Q2 2026 First Citizens BancShares Inc Earnings Call

July 23, 2026

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the First Citizens BancShares Q2 2026 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, please press star one to raise your hand. To withdraw your question, press star one again. If you require operator assistance during the program, please press star 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 #1: Ladies and gentlemen, thank you for standing by, and welcome to the FIRST CITIZENS BANKSHARES Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, please press *1 to raise your hand. To withdraw your question, press *1 again.

Speaker #1: If you require operator assistance during the program, please press *0. As a reminder, today's conference is being recorded. I would now like to introduce the host of this conference call, Ms. Deanna Hart.

Speaker #1: Head of Investor Relations. You may begin.

Speaker #2: Good morning, and welcome to FIRST CITIZENS Q2 2026 earnings call. Joining me on the call are Chairman and Chief Executive Officer Frank Holding and Chief Financial Officer Craig Nix.

Deanna Hart: Good morning, and welcome to First Citizens' Q2 2026 earnings call. Joining me on the call are Chairman and Chief Executive Officer, Frank Holding, and Chief Financial Officer, Craig Nix. They will provide Q2 business and financial updates referencing our earnings call presentation, which you can find on our investor relations website. Before we begin, please note that 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 guarantee the accuracy of earnings transcripts provided by third parties.

Speaker #2: They will provide Q2 business and financial updates referencing our earnings call presentation, which you can find on our investor relations website. Before we begin, please note that our comments will include forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ materially from expectations.

Speaker #2: 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.

Speaker #2: Reconciliations of these measures against the most directly comparable GAAP measures can be found in section 5 of the presentation. Finally, for citizens not responsible for and do not guarantee the accuracy of earnings transcripts provided by third parties.

Speaker #2: With that, I'll now turn it over to Frank.

Deanna Hart: With that, I'll now turn it over to Frank.

Speaker #3: Thank you, Deanna, and good morning and welcome, everyone. Thank you for joining us today. I'll begin with a summary of our Q2 performance before turning it over to Craig Nix.

Frank Holding: Thank you, Deanna. Good morning, and welcome everyone. Thank you for joining us today. I'll begin with a summary of our Q2 performance before turning it over to Craig Nix to review our financial results and our 2026 outlook in more detail. We delivered strong Q2 performance characterized by sequential top-line growth that exceeded our guidance and consensus estimates. These results reflect the continued successful execution of a strategy built to drive long-term sustainable shareholder value and the strength of our diversified franchise. This morning, we reported adjusted net income of $691 million and adjusted earnings per share of $57.09, driving an adjusted ROE of 12.94% and an adjusted ROA of 1.18%. These results reflect robust sequential growth and significant year-over-year expansion. Both key metrics increased by more than 20% compared to the prior quarter.

Speaker #3: To review our financial results and our 2026 outlook in more detail. We delivered strong Q2 performance, characterized by sequential top-line growth that exceeded our guidance and consensus estimates.

Speaker #3: These results reflect the continued successful execution of a strategy built to drive long-term, sustainable shareholder value and the strength of our diversified franchise. This morning, we reported adjusted net income of $691 million, and adjusted earnings per share of $57.09.

Speaker #3: Driving an adjusted ROE of 12.94% and an adjusted ROA of 1.18%. These results reflect robust sequential growth and significant year-over-year expansion. Both key metrics increased by more than 20% compared to the prior quarter.

Speaker #3: This strong profitability was powered by top-line net revenue expansion, disciplined expense and balance sheet management, and resilient credit quality. On the balance sheet, we delivered 1.6% sequential loan growth, with increases in both period-end and average loans.

Frank Holding: This strong profitability was powered by top-line net revenue expansion, disciplined expense and balance sheet management, and resilient credit quality. On the balance sheet, we delivered 1.6% sequential loan growth with increases in both period end and average loans. This momentum was anchored by our global fund banking business, fueled by strong production and heightened capital call line utilization. Additionally, we achieved broad-based growth within our tech and healthcare banking and middle-market banking verticals. We delivered a 1.5% sequential increase in period end deposits and a 2.8% expansion in average deposits. These results validate the structural resilience of our operating model and the effectiveness of our targeted deposit gathering initiatives within a highly competitive industry environment, excuse me.

Speaker #3: This momentum was anchored by our global fund banking business, fueled by strong production and heightened capital call line utilization, additionally we achieved broad-based growth within our tech and healthcare banking and middle-market banking verticals.

