 2025

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the First Citizens BancShares Q1 2025 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. 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.

Deanna Hart: Good morning, and welcome to First Citizens' Q1 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 first quarter business and financial updates, referencing our earnings call presentation, which you can find on our website. Our comments will include forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ materially from expectations. We assume no obligation to update such statements. These risks are outlined on page three 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 five 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.

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

Frank Holding: Thank you, Deanna. Good morning, everyone, and welcome to our earnings call, and thank you for joining us today. I'll start by providing brief comments on our Q1 results before turning it over to Craig to review our performance in more detail. Starting on page 5, today we reported solid financial results aligned with our guidance with adjusted earnings per share of $37.79. We remain encouraged by the performance of our operating segments and achieved loan growth in our commercial bank and SVB commercial segments. Deposit growth was strong, concentrated in our direct bank and throughout our branch network. Credit performance remained stable, with net charge-offs declining from the Q4 and at 41 basis points, coming in at the low end of our guidance range.

Ladies and gentlemen, thank you for standing by and welcome to the First Citizens BancShares First Quarter 2025 earnings conference school.

at this time participants are really listening only mode. After the speakers 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.

Speaker Change: If you require operator assistance during the program, please press barb and zero. As a reminder, today's conference has been recorded. A couple of now lots of things to do with the host at this conference school, Ms Deanna Hartz, who have invested relations you may begin.

Speaker Change: Good morning and welcome to First Citizens First Quarter Earnings Call. Joining me on the call today are chairman and chief executive officer Frank Hoding and chief financial officer Craig Nick. They will provide first quarter business and financial updates referencing our Earnings call presentation that you can find on our website.

Frank Holding: We maintained strong capital and liquidity positions, which allowed us to return an additional $613 million of capital to our shareholders through share repurchases. This quarter's repurchases brought total repurchases since inception of the plan to $2.3 billion or 8.26% of the total Class A shares. In early March, we successfully reentered the debt markets, issuing $500 million of senior unsecured borrowings and $750 million of subordinated debt, providing us with additional funding and capital at attractive terms. We believe this was a proactive step that positions us to effectively manage our debt and capital structures to support future growth. On 7 April, we terminated our Shared-Loss Agreement with the FDIC, which we entered into as a part of the SVB acquisition.

Speaker Change: Our comments will include forward-looking statements with your subject to risks.

Speaker Change: and uncertainties that may cause actual results to differ materially from expectations. We assume no obligation to update such statements.

Speaker Change: These risks are outlined on page 3 of the presentation. We will also reference non-GAAP financial measures. Reconciliation 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.

Frank Holdings: Thank you, Deanna. Good morning, everyone, and welcome to our earnings call and thank you for joining us today. I'll start with by providing brief comments on our first core results before turning it over to Craig to review our performance in more details.

Frank Holding: The agreement was put in place to protect the bank from material downside risk on the acquired commercial loan portfolios, despite SVB's long history of strong credit performance. After two years together, given the low likelihood of reaching the $5 billion loss threshold during the 5-year period covered by the agreement, the adequacy of our reserves and the purchase discount on the covered portfolio, and the operational complexity and cost of maintaining the agreement, we determined that the Shared-Loss Agreement was no longer warranted. The decision to terminate reflects our confidence in the quality of the SVB portfolio. We continue to make progress on our strategic priorities, as outlined on slide 6, and remain focused on our commitments to our customers and clients, innovation, and operational efficiency.

Frank Holdings: Starting on page 5, today we reported solid financial results aligned with our guidance with adjusted earnings per share of $37.79.

Frank Holdings: We remain encouraged by the performance of our operating segments and achieved the blown growth in our commercial bank and FDB commercial segments.

Frank Holdings: Deposit Growth was strong, concentrated in our direct bank and throughout our branch network.

Frank Holdings: Credit performance remains stable with net charge-offs declining from the fourth quarter and at a 41 basis point.

Coming in at the low end of our guidance range.

Frank Holdings: We maintain strong capital and liquidity positions which allowed us to return an additional $613 million of capital to our shareholders through share repurchases.

Frank Holding: Before I hand it over to Craig, I want to take a second to acknowledge the level of uncertainty in the macro environment and the macroeconomic environment. While tariff announcements and market volatility have been disruptive, the ultimate impact on the broader economy is unknown at this point, and as such, quantifying potential impacts on our future results is difficult. Despite the level of uncertainty, we continue to operate from a position of strength, supported by our strong capital and liquidity levels, which we believe will allow us to continue to support our customers and clients in a variety of economic scenarios. We will continue to monitor and respond to both known and anticipated policy changes and their potential effects on our operating environment.

Frank Holdings: This quarter's repurchases brought total repurchases since inception of the plan to $2.3 billion or $8.26% of the total class A shares.

Frank Holdings: In early March, we successfully re-entered the debt markets, issuing $500 million of senior unsecured borrowings and $750 million of subordinated debt providing us with additional funding and capital at attractive terms.

Frank Holdings: We believe this was a proactive step that positions us to effectively manage our debt and capital structures to support future growth.

Frank Holdings: On April 7th, we terminated our last share agreement with the FDIC, which we entered into as a part of the FB acquisition.

Frank Holding: No matter what outcomes eventually materialize, we're committed to staying disciplined in our long-term strategic approach, which will enable us to remain resilient through short-term volatility while continuing to support our customers and clients with confidence. I'll now turn it over to Craig to review our financial results in more detail. Craig?

Frank Holdings: The agreement was put in place to protect the bank from material downside risk on the acquired commercial loan portfolios despite SBB's long history of strong credit performance.

Frank Holdings: After two years together, given the low likelihood of reaching the $5 billion loss threshold during the five-year period covered by the agreement.

Frank Holdings: The adequacy of our reserves and the purchase discount on the covered portfolio and the operational complexity and cost of maintaining the agreement, we determined that the shared loss agreement was no longer warranted.

Craig Nix: ... Thank you, Frank. I appreciate everyone joining us today. I will anchor my comments to the Q1 key takeaways outlined on page 8. Pages 9 through 26 provide more details underlying our results and are for your reference. As Frank noted, to start the call, Q1 financial metrics were aligned with our guidance. We reported adjusted net income of $528 million and EPS of $37.79. This translated into adjusted ROE and ROA of 9.64% and 0.95% respectively. Our adjusted efficiency ratio came in at 59.6%. Headline NIM was 3.26%, and NIM ex-accretion was 3.12%.

Frank Holdings: The decision to terminate reflects our confidence and the quality of the SBV portfolio.

Frank Holdings: We continue to make progress on our strategic priorities as outlined on slide 6 and remain focused on our commitments to our customers and clients, that's innovation and operational efficiency.

Speaker Change: Before I hand it over to Craig, I want to take a second to acknowledge the level of uncertainty in the macro-environment and the macro-economic environment.

While tariff announcements and market volatility have been disrupted,

Speaker Change: The ultimate impact on the broader economy is unknown at this point, and that such quantifying potential impacts on our future results is difficult.

Craig Nix: As anticipated, headline net interest income was down from the linked quarter as the impact of lower loan and Fed funds yields, coupled with lower accretion income and two fewer days in the quarter, more than offset lower deposit costs and higher investment securities income. Headline NIM contracted modestly from the linked quarter by six basis points, and excluding accretion by four basis points. The four basis points decline was driven primarily by the negative impact of Fed fund rate cuts late in Q4 2024, which continued to pull through into Q1, lowering the earning asset yield, which was only partially offset by lower funding costs. However, the pace of the decline moderated from the prior quarter as we continued to execute on our Down Beta action strategy, including lowering deposit rates.

Speaker Change: Despite the level of uncertainty, we continue to operate from a position of strength supported by our strong capital and liquidity levels, which we believe will allow us to continue to support our customers and clients in a variety of economic scenarios.

Speaker Change: We will continue to monitor and respond to both known and anticipated policy changes and their potential effects on our operating environment.

No matter what outcomes, eventually materialize.

Speaker Change: We are committed to staying disciplined in our long-term strategic approach, which will enable us to remain resilient through short-term volatility while continuing to support our customers and clients with confidence.

Speaker Change: I'll now turn it over to Craig to review our financial results in more detail. Craig?

Craig Nix: Also, as anticipated, adjusted non-interest income decreased sequentially, but was aligned with our guidance range. The primary driver of the decline was the negative impacts from fair value changes in customer derivative positions, driven by changes in the rate environment and the write-down of a held-for-sale asset. We also saw a $6 million decline in adjusted rental income, as lower rental income and higher maintenance costs more than offset continued strong repricing trends. As we have called out previously, maintenance expense in this business can be lumpy quarter to quarter. While down on the quarter, the overall fundamentals in the rail business remain solid, and we believe it continues to conduct itself well, limiting the impact of possible recessionary effects through proactive sales practices. Only 16% of rail leases expire in 2025, while more than 45% expire after 2027.

Craig Nix: Thank you Frank. I appreciate everyone joining us today. I will anchor my comments to the first quarter of key takeaways outlined on page 8. Pages 9 through 26 provide more details underlying our results and are for your reference.

Craig Nix: As Frank noted to start the call, first quarter financial metrics were aligned with our guidance. We reported adjusted net income of $528 million in EPS of $37.79.

Craig Nix: This translated into adjusted ROE and ROA of 9.64% and 0.95% respectively.

Craig Nix: Our adjusted efficiency ratio came in at 59.6%. Headline NIM was 3.26% and NIM's execution was 3.12%.

Craig Nix: As anticipated, headline net interest income was down from the link quarter.

Craig Nix: Additionally, repricing continued to be strong in Q1. These declines were partially offset by a $2 million increase in wealth management income, as this business continues to see solid momentum, demonstrating the strength of our brand and the trust clients place in our advisors. Adjusted non-interest expense came in at the lower end of our guidance, increasing sequentially by less than 1%. The increase over the sequential quarter was driven primarily by higher personnel and marketing expenses. Increased personnel costs were due mostly to two factors: one, net staff additions in technology and risk management as we continue to scale for future growth; and two, seasonally higher benefit expenses.

Craig Nix: As the impact of lower loan and said funds yields coupled with lower accretion income in two fewer days in the quarter, more than offset lower deposit costs and higher investment securities income.

Craig Nix: Headlined NIM contracted modestly from the link quarter by six basis points and excluding a creation by four basis points.

First Citizens BancShares Inc.

Craig Nix: The four basis points to climb was driven primarily by the negative impact the Fed Fund rate cuts.

Craig Nix: late in the fourth quarter of 2024, which continued to pull through into the first quarter, lowering the earning asset yield, which was only partially offset by lower funding costs.

Craig Nix: However, the pace of the decline moderated from the prior quarter, as we continue to execute on our down data action strategy, including lowering deposit rates.

Craig Nix: Marketing expense increased due to efforts in the Direct Bank to maintain and attract new deposit balances to help offset the strategic decision to shift approximately $2.4 billion in higher yielding SVB commercial deposits off balance sheet and continue right sizing our loan-to-deposit ratio. Despite the growth in balances, we were successful in bringing down rates in the Direct Bank during the quarter. These increases were partially offset by a decline in other non-interest expense, driven by several miscellaneous items, with the most significant including lower state-related non-income taxes, lower donations, and other general and administrative expenses. Moving to the balance sheet, loans grew $1.1 billion or by 0.8% sequentially, with growth concentrated in the commercial bank and SVB commercial segments.

Craig Nix: Also, as anticipated, adjusted non-interest income decreased sequentially, but was aligned with our guidance range.

Craig Nix: The primary driver of the decline was the negative impact from fair value changes in customer derivative positions driven by changes in the rate environment and the right down of a hill for sale asset.

Craig Nix: We also saw a $6 million decline in adjusted rental income as lower rental income and higher maintenance costs, more than offset continued strong repricing trends.

Craig Nix: As we have called out previously, maintenance expense in this business can be lumpy quarter to quarter.

Craig Nix: While down on the core of the overall fundamentals and the rail business remain solid, and we believe it continues to conduct itself well limiting the impact of possible recessionary effects through proactive sales practices.

Craig Nix: Only 16% of rail leases expire in 2025, while more than 45% expire after 2027. Additionally, reprising continued to be strong in the first quarter.

Craig Nix: Commercial bank loans grew by $733 million, primarily driven by continued strong performance in our Tech, Media, and Telecom, and healthcare industry verticals, as well as higher balances in our factoring business. Our industry verticals continue to bring unique capabilities to our clients, and our factoring business benefited from new client acquisition and higher facility usage from existing clients. SVB commercial loans grew by $440 million, driven by Global Fund Banking, as new loan originations and draws outpaced pay downs and payoffs. Our pipelines remain robust, and we remain encouraged by our team's success, even in this down market. Tech and healthcare business loans declined from the sequential quarter in line with our expectations, given that macro environment challenges continue to be a drag on originations.

Craig Nix: These declines were partially all set by $2 million in increase in wealth management income. This business continues to see solid momentum, demonstrating the strength of our brand and the trust clients place in our advisors.

Craig Nix: Adjusted non-interest expense came in at the lower end of our guidance, increasing sequentially by less than 1%. The increase over the sequential quarter was driven primarily by higher personnel and marketing expenses.

Craig Nix: Increased personnel costs do mostly to two factors. One, net staff additions and technology and risk management as we continue to scale for future growth and two seasonally higher benefit expenses.

Craig Nix: Marketing expressed increased due to efforts in the Direct Bank to maintain and attract new deposit balances to help offset the strategic decision to shift approximately $2.4 billion in higher-yielding SVB commercial deposits.

Craig Nix: General Bank loans decreased modestly by $40 million, attributable to net declines in the business and commercial loan portfolios, driven primarily by elevated prepayments and seasonal lines paying down in Q1. We also saw declines in our consumer and mortgage books as we shifted to move pockets of our retail production off balance sheet to create additional liquidity while generating supplemental non-interest income. Turning to the right-hand side of the balance sheet, deposits were up $4.1 billion or about 2.6% sequentially, and exceeded our guidance as we experienced strong growth in the Direct Bank and General Bank. The Direct Bank was the largest contributor to the increase, growing by $3.1 billion.

Off-Balance Seat, and continue right-sizing our loan to the Posit Ratio.

Craig Nix: Despite the growth and balances, we were successful in bringing down rates in the direct bank

Craig Nix: These increases were partially all set by a decline in other non-interest expense driven by several miscellaneous items with the most significant, including lower state-related non-income taxes, lower donations, and other general and administrative expenses.

Craig Nix: Moving to the balance sheet, loans grew $1.1 billion or by 0.8% sequentially with growth concentrated in the commercial bank and SVB commercial segments.

Craig Nix: As noted last quarter, we leveraged this channel to help retain and attract new clients, given a shift in strategy for one of our SVB commercial deposit products. This high-yielding deposit product was moved off balance sheet in the first quarter, lowering total deposits in SVB Commercial by $2.4 billion. We continue to see solid elasticity in Direct Bank deposits despite lowering rates, and achieved strong growth in the first quarter, which resulted in us exceeding our guidance. In the general bank, we experienced growth of $1.4 billion as we continued to maintain strong client relationships and grow deposits organically within the branch network, while also capitalizing on our national market share position in Community Association Banking, which typically has the most seasonal growth in the first quarter of each year.

Craig Nix: Commercial Bank loans grew by $733 million, primarily driven by continued strong performance in our tech media and telecom and health care industry verticals as well as higher balances in our factoring business.

Craig Nix: Our industry verticals continue to bring unique capability to our clients and our factoring businesses business benefited from new client acquisition and higher facility usage from existing clients.

Craig Nix: SBB Commercial once grew by $440 million driven by Global Fund Banking as new own originations and draws outpaced paydowns and payoffs.

Craig Nix: Our pipeline's remained robust and we remain encouraged by our team's success even in the down market.

Craig Nix: Despite the expected off-balance sheet movement, SVB Commercial achieved spot deposit growth of $496 million. Importantly, tech and healthcare balances were up when adjusted for the impact of the off-balance sheet migration, demonstrating the competitive advantage we maintain in this business, despite continued macroeconomic headwinds impacting inflows from both existing and new clients. While average deposits were down from the sequential quarter, average total client funds increased as expected, and the strategic action helped to optimize our balance sheet and reduce deposit costs in SVB Commercial. These increases were partially offset by $508 million decline in the commercial bank. Moving to credit, net charge-offs declined by 5 basis points sequentially, and were on the lower end of our guidance range. Consistent with prior quarters, net charge-offs were mostly concentrated in the general office, investor-dependent, and equipment finance portfolios.

Craig Nix: General bank loans decrease modestly by $40 million, attributable to net declines in the business and commercial loan portfolio.

Craig Nix: driven primarily by elevated prepayments and seasonal lines paying down in the first quarters.