Speaker #3: We delivered a $1.5% sequential increase in period end deposits and a 2.8% expansion in average deposits. These results validate the structural resilience of our operating model and the effectiveness of our targeted deposit gathering initiatives, within a highly competitive industrial environment.

Speaker #3: Industry environment, excuse me. Beyond core balance sheet growth, client engagement in our tech and healthcare and global fund banking businesses drove solid increases in both period end and average off-balance sheet client funds.

Frank Holding: Beyond core balance sheet growth, client engagement in our tech and healthcare and global fund banking businesses drove solid increases in both period end and average off balance sheet client funds. Simultaneously, we continued to execute on capital efficiency, returning an additional $600 million to shareholders through share repurchases. Backed by a strong liquidity position, we prepaid another $2.5 billion of the FDIC purchase money note during the quarter, followed by an additional $1 billion in July. This brings our total cumulative prepayments to $8.5 billion. To wrap up my comments, credit performance remains strong, exceeding our expectations. These durable credit trends, combined with disciplined expense management and healthy client activity demonstrated this quarter, position us well to drive positive operating leverage and long-term shareholder value moving forward.

Speaker #3: Simultaneously, we continued to execute on capital efficiency, returning an initial $600 million to shareholders through share repurchases. Backed by strong liquidity position, we prepaid another $2.5 billion of the FDIC purchase money note during the quarter.

Speaker #3: Followed by an additional $1 billion in July. This brings our total cumulative prepayments to $8.5 billion. To wrap up my comments, credit performance remains strong.

Speaker #3: Exceeding our expectations, these durable credit trends, combined with disciplined expense management and healthy client activity demonstrated this quarter, positioned us well to drive positive operating leverage and long-term shareholder value moving forward.

Speaker #3: I would like now to turn it over to Craig to take us through our Q2 financial results and our outlook for the remainder of the year.

Frank Holding: I would like now to turn it over to Craig to take us through our second quarter financial results and our outlook for the remainder of the year. Craig?

Speaker #3: Craig?

Speaker #4: Thanks, Frank, and good morning, everyone. I'll begin with a review of our financial performance for the quarter. Followed by an update on our balance sheet, credit, and capital trends and outlook.

Craig Nix: Thanks, Frank. Good morning, everyone. I'll begin with a review of our financial performance for the quarter, followed by an update on our balance sheet, credit, capital trends, and outlook. I will anchor my comments to page eight of the presentation. Pages nine through 26 provide details underlying our second quarter results. As Frank mentioned, we are pleased that in the second quarter, adjusted earnings were up by over 20% sequentially, exceeding internal and consensus expectations. Slightly over half of the increase was generated by higher pre-provision net revenue, supported by resilient net interest income, fee-based non-interest income expansion, and disciplined expense management. The remainder was driven by net benefit for credit losses, underscoring strong credit performance.

Speaker #4: I will anchor my comments to page 8 of the presentation. Pages 9 through 26 provide details underlying our Q2 results. As Frank mentioned, we are pleased in the Q2 adjusted earnings were up by over 20% sequentially, exceeding internal and consensus expectations.

Speaker #4: Slightly over half of the increase was generated by higher pre-provision net revenue, supported by resilient net interest income, fee-based non-interest income expansion, and disciplined expense management.

Speaker #4: The remainder was driven by a net benefit for credit losses, underscoring strong credit performance. In line with our guidance, net interest income increased by $35 million over the linked quarter, driven by favorable earning asset volumes and yields, higher purchase accounting accretion, reduced borrowings, as well as a higher day count.

Craig Nix: In line with our guidance, net interest income increased by $35 million over the linked quarter, driven by favorable earning asset volumes and yields, higher purchase accounting accretion, reduced borrowings, as well as a higher day count. These positive factors successfully offset higher funding costs and interest-bearing deposit balances. On a margin basis, headline NIM improved by 1 basis point due to the same factors while our core NIM remained unchanged. Adjusted non-interest income rose by $66 million sequentially, exceeding our guidance. While $50 million of the growth was in other non-interest income, driven by asset monetization and portfolio revaluation, we did see increases across our fee-generating businesses. Favorable public and private market valuation adjustments and realized gains generated a $27 million gain within our equity warrant portfolio, which has grown since the SVB acquisition and serves as a structural driver of long-term upside via lending and financing relationships.

Speaker #4: These positive factors successfully offset higher funding costs and interest-bearing deposit balances. On a margin basis, headline NIM improved by 1 basis point due to the same factors, while our core NIM remained unchanged.

Speaker #4: Adjusted non-interest income rose by $66 million sequentially, exceeding our guidance. While $50 million of the growth was in other non-interest income driven by asset monetization and portfolio revaluation, we did see increases across our fee-generating businesses.