Craig Nix: We also saw the clients in our Consumer and Mortgage books as we shifted to move pockets of our retail production off-balance sheet to create additional liquidity while generating supplemental non-interest income.

Craig Nix: Turning to the right-hand side of the balance sheet, deposits were up $4.1 billion or about 2.6% sequentially and exceeded our guidance as we experienced strong growth in the Direct Bank and General Bank.

Craig Nix: The Direct Bank was the largest contributor to the increase growing by $3.1 billion.

Craig Nix: As noted last quarter, we leveraged this channel to help retain and attract new clients given a shift in strategy for one of our SVB commercial deposit products. This high-yielding deposit product was moved off balance sheet in the first quarter, lowering total deposits and SVD commercial buy.

Craig Nix: We did experience a couple of larger losses in the broader SVB innovation portfolio and in our commercial finance business. As noted previously, the large hold sizes within some of our portfolios can cause net charge-offs to be lumpy between quarters. The losses in these two portfolios were idiosyncratic in nature and were reserved for previously. At this time, we are not seeing any further trends that would signal wider credit quality concerns within these portfolios and believed we are well reserved. The allowance ratio decreased by one basis point to 1.19%. We feel good about our overall reserve coverage, as well as the coverage on portfolios experiencing stress. Ultimately, our strong risk management framework, rigorous underwriting standards, and diversified portfolio help us maintain a resilient balance sheet, safeguarding us against losses.

2.4 billion dollars.

Craig Nix: We continue to see solid elasticity in direct bank deposits, despite lowering rates and achieved strong growth in the first quarter which resulted in us exceeding our guidance.

Craig Nix: In the general bank, we experience growth of $1.4 billion as we continue to maintain strong client relationships and grow deposits organically within the branch network while also capitalizing on our national market share position and community association banking.

which typically has the most seasonal growth.

in the first quarter of each year.

Despite the expected off-balance sheet movement

SBB commercial achieves spot deposit growth of $496 million.

Craig Nix: Importantly, tech and healthcare balances were up when adjusted for the impact of the off-balance sheet migrations demonstrating the competitive advantage we maintain in this business.

Craig Nix: Moving to capital, Frank mentioned that we continue to make progress on our share repurchase plan. As of the close of business on 22 April 2025, we had repurchased 8.91% of Class A common shares, or 8.29% of total common shares outstanding, for a total price of $2.4 billion. This represents approximately 69% of our board-approved $3.5 billion repurchase plan. Given the termination of the FDIC Shared-Loss Agreement, or SLA, I will focus my commentary on our adjusted CET1 capital ratio. Recall that while the SLA benefited our capital ratios, we have always managed capital without the benefit of the SLA, knowing that it only provided a temporary lift. As a result, the termination does not impact our approach to capital management or related actions.

Craig Nix: despite continued macroeconomic headwinds impacting inflows from both existing and new clients.

Craig Nix: While average deposits were down from the sequential quarter, average total client funds increased as expected and the strategic action helped to optimize our balance sheet and reduce deposit costs in SVB commercial.

Craig Nix: These increases were partially offset by a $508 million decline in the commercial bank.

Craig Nix: Moving to Credit, Net Charge Offs Declined by five basis points sequentially and we're on the lower end of our guidance range. Consistent with prior quarters, Net Charge Offs were mostly concentrated in the general office, investor dependent, and equipment finance portfolios.

Craig Nix: We did experience a couple of larger losses in the broader SVB innovation portfolio and in our commercial finance business.

Craig Nix: The CET1 ratio, excluding the benefits of the LSA, was 12.19, 12.19%, a decrease of 14 basis points sequentially as risk-weighted asset growth and the impact from share repurchases outpaced earnings growth. We intend to manage CET1 towards the 10.5 to 11% range by the end of Q1 2026, which is the level it was following the SVB acquisition. 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. This contemplates an additional share repurchase plan in the second half of 2025, which we will discuss further during our Q2 earnings call. I will close on page 28 with our Q2 and full year 2025 outlook.

Craig Nix: As noted previously, the large hold sizes within some of our portfolios can cause net charge-offs to the lumpy between quarters. The losses in these two portfolios were idiosyncratic in nature and were reserved for previously.

Craig Nix: At this time we are not seeing any further trends that would signal wider credit quality concerns within these portfolios and believe that we are well reserved.

Craig Nix: The allowance ratio decreased by 1 basis point to 1.19%.

Craig Nix: We feel good about our overall reserve coverage as well as the coverage on portfolios experiencing stress. Ultimately, our strongest management framework, rigorous underwriting standards and diversified portfolio help us maintain a resilient balance sheet safeguarding us against losses.

Voting the Capitol

Craig Nix: Frank mentioned that we continue to make progress on our Sherry Purchase Plan.

Craig Nix: As the close of business on April 22nd, 2025, we had refurges 8.91% of Class A common shares or 8.29% of total common shares outstanding for a total price of $2.4 billion.

Craig Nix: As Frank mentioned earlier, there's been an increased level of market volatility due to uncertainty regarding tariffs and its impact on the overall macroeconomic outlook. We continue to monitor the situation... but it is early, and the fluidity of the changes makes it difficult at this time to narrow the range of potential impacts on the broader economy and our -- on our business lines and clients. Accordingly, we have not made significant changes to our guidance this quarter. However, we will be diligently monitoring developments and economic indicators and how they may impact our performance moving forward. If we find that the impacts are likely to have a significant adverse effect on our earnings or growth prospects, we will reflect that in updated guidance.

Craig Nix: This represents approximately 69% of our board of 3.5 billion dollar repurchase plan.

BancShares Inc.

Craig Nix: Given the termination of the FDIC shared loss agreement or SLA, I will focus my commentary on our adjusted CET-1 capital ratio.

Craig Nix: Recall that while the SLA benefited our capital ratios, we have always managed capital without the benefit of the SLA knowing that it only provided a temporary lift. As a result, the termination does not impact our approach to capital management or related actions.

Craig Nix: Starting with the balance sheet, we anticipate loans in the $142 to 144 billion range in Q2, driven by growth in the commercial bank and SVB Commercial segments. Commercial bank growth will continue to come from our industry verticals. We expect SVB Commercial will benefit from the 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, given recent macroeconomic uncertainty. For the full year, we reiterate our previous guidance for loans in the $144 to 147 billion range, and anticipate growth will be driven by SVB Commercial and the commercial bank industry verticals.

The CET-1 ratio excluding the benefits of the LSA.

Craig Nix: was 12.19, a decrease of 14 basis points sequentially as risk-weighted asset growth in the impact from Sherry Purchases Outpaced Earnings Growth.

Craig Nix: We intend to manage CET1 towards the 10.5 to 11% range by the end of the first quarter of 26, which is the level it was following the SBB acquisition.

Craig Nix: We attend to accomplish this through regular sharey purchases in 2025 as we continue to assess capital needs considering loan broad.

Craig Nix: Earnings, trajectories, and the economic and regulatory environments. This contemplates an additional Sherry Purchase Plan in the second half of 2025, which we will discuss further during our second quarter earnings call.

Craig Nix: 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 expect the benefit of higher VC investment and capital markets activity. However, the overall level of growth will be dependent upon the final tariff policies implemented and the macroeconomic environment. We expect deposits to be in the $158 to 161 billion dollar range in Q2, driven by growth in the general and direct banks. In the general bank, we expect to 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.

Craig Nix: I will close on page 28 with our second quarter in full year 2025 Outlook.

Frank Holdings: As Frank mentioned earlier, there's been an increased level of market volatility due to uncertainty regarding tariffs and its impact on the overall macroeconomic outlook.

Frank Holdings: We continue to monitor the situation but it is early and the fluidity of the changes makes it difficult at this time to narrow the range of potential impacts on the broader economy and our on our business lines and clients.

Frank Holdings: Accordingly, we have not made significant changes to our guidance this quarter. However...

Frank Holdings: We will be diligently monitoring developments in economic indicators and how they may impact our performance moving forward.

Frank Holdings: If we find that the impacts are likely to have a significant adverse effect on our earnings or growth prospects, we will reflect that in updated guidance.

Craig Nix: We will continue to leverage the Direct Bank to drive growth in insured core deposits. While it is a higher cost channel, we anticipate benefiting from falling interest rates and believe it will provide us with the strategic agility to pursue our balance sheet optimization efforts. We also continue to benefit from a shift in consumer behavior to a digitally centric delivery platform, which is supporting client acquisition. We expect that this growth will be partially offset by a decline in SVB Commercial, as continued client cash burn, and muted public and private investment activity pressures growth. For the full year, we are raising our deposits guidance slightly to the $163 to 168 billion range, given strong Q1 results.

Frank Holdings: Starting with the balance sheet, we anticipate loans in the $142 to $144 billion range in the second quarter driven by growth in the commercial bank and SVD commercial segments.

Frank Holdings: Commercial bank roads will continue to come from our industry verticals.

Frank Holdings: We expect SVB commercial will benefit from the 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 given recent macroeconomic uncertainty.

Frank Holdings: For the full year, we reiterate our previous guidance for loans in the $144.147 billion range. And anticipate growth will be driven by SVB commercial and the commercial bank industry verticals.

Craig Nix: Our interest rate forecast covers a range of zero to 425 basis points rate cuts, which is aligned with our prior guidance, with the effective funds, the effective funds rate range declining from 4.25% to 4.50% currently, to as low as 3.25% to 3.5% by the end of the year. While our baseline forecast includes 3 rate cuts, we believe there is possibility that a broader economic slowdown could lead to additional cuts. However, given stubborn inflationary metrics and possible impacts of the macroeconomic policy, we recognize these cuts may not occur. Therefore, we believe it's prudent to provide, to provide a range of expectations for the year.

Frank Holdings: We expect that SBB commercial growth will be more concentrated in the back half of the year is the Feds monetary easing cycle begins to take effect and we expect the benefit of higher VC investment and capital markets activity.

Frank Holdings: However, the overall level of growth will be dependent upon the final tier of policies implemented and the macroeconomic environment.

Frank Holdings: We expect deposits to be in the 158-161 billion dollar range in the second quarter, driven by growth in the general and direct banks.

Frank Holdings: In the General Bank we expect to continue to benefit from our branch network, leveraging new products, and initiatives to deepen client relationships.

Frank Holdings: 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.

Craig Nix: We expect Q2 Headline Net Interest Income to be relatively stable compared to Q1, as lower deposit costs are offset by lower Accretion and interest income on earning assets. Our guidance does include the planned impact of share repurchase activity for 2025 under our current share repurchase plan. For the full year, we are modestly lowering our Headline Net Interest Income guidance to be in the range of $6.55 to 6.95 billion, from $6.6 to 7 billion. The revision reflects the new interest rate curves, as well as the jumping off point from Q1. In either case, as expected, we project that loan Accretion will be down by over $200 million for the year compared to 2024.

Frank Holdings: We will continue to leverage the direct bank to drive growth and insured core deposits.

Frank Holdings: But as a higher cost channel, we anticipate benefiting from falling interfaiths and believe it will provide us with a strategic agility to pursue our balance sheet optimization efforts.

Frank Holdings: We also continue to benefit from a shift in consumer behavior to a digitally centric delivery platform which is supporting client acquisition.

Frank Holdings: We expect that this growth will be partially all set by the client and SVB commercial, this continued client cash burn and muted public and private investment activity pressures

Frank Holdings: For the full year, we are raising our deposits guide slightly to the $163-168 billion range given strong first-quarter results.

Craig Nix: On credit losses, we anticipate Q2 net charge-offs in the range of 40 to 50 basis points, aligned with the Q1 range. In commercial real estate, while rate cuts could ease some of the pressure on borrowers in the general office sector, 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, especially given the market dislocation resulting from the tariff announcement. We did see a $14 billion uptick in VC investment sequentially…

Frank Holdings: Our Interfraid Forecast covers a range of 0 to 425 basis points rate cuts which is aligned with our prior guidance with the effective funds.

Frank Holdings: The effective funds rate range to climbing from 4.25% to 450 currently to as low as 3.25% to 3.5% by the end of the year.

Frank Holdings: While our baseline forecast includes three rate cuts, we believe there's possibility that a broader economic slowdown could lead to additional cuts.

Frank Holdings: However, given stubborn, inflationary metrics and possible impacts of the macroeconomic policy, we recognize these cuts may not occur, therefore we believe is prudent to provide a range of expectations for the year.

Craig Nix: We remain guarded on the overall outlook as there were a few outsized deals in these totals, which are not part of our service addressable market. These large deals accounted for approximately 60% of investment in the quarter, and when large deals are removed, the first quarter total is aligned with the first quarter. We expect the continued improvement here will be facilitated by a higher fundraising environment, driven by both M&A and IPOs. With respect to the full year range, we are maintaining our guide of 35 to 45 basis points despite the lower jump-off point. This is because we continue to see some lumpiness and losses in the portfolio, and as we mentioned earlier, we have a portfolio where a handful of large deals can swing the ratio, and timing-wise, they can easily fall into one quarter or another.

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

Frank Holdings: Our guidance does include the planned impact of Sherry Purchase Activity for 2025 under our current Sherry Purchase Plan.

Frank Holdings: For the full year, we are modestly lowering our headline net interest income guidance to be in the range of 6.55 to 6.95 billion dollars from 6.6 to 7 billion dollars.

Frank Holdings: The revision reflects the new interest rate curves as well as the jumping off point from the first quarter. In either case, as expected, we project that line of creation will be down by over 200 million for the year compared to 2024.

Craig Nix: It is important to note that our net charge-off guidance does not include an estimate for the impact of tariffs, inflation, or interest rate cuts, as it is too early to determine the full impact on our asset quality. While higher tariffs could drive economic stress in the form of inflation and/or lower growth, we believe the credit risk is manageable. We will continually assess the potential impact to our portfolio, but we do believe the diversity in our loan portfolio is a strength heading into this environment. Moving to adjusted non-interest income, we expect to be in the $480 to 510 million range in Q2, which is aligned with a typical quarter for us.

Frank Holdings: On credit losses, we anticipate second quarter net charge-offs in the range of 40-50 basis points aligned with the first quarter range.

Frank Holdings: In commercial real estate while rate cuts could ease some of the pressure on borrowers in the general office sector, we do believe losses were remain elevated in 2025, even as market disruption may lessen as more companies begin to reinstate office attendance requirements.

Frank Holdings: We also anticipate continued stress in the Investor Dependent Portfolio throughout 2025 while the Fed cycle is a welcome change.

Frank Holdings: The catalyst for buyers to become more positive and for public investors to have an improved appetite for IPOs remain elusive, especially given the market dislocation resulting from the tariff announcement.

Frank Holdings: We did see a $14 billion uptick in VC investment sequentially.

Craig Nix: Overall, we continue to see potential strength in many of our core lines of business, such as rail, merchant, international, and wealth. We have not changed our full-year adjusted non-interest income ranges and expect this to be in the $1.95 to 2.05 billion range. This growth continues to be driven by our rail outlook, which includes a balanced railcar portfolio and a strategic exploration ladder. We are beginning to see some competitive pricing pressure because of economic uncertainty, and our outlook will ultimately be dependent on the tariff regime going forward, as well as its impact on overall economic activity. At this point, the potential impacts are unclear, but we do believe this business is well positioned to handle possible changes throughout 2025.

Frank Holdings: We remain guarded on the overall outlook as there were a few outside deals and deals in these totals which are not part of our service addressable market.

Frank Holdings: These large deals accounted for approximately 60% of investment in the quarter, and when large deals are removed, the first quarter total is aligned with the first quarter.

Frank Holdings: We expect a continued improvement here will be facilitated by a higher fund-raising environment driven by both M&A and IPOs.

Frank Holdings: With respect to the 4-year range, we are maintaining our guide of 35-45 basis points despite the lower jump-off point.

Frank Holdings: This is because we continue to see some lumpiness and losses in the portfolio.

Speaker Change: As we mentioned earlier, we have a portfolio where a handful.

Craig Nix: We also expect continued momentum in our wealth business as we continue to organically add new clients, as well as higher international and lending-related fees, given the healthy fundamentals supporting these businesses. I do want to caution that given the changing rate environment, our client derivative positions can fluctuate between quarters, causing some lumpiness in our non-interest income results. Moving to adjusted non-interest expense, we expect the second quarter to be flat to modestly up compared to the first, as personnel expenses level out following seasonal increases, but are offset by investments in risk and technology to build towards Category III expectations and to simplify and optimize our platforms. Looking at the full year, we continue to see adjusted non-interest expense in the $5.05 to 5.2 billion range.

Speaker Change: Of large deals can swing the ratio and timing wise they can easily fall into one quarter or another.

Speaker Change: is important to note that our Net Charge Off Guidance does include an estimate for the ... is important to note that our Net Charge Off Guidance does not include an estimate for the impact of tariffs, inflation, or interest rate cuts as it is too early to determine the full impact on our asset quality.

Speaker Change: While higher tariffs could drop economic stress in the form of inflation and or lower growth, we believe the credit risk is manageable.

Speaker Change: We will continually assess the potential impact to our portfolio, but we do believe the diversity in our loan portfolio is a strength heading into this environment.

First Citizens BancShares Inc.

Speaker Change: Moving to adjusted non-interest income, we expect to be in the $480 to $510 million range in the second quarter, which is aligned with a typical quarter for us.

Craig Nix: Exercising disciplined expense management while making opportunistic investments is a top priority for us, giving headwinds to net interest income. 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 3 status when we cross that threshold. Longer term, our goal is to operate in the mid-50s. Finally, for both Q2 and full year 2025, we expect our tax rate to be in the range of 25% to 26%, which is exclusive of any discrete tax items. To conclude, we are pleased with another quarter of solid financial performance while maintaining strong capital and liquidity positions.

Speaker Change: Overall, we continue to see potential strength in many of our core lines of business, such as rail, merchant, international and wealth.

Speaker Change: We have not changed our full-year adjusted non-interest income ranges and expect this to be in the 1.95 to 2.05 billion dollar range.

Speaker Change: This growth continues to be driven by a rail outlook which includes a balanced rail cart portfolio and a strategic exploration ladder.

Speaker Change: We are beginning to see some competitive pricing pressure because of economic uncertainty and our outlook will ultimately be dependent on the tariff regime going forward.

Speaker Change: as well as its impact on overall economic activity. At this point the potential impacts are unclear, but we do believe this business is well positioned to handle possible changes throughout 2025.

Speaker Change: We also expect continued momentum in our wealth business as we continue to organically add new clients as well as higher international and lending-related fees given healthy fundamentals supporting these businesses.

Craig Nix: Our focus now turns to the future, which currently includes an increased level of uncertainty. What we do know is that we will be here to support our customers and clients through it all. We have consistently demonstrated solid performance in periods of uncertainty, given the strength of our capital and liquidity positions, risk management, client selection, and our diversified business mix. All these attributes serve as sources of strength in periods of stress and gives us confidence in our prospects moving forward in supporting our customers and clients. I will now turn it over to the operator for instructions for this question-and-answer portion of the call.

Speaker Change: I do want the cost and the given the changing rate environment, our client-derivative positions can fluctuate between quarters causing some lumpiness and our non-inter-sincome results.

Speaker Change: Moving to adjusted non-interest expense, we expect the second quarter to be flat to modestly up compared to the first, as personnel expenses level out following seasonal increases but are offset by investments in risk and technology to build towards category three expectations.

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 touch-tone telephone. As a courtesy to others on the call, we ask that you limit yourself to one question and one follow-up each, 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 today comes from Chris McGratty from KBW. Chris, please go ahead. Your line is open.

into Simplify and Optimize our Platforms.

Speaker Change: Looking at the full year, we continue to see adjusted non-interest expense in the $5.05 to $5.2 billion range.

Speaker Change: Exercising the disciplined expense management while making opportunistic investments is a top priority for us giving headwinds to net interest income.

Speaker Change: Our adjusted efficiency ratio is expected to remain in the upper 50% range in 2025 as the impact of the Fed rates threat cyclopist downward pressure on net interest margin.

Chris McGratty: ... Oh, great. Good morning, everybody.

Craig Nix: Good morning.

Chris McGratty: Craig, I guess a question on the buyback, the 10.5 to 11 by Q1, basically would imply a pretty meaningful step up in either growth or the pace of buybacks. Could you just help me reconcile how you get there over the next, call it, nine months?

Speaker Change: We continue to make investments into areas that will help us scale the Category 3 status when we cross that threshold.

Longer term, our goal is to operate in the mid-50s.

First Citizens BancShares Inc.

Speaker Change: Finally, for both the second quarter and four-year 2025, we expect our tax rate to be in the range of 25 to 26%, which is exclusive of any discrete tax items.

Craig Nix: You're specifically referring, how do we get to the 10.5% to 11% range over the next nine months?

BancShares Inc.

Speaker Change: To conclude, we are pleased with another quarter of solid financial performance while maintaining strong capital and liquidity positions. Our focus now turns to the future which currently includes an increased level of uncertainty.

Chris McGratty: Exactly. From the 2 December today. Exactly. How do you pull a 100 and-

Craig Nix: Yeah, it assumes that we obviously complete the repurchase that's ongoing, and that we implement another repurchase plan in the back half of 2025.

Speaker Change: What we do know is that we will be here to support our customers and clients through it all.

Speaker Change: We have consistently demonstrated solid performance and periods of uncertainty given the strength of our capital and liquidity positions, risk management, client selection, and our diversified business mix.

Chris McGratty: Okay. And then, I guess, given market volatilities and the stock's valuation, I see what you've done quarter to date. Is there an opportunity just to step it up near term? Obviously, there's liquidity restrictions on a daily basis, but how do we think about near term, where the stock is? Thanks.

Speaker Change: All these attributes serve as sources of strength and periods of stress and gives us confidence in our prospect moving forward in supporting our customers and clients.

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

Craig Nix: Obviously, where the stock is, is making our repurchases more effectual. And we're able to repurchase more shares than otherwise. The pace of our share repurchases are really dictated by our capital plan, which we are very hesitant to deviate from. Tom, I will let you add to that if you have any other comments.

BancShares Inc.

Speaker Change: Thank you. Ladies and gentlemen, if you have a question or comments at this time, please press star and then the one-key and or touch-tone telephone. For the courtesy to others on the call, we ask that you limit yourself to one question and one follow-up each, and then return to the call queue if you have additional questions.

Speaker Change: If your question has been answered and you wish to remove your stuff from the cues, please press starfully by two. We'll pause for one moment to compile our Q&A roster.

Tom Eklund: Oh, yeah. And, you know, as a large financial institution, you know, we just wrapped up sort of our Q1, submitted it to regulators and sort of going through that review process. And as Craig mentioned, provide some more context on the next earnings call and sort of where we sit there. But I think overall, share repurchases is sort of part of our capital strategy. And then as we communicated when we kicked it off, you know, we'll continue to be methodical and something we want to continue to do over time.

Speaker Change: Our first question today comes from Chris McGrattie from KBW. Please go ahead. Your line is open.

Great. Good morning, everybody.

Monitoring

Speaker Change: Craig, I guess question on the buyback, the ten and a half to eleven by the first quarter.

Speaker Change: Basically, it would imply a pretty meaningful step up in either growth or the pace of buybacks. Could you just help me reconcile how you get there over the next couple of nine months?

Chris McGratty: Okay. Thank you.

Craig Nix: Thank you.

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

Speaker Change: You're specifically referring how do we get to the ten and a half to eleven percent range?

Christopher Marinac: Yeah, thanks. Good morning. I wanted to ask about the FDIC receivable and what impact that's going to have on, balance sheet and buybacks and, and even earnings, you know, beyond the next quarter.

Over the next nine months. Exactly. From the from the

Speaker Change: from the 12th to today. Exactly. How do you how do you pull a hundred? Yeah, in a sense that you obviously complete the repurchase that's ongoing and that we implement another repurchase plan in the back half.

Craig Nix: So, you're talking about the -- are you talking about the Purchase Money Note?

Christopher Marinac: Yes, sir, correct.

Craig Nix: Okay. And could you repeat the last part of that question?

of 2025.

Christopher Marinac: Just in terms of how it's going to impact the balance sheet, you know, when you pay that off. I think last quarter, Craig, you mentioned that it was going to get paid off by the end of this year.

BancShares Inc.

Speaker Change: Okay. And then given, I guess given market volatility and the stocks valuation.

Craig Nix: No, we don't think we indicated it would be paid off at the end of the year. What we do say is that if the arbitrage goes out of the note, then we would pay it down. Right now, we don't anticipate. The rates are forecasted to be pay downs in 2025. Although, as we move into 2026, we would anticipate if the forward curve is correct, paying down a portion of that note.

I see what you've done in order to date.

Speaker Change: Is there an opportunity just to step it up near-term, obviously there's liquidity restrictions on a daily basis, but how do we think about near-term where the stock is? Thanks.

Speaker Change: Obviously where the stock is is making our repurchases more factual and we're able to repurchase more shares than otherwise.

Bye.

Speaker Change: The pace of our Sherry purchases are really dictated by our capital plan, which we are very hesitant to deviate from.

Christopher Marinac: Great. Thank you for that clarification. I appreciate it. And from a general margin standpoint, do you still see yourself as somewhat asset sensitive, or is that changing as time passes?

Speaker Change: Tom, I'll let you add to that if you have any other comments.

Craig Nix: We are asset sensitive, and we'd anticipate staying that way.

Christopher Marinac: Great. Thanks very much for taking our questions this morning.

Craig Nix: Thank you.

Operator: The next question comes from Anthony Elian, from J.P. Morgan. Anthony, please go ahead. Your line is open.

Anthony Elian: Hi, everyone. I'd like to get more color on the total client fund growth you saw in SVB in the first quarter, where, I mean, average balances were up $2 billion in Q1, they're up $4 billion in Q4. I'm just curious, and maybe if Mark's on the line, if you can dive a bit deeper into the growth you saw, and if you think growth overall in total client funds can persist given the market volatility.

Marc Cadieux: Hi, it's Mark. I'll start and leave it open for Craig or others if they wish to add. Starting with Q1, it is the way I think of it is the TCF, the total client funds growth that we saw, and recognizing that there is a shift between deposits and off-balance sheet in the quarter, as Craig mentioned, I think is reflective of SVB's continued ability to execute, win business, drive balances, despite the ongoing innovation economy headwinds that we continue to experience. Going to your question about the outlook for the rest of the year, I think all of that is reflected in our guidance, as Craig mentioned. And at the same time, there's an awful lot of uncertainty, as Craig also mentioned, hanging over all of this.

Marc Theisinger: Hi, it's Mark. I'll start and leave it open for Craig or others if they wish to add. Starting with Q1, it is the way I think of it is the TCF, the total client funds growth that we saw, and recognizing that there is a shift between deposits and off-balance sheet in the quarter, as Craig mentioned, I think is reflective of SVB's continued ability to execute, win business, drive balances, despite the ongoing innovation economy headwinds that we continue to experience. Going to your question about the outlook for the rest of the year, I think all of that is reflected in our guidance, as Craig mentioned. And at the same time, there's an awful lot of uncertainty, as Craig also mentioned, hanging over all of this.

Speaker Change: Yes, you are correct, Okay and could you repeat the last part of that question.

Speaker Change: Just in terms of how it's going to impact the <unk>.

Speaker Change: Balance sheet when you pay that off I think last quarter. Craig you mentioned that it was going to get paid off by the end of this year.

Speaker Change: No I don't think we indicated it would be paid off at the end of the year. What we do say is that if the arbitrage.

Speaker Change: Goes out of the note that we would we would pay it down right.

Speaker Change: Right now we don't anticipate rates are forecasted to be pay downs in 2025.

Speaker Change: Although as we move into 2020 six we would anticipate if the forward curve is correct paying down a portion of that node.

Marc Cadieux: You know, will some kind of pause related to the uncertainty turn out to be a headwind? We'll all get to find out, but so far through the first quarter, very encouraged by our ability to execute.

Marc Theisinger: You know, will some kind of pause related to the uncertainty turn out to be a headwind? We'll all get to find out, but so far through the first quarter, very encouraged by our ability to execute.

Speaker Change: Great. Thank you for that clarification I appreciate it and from a general margin standpoint could you still see yourself as somewhat asset sensitive or is that changing as time passes.

Speaker Change: We are we are asset sensitive and we anticipate staying that way.

Anthony Elian: Thank you. Then my follow-up on credit quality, I think you mentioned this in the prepared remarks, but I was hoping you could dive a bit deeper into potentially any loan portfolios, specific borrowers you may be paying a closer attention to now that have outsized exposure to supply chain or tariffs, and maybe if you can size them up for us, that'd be great. Thank you.

Speaker Change: Great. Thanks, very much for taking our questions. This morning.

Speaker Change: Thank you.

Speaker Change: The next question comes from Anthony Elian from J P. Morgan Anthony. Please go ahead. Your line is open.

Anthony Elian: Hi, everyone I'd like to give more color on the total client funds growth you saw on S. Maybe in the first quarter, but average balances were up 2 billion in <unk>, they're up $4 billion in <unk> I'm, just curious and maybe if Mark's on the line. If you can dive a bit deeper into the growth you saw and if you think growth.

Craig Nix: Andy, you want to answer that one, please?

Andrew Giangrave: Sure. So we have done a review of the portfolio as an asset class exposure that we think is at risk to certainly the tariffs and all that go with that. We looked at the level of tariffs by country and how that impacts any particular portfolio, the origin of the supply chain, any potential impacts on margins, volumes, collateral values, et cetera. Obviously, it's very difficult at this point to assess the full impact. But some of the portfolios that we're focused on is textile, footwear, retail, right? Given that most of that comes from Asia, with the largest impacts from tariffs there. Certainly, auto exposure, equipment finance, and innovation would be some of the larger portfolios that we're watching.

Andy Giangrave: Sure. So we have done a review of the portfolio as an asset class exposure that we think is at risk to certainly the tariffs and all that go with that. We looked at the level of tariffs by country and how that impacts any particular portfolio, the origin of the supply chain, any potential impacts on margins, volumes, collateral values, et cetera. Obviously, it's very difficult at this point to assess the full impact. But some of the portfolios that we're focused on is textile, footwear, retail, right? Given that most of that comes from Asia, with the largest impacts from tariffs there. Certainly, auto exposure, equipment finance, and innovation would be some of the larger portfolios that we're watching.

Anthony Elian: Overall in total client funds can persist given the market volatility.

Mark: Hi, it's mark.

Craig Nix: I'll start and leave it open for for Craig or others, if they wish to add.

Speaker Change: Starting with the first quarter.

Speaker Change: Is that the way I think of it is the Tcf total client funds growth that we saw and recognizing that there is a shift between deposits and off balance sheet in the quarter as Craig mentioned.

Speaker Change: I think is reflective of SB.

Speaker Change: <unk> continued ability to execute.

Speaker Change: When business drive balances despite the ongoing.

Speaker Change: Innovation economy headwinds that we continue to experience.

Speaker Change: And to your question about the outlook for the rest of the year I think all of that is reflected in our guidance as Craig mentioned and at the same time. There is an awful lot of uncertainty as Craig also mentioned hanging over all of this and so we'll have some kind of pause related to the uncertainty.

Andrew Giangrave: The good thing is, we haven't seen any change in customer behavior regarding draws. I think everyone's being cautious as they try to get more clarity on the full impact. So it's still early days.

Andy Giangrave: The good thing is, we haven't seen any change in customer behavior regarding draws. I think everyone's being cautious as they try to get more clarity on the full impact. So it's still early days.

Speaker Change: Turned out to be a headwind, we'll all get to find out but so far through the first quarter very encouraged by our ability to execute.

Anthony Elian: Thank you.

Operator: The next question comes from Brian Foran from Truist. Brian, your line is open. Please go ahead.

Speaker Change: Thank you and then my follow up on credit quality I think you mentioned this in the prepared remarks, but I was hoping you could dive a bit deeper into potentially any loan portfolios specific borrowers who may be paying closer attention to now that have outsized exposure to supply chain or <unk>.

Brian Foran: Hi, I'm just thinking about the stock valuation. You know, it's kind of hard to reconcile 1.1x tangible book with the value you've created pretty consistently over time. The pushback I do hear a lot is, well, the current ROTC is only 9 or 10%. Even if you adjust for the excess capital, it's maybe 12. You know, can you just share your updated thoughts when you look out 3, 5 years, or maybe it's easier to speak to a normalized environment? You know, how do you think about the normalized return potential of the franchise? And, you know, what are the big things to get there?

Speaker Change: Tariffs and maybe if you can size them up for us that'd be great. Thank you.

Andy: Andy you want to answer that one place.

Speaker Change: Yeah.

Speaker Change: Sure.

Speaker Change: So we have done a review of the portfolio as an asset class exposure that we think is at risk to.

Speaker Change: Certainly the tariffs and all that go with that we look at the level of the level of tariffs by country and how that impacts any particular portfolio.

Craig Nix: Brian, your question got muted out, but I think I have the gist of it. In terms of return, we've consistently produced peer-leading total shareholder returns. I don't want to speculate on the multiple. I think you were asking about the price to tangible multiple. We do, though, we are carrying a good bit of excess capital right now, so that should be part of it. But anything like that would be purely speculation on my part.

Speaker Change: Origin of the supply chain and any potential impacts on margins volumes collateral values et cetera.

Speaker Change: Obviously, it's very difficult at this point to.

Speaker Change: To assess.

Speaker Change: The full impact.

Speaker Change: But some of the some of the portfolios that certainly that where we're focused on is textile footwear retail right given that most of that comes from Asia with the largest impacts from tariffs there certainly auto exposure.

Speaker Change: Equipment finance and our innovation that would be some of the larger portfolios that were watching and.

Brian Foran: Sorry, and I think the important part of my question got cut off. Sorry about that, and hopefully, it's coming through now.

Speaker Change: The good thing is we haven't seen any change in customer behavior.

Speaker Change: Regarding draws I think everyone's.

Craig Nix: Yeah, yeah.

Brian Foran: I was really asking more about the ROTCE. Yeah, I, I was really asking more about the ROTCE because, I think a lot of people justify the current valuation based on the current ROTCE. But is there any thoughts you can share on, you know, three to five years out, can you do a 15% ROTCE, 13%? Is there a range? Just your updated thoughts on what you think a normalized return is for the business.

Speaker Change: Being cautious as they try to get more clarity.

Speaker Change: On the full impact so it's still it's still early.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: The next question comes from Brian Foran from Curtis Brian. Your line is open. Please go ahead.

Craig Nix: Well, well, Brian, first of all, we're not big fans of ROTCE because it allows banks to take deals out of their, or premiums they've paid or dilutive deals out of their denominator. So we much more focus on ROE, and we also much more focus on tangible book value. We believe over time on that, that we can return, you know, on average, over 10% PBV growth over long periods of time, which would lead to double-digit ROE. But ROTCE, the difference between ROTCE for us and ROE is only about 30 basis points, given that we don't have a high level of goodwill and intangibles on our balance sheet.

Brian Foran: Hi, I'm just.

Speaker Change: Thinking about the stock.

Speaker Change: And you know, it's kind of hard to reconcile one one times tangible book with the value you've created pretty consistently over time.

Speaker Change: The pushback that you hear a lot is current RPC is only nine or 10%, even if you adjust for the excess capital that's maybe 12.

Speaker Change: You know can you just share your updated thoughts when you look out three five years or maybe if you could speak to a normalized environment.

Speaker Change: How do you think about the normalized return potential of the franchise and what are the big things to get there.

Speaker Change: Brian Summit some of your question get viewed it out, but I think I have the gist of it in terms of.

Craig Nix: So we're not really, we're not really focused on ROTCE and really don't think it's a fair comparison between us and our competitors, as they have a lot more goodwill on their balance sheet and a lot more AOCI as well.

Speaker Change: Return.

Consistently produced.

Speaker Change: Peer leading total shareholder returns.

Speaker Change: I don't want to speculate on the multiple I think you were asking about the <unk>.

Brian Foran: Thank you. And if I could sneak in one follow-up. The rate markets have been all over the place, so I realize this can change tomorrow, but right now, it's kind of centered on the 4-cut scenario. Is there any help you can give us on the trajectory of NII and really kind of the exit run rate for the year, the jumping-off point for next year? If we get that 4-rate cut scenario, would, you know, quarterly NII by the end of the year still be kind of near that $6.5 billion bottom end of the range, or could it actually dip a little bit below that? Just, you know, I know it's hard to ask for quarterly guidance, but just any big-picture thoughts if we get the 4-rate cut scenario-

Speaker Change: The tangible multiple we do though we are carrying a good bit of excess capital right now so that that could be part of it but any any.

Speaker Change: Or anything like that would be purely speculation on my part.

Speaker Change: Yeah.

Speaker Change: Sorry, and I think the important part of my question got cut off.

Speaker Change: Sorry about that and hopefully it's coming through now.

Speaker Change: How much of that R O T E.

Speaker Change: Yeah, I was really asking more about the R. A T C because.

Speaker Change: I think a lot of people justify the current valuation based on the current Aro TCE, but is there any thoughts you can share on you know.

Craig Nix: Yeah, I'll focus-

Brian Foran: Expect NII to trough.

Speaker Change: Three to five years out can you do with 15% of our OTT or team. That's got a range just your updated thoughts on what you think a normalized.

Craig Nix: Sure. Thank you. I will focus on comparing the Q1 2025 actual to the Q4 2025 exit. With 3 or 4 rate cuts, the fourth rate cut would be late in the year, so the impact on this year would be muted. So with 3 rate cuts, our headline net interest income. We expect it to be up low single digits percentage points, and headline NIM to be in the low 3.10s. And with 3 rate cuts, ex accretion net interest income to be up low to mid single digits percentage points, and ex accretion NIM to be in the low 3s. And in terms of troughs, we would have pretty much everything troughing and all those measures, NIM, ex accretion and headline, net interest income, ex accretion and headline to trough in the Q1 2026.

Speaker Change: Our return is for the business well, Brian first of all we're not big fans of ROTC because it allows.

Banks to take.

Speaker Change: Deals out of there are premiums they paid are dilutive deals out of the denominator. So we've much more focus on ROE V and we also much more focus on tangible book value.

Speaker Change: We believe over time on that that we can return.

Speaker Change: You know I Wanna average over 10% <unk> growth over long periods of time.

Speaker Change: Which would lead to double digit Roe V.

Speaker Change: But ROTC difference between ROTC for us in ROE is only about 30 basis points given that we don't have high level of goodwill and intangibles on our balance sheet. So we're not really we're not really focused on ROTC and really don't think it's a fair comparison.

Craig Nix: That's subject to timing and magnitude of rates, and we could have more rate cuts in next year, which would just push the trough out further.

Speaker Change: Between us and our competitors is they have a lot more goodwill on our balance sheet.

Speaker Change: And a lot more aoc I as well.

Speaker Change: Thank you if I could sneak in one follow up.

Operator: The next question comes from Ben Gerlinger from Citi. Please go ahead. Your line is open.

Speaker Change: The rate market has been all over the place. So I realize this can change tomorrow, but right now it's kind of centered on the four cuts scenario.

Benjamin Gerlinger: Hi, good morning.

Ben Gerlinger: Hi, good morning.

Craig Nix: Good morning.

Benjamin Gerlinger: I was curious. It's pretty clear you guys want to return shareholder capital via a buyback. You teased another one in the second half of this year. And at these valuations, I totally understand that. But when you think about the economic outlook, you've cited some volatility. I have no issue with your credit profile, but you guys have always been good acquirers. Does this mean you really have no appetite for a potential partnership or acquisition should economic volatility increase? Just kind of thinking about deployment outside of the buyback over the next 12, 18, 24 months with this volatility economically.

Ben Gerlinger: I was curious. It's pretty clear you guys want to return shareholder capital via a buyback. You teased another one in the second half of this year. And at these valuations, I totally understand that. But when you think about the economic outlook, you've cited some volatility. I have no issue with your credit profile, but you guys have always been good acquirers. Does this mean you really have no appetite for a potential partnership or acquisition should economic volatility increase? Just kind of thinking about deployment outside of the buyback over the next 12, 18, 24 months with this volatility economically.

Speaker Change: Is there any help you can give us on the trajectory of NII and really kind of the exit run rate for the year. The jumping off point for next year, if we get that four rate cut scenario would you.

Speaker Change: Quarterly NII by the end of the year are still be kind of near that $6 5 billion bottom end of the range or or could it actually dipped a little bit below that.

Speaker Change: I know it's hard to.

Speaker Change: As for quarterly guidance, but just any big picture thoughts if we can at the floor rate cut scenario.

Speaker Change: With respect to NII to trough sure. Thank you I will focus on comparing the first quarter twenty-five actual through.

Speaker Change: Through the fourth quarter twenty-five exit.

Craig Nix: Yeah, I would not say that our appetite for M&A has changed. We're really dealing with what's in front of us right now, and that's the share repurchase plan. That's the most effectual way for us to return capital at this point in time. But M&A remains an important part of our growth strategy over the long term.

Speaker Change: With three with three or four rate cuts the fourth rate cut would be late in the year. So the impact on this year would be muted so with three rate cuts.

Speaker Change: Our headline net interest income.

Speaker Change: We expect it to be up low single digits percentage points.

Speaker Change: And headline NIM to be in the low three times.

Speaker Change: And with three rate cuts ex accretion net interest income to be up low to mid single digits percentage points in ex accretion NIM to be in the low threes and in terms of cross we would have pretty much everything profit.

Benjamin Gerlinger: I got you. Do you need to repay the FDIC in its entirety at all or at all, to do any meaningful deal?

Ben Gerlinger: I got you. Do you need to repay the FDIC in its entirety at all or at all, to do any meaningful deal?

Craig Nix: We do not think so.

Speaker Change: And all those measures NIM ex accretion that headline net interest income ex accretion a headline to trough in the first quarter of 'twenty six.

Benjamin Gerlinger: Got you. Okay, I appreciate the time.

Ben Gerlinger: Got you. Okay, I appreciate the time.

Craig Nix: Yeah. Thank you.

Operator: The next question comes from Nick Holowko from UBS. Nick, your line is open. Please go ahead.

Speaker Change: And that's subject to timing and.

Speaker Change: Magnitude of rates and we could have more.

Nicholas Holowko: Hi, good morning.

Nick Holowko: Hi, good morning.

Speaker Change: Rent cuts in next year, which would just pushed to trough out further.

Craig Nix: Good morning.

Nicholas Holowko: Maybe just thinking about that NII cadence as we're moving throughout the year, heading towards that Q4 exit rate. Do you have any other plans to continue to grow the balance sheet, either through further issuance of debt? I know you did some issuance this quarter. Maybe you can just talk about the non-deposit funding that you have outside of the FDIC note.

Nick Holowko: Maybe just thinking about that NII cadence as we're moving throughout the year, heading towards that Q4 exit rate. Do you have any other plans to continue to grow the balance sheet, either through further issuance of debt? I know you did some issuance this quarter. Maybe you can just talk about the non-deposit funding that you have outside of the FDIC note.

Ben: The next question comes from Ben <unk> from Citi. Please go ahead. Your line is open.

Speaker Change: Yes.

Speaker Change: Hi, good morning.

Speaker Change: Good morning.

Speaker Change: I was curious.

Speaker Change: It's pretty clear you guys wanted to return shareholder capital.

Speaker Change: Buy back to used.

Speaker Change: Another one in the second half of this year and these valuations I totally understand that.

Tom Eklund: Yeah, on the funding side, you obviously saw we went to market this quarter. I think, you know, that was a little bit of a mix of funding and capital. You know, we're also looking obviously closely at our capital stack. If you look at us compared to peer, we are heavily concentrated in common equity, less so in, you know, tier one and tier two instruments. So I think that's also part of why we're going to market. I think from a funding perspective, our goal is really to continue grow core deposits. We prefer to be majority core deposit funding, and would like to get that concentration up from the, you know, 81% range where we are now to, you know, low to mid-90s range really over time.

Speaker Change: What are you thinking about the economic outlook.

Speaker Change: Some volatility.

Speaker Change: For the year credit profile, but you guys have always been good acquirers does this mean you really have no appetite.

Speaker Change: Or a potential partnership for acquisition should economic volatility increase just kind of thinking about.

Speaker Change: The deployment outside of buyback over the next 12 18 24 months with this volatility.

Speaker Change: Yeah, I would not say that our appetite for M&A has changed.

Speaker Change: We were really dealing with what's in front of US right now and that's the share repurchase plan. That's the most effectual away for us to return capital at this point in time.

Nicholas Holowko: Got it. Thank you. Then, you know, just going through a bunch of the recent press releases you put out in terms of where you're winning deals and bringing on new balances on the loan side of the equation. Seems like for a while there's been a bigger mix of things related to, like, environmental-type businesses. Just wondering if that's an area you guys are emphasizing or a specific area where you're seeing a lot of positive momentum, or if there's anywhere else worth calling out in terms of those opportunities. Thank you.

Nick Holowko: Got it. Thank you. Then, you know, just going through a bunch of the recent press releases you put out in terms of where you're winning deals and bringing on new balances on the loan side of the equation. Seems like for a while there's been a bigger mix of things related to, like, environmental-type businesses. Just wondering if that's an area you guys are emphasizing or a specific area where you're seeing a lot of positive momentum, or if there's anywhere else worth calling out in terms of those opportunities. Thank you.

Speaker Change: But M&A.

Speaker Change: M&A remains an.

Speaker Change: Important part of our growth strategy over the long term.

Speaker Change: I Gotcha do you need to.

Speaker Change: Repay let's see.

Speaker Change: Tired at or at all to do a meaningful deal.

Speaker Change: We don't we didn't we do not think so.

Speaker Change: Gotcha, Okay I appreciate the time.

Speaker Change: Thank you.

Speaker Change: Yeah.

Nick: The next question comes from Nick Hello, Krish from UBS. Your line is open. Please go ahead.

[Company Representative] (First Citizens BancShares, Inc.): Yeah. I mean, I think you've seen some of the releases. We've certainly had, you know, some good success in environmental and really energy, but, you know, I think it's really more broad-based than that. Yeah, I think as we talked to, you know, our Global Fund Banking portfolio has an excellent pipeline. We've seen good growth there. I think if you look at commercial, tech, media, and telecom, you know, data center funding, and then in healthcare, you know, kind of retirement facilities. So it's broad-based. You know, I think as we look for the year, you know, our branch network, we continue to build business, commercial clients. And so even though that might have dominated some of the releases, it's really pretty broad-based.

Marc Theisinger: Yeah. I mean, I think you've seen some of the releases. We've certainly had, you know, some good success in environmental and really energy, but, you know, I think it's really more broad-based than that. Yeah, I think as we talked to, you know, our Global Fund Banking portfolio has an excellent pipeline. We've seen good growth there. I think if you look at commercial, tech, media, and telecom, you know, data center funding, and then in healthcare, you know, kind of retirement facilities. So it's broad-based. You know, I think as we look for the year, you know, our branch network, we continue to build business, commercial clients. And so even though that might have dominated some of the releases, it's really pretty broad-based.

Speaker Change: Hi, good morning.

Speaker Change: Maybe just thinking about that and I.

Speaker Change: Maybe just thinking about that.

Speaker Change: Cadence as we're moving throughout the year heading towards that fourth quarter exit rate.

Speaker Change: Do you have any other plans to continue to grow the balance sheet either through further issuance of debt I know you did some issuance. This quarter. Maybe you can just talk about the non deposit funding that you have outside of the FDIC note.

Speaker Change: Yeah.

Speaker Change: Yes on the funding side you. Obviously saw we went to market. This quarter. I think you know that that was a little bit of a mix of funding and capital. We're also looking obviously closely at our capital stack. If you look at us compared to peer we.

Nicholas Holowko: Got it. Thank you.

Nick Holowko: Got it. Thank you.

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: We are heavily concentrated in common equity less so in tier one and tier two instruments I think that that's also part of why we're going to market I think from a funding perspective. Our goal is really to continue grow core deposits, we prefer to be majority core deposit funding and we'd like to get that concentration up.

Craig Nix: Thank you, everyone, for joining our earnings call today. We appreciate your ongoing interest in our company, and if you have any 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 the day.

Deanna Hart: Thank you, everyone, for joining our earnings call today. We appreciate your ongoing interest in our company, and if you have any 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 the day.

Speaker Change: The <unk> 81 per cent range, where we are now to.

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

Speaker Change: Low to mid nineties range really overtimes.

Speaker Change: Got it thank you and then.

Speaker Change: Just going through a bunch of the recent press releases you put out in terms of where you are winning deals and bring on new new balances on the loan side of the equation.

Speaker Change: Seems like for a while there has been a bigger mix of things related to like environmental type businesses.

Speaker Change: Wondering if that's an area an area you guys are emphasizing or a specific area, where you're seeing a lot of positive momentum.

Speaker Change: Or if there's anywhere else worth calling out in terms of.

Speaker Change: Growth opportunities. Thank you.

Speaker Change: Yeah, I mean, I think you've seen some of the releases, we've certainly had some.

Speaker Change: Some good success in environmental related energy, but I think it's really more broad based on the yes.

Speaker Change: I think as we talk to our global fund banking portfolio.

Speaker Change: Exxon pipeline, we've seen good growth there.

Speaker Change: Okay commercial take me to telecom.

Speaker Change: Data center funding.

Speaker Change: In healthcare, you know kind of retirement facilities.

Speaker Change: It's broad based.

Speaker Change: I think as we look for the year and our branch network, we continue to build.

Speaker Change: Most clients.

Speaker Change: So even though you're.

Speaker Change: So dominant in some of the releases, it's really pretty broad based.

Speaker Change: Yeah.

Speaker Change: Got it 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 host Ms. Danaher for any closing remarks.

Danaher: Thank you everyone for joining our earnings call today. We appreciate your ongoing interest in our company and if you have any further questions or need additional information. Please feel free to reach out to the Investor relations team through our web site. We have we have a great rest of the day.

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

Q1 2025 First Citizens BancShares Inc Earnings Call

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