Speaker #4: Favorable public and private market valuation adjustments and realized gains generated a $27 million gain within our equity warrant portfolio, which has grown since the SVB acquisition and serves as a structural driver of long-term upside via lending and financing relationships.

Speaker #4: Additionally, we successfully realized a $17 million gain through the opportunistic sale of a tax credit investment. Independent of other non-interest income growth, momentum continued in our core fee categories, demonstrating strong execution by our commercial and general banking teams.

Craig Nix: We successfully realized a $17 million gain through the opportunistic sale of a tax credit investment. Independent of other non-interest income growth, momentum continued in our core fee categories, demonstrating strong execution by our commercial and general banking teams. Client investment fees benefited from rising transaction volumes within tech and healthcare and improved margins from a higher yielding product mix. In wealth management, driven by deliberate ongoing investments in team capacity and service breadth, Q2 fee income increased by 12% year over year. This expansion deepens client wallet share and establishes a highly predictable recurring revenue stream. Deposit and lending related fees also posted steady sequential gains, reinforcing the stability of our core banking operations. Adjusted non-interest expense increased by $16 million sequentially, landing at the favorable end of our guidance range and reflecting a disciplined balance between strategic reinvestment and cost management.

Speaker #4: Client investment fees benefited from rising transaction volumes within tech and healthcare, and improved margins from a higher-yielding product mix. In wealth management, driven by deliberate ongoing investments, team capacity, and service breadth, Q2 fee income increased by 12% year over year.

Speaker #4: This expansion deepens client wallet share and establishes a highly predictable recurring revenue stream. Deposit and lending-related fees also posted steady sequential gains, reinforcing the stability of our core banking operations.

Speaker #4: Adjusted non-interest expense increased by $16 million sequentially, landing at the favorable end of our guidance range and reflecting a disciplined balance between strategic reinvestment and cost management.

Speaker #4: The sequential increase was primarily driven by a $15 million targeted increase in marketing expense to maintain and attract new deposit balances in the direct bank.

Craig Nix: The sequential increase was primarily driven by a $15 million targeted increase in marketing expense to maintain and attract new deposit balances in the direct bank. Simultaneously, we advanced our long-term digital transformation through higher third-party processing fees and equipment expenses dedicated to data center modernization and enhanced client-facing capabilities. The uptick in other non-interest expense was driven by increased charitable contributions after a seasonally low Q1. These increases were partially mitigated by a decline in personnel costs due to lower incentive compensation and seasonal declines as employees reach annual benefit limits, partially offset by the impact of merit increases, 1 additional payroll day, and higher health insurance claims. Ultimately, top-line net revenue expansion outpaced a modest increase in expenses during the quarter, delivering positive operating leverage and reinforcing our commitment to strategic cost management.

Speaker #4: Simultaneously, we advanced our long-term digital transformation through higher third-party processing fees and equipment expenses dedicated to data center modernization and enhanced client-facing capabilities. The uptick in other non-interest expense was driven by increased charitable contributions after a seasonally low Q1.

Speaker #4: These increases were partially mitigated by a decline in personnel costs due to lower incentive compensation and seasonal declines as employees reached annual benefit limits partially offset by the impact of merit increases, one additional payroll day, and higher health insurance claims.

Speaker #4: Ultimately, top-line revenue net revenue expansion outpaced a modest increase in expenses during the quarter, delivering positive operating leverage and reinforcing our commitment to strategic cost management.

Speaker #4: Period-end loans grew by $2.3 billion, or 1.6% sequentially, driven by global fund banking production and robust growth in the tech, healthcare, and middle-market banking businesses.

Craig Nix: Period-end loans grew by $2.3 billion or 1.6% sequentially, driven by global fund banking production and robust growth in the tech and healthcare and middle-market banking businesses. Global fund banking grew by $2.6 billion thanks to favorable financing costs, catch-up investments due to prior tariff pauses, and a healthy rebound in secondary market valuation, accelerating exit activity. The pipeline remains highly robust with strong line utilization. Middle market banking achieved $205 million in growth supported by solid production and utilization rates. Tech and healthcare delivered strong momentum with a 3.7% sequential increase anchored by strong performance in the fintech and sponsor segments. In the general bank, production numbers remained strong. Loans were relatively flat as pay-downs and payoffs outpaced new loan production. We are focused on new prospecting opportunities as well as new referral opportunities to drive lending and overall relationship growth.

Speaker #4: Global fund banking grew by 2.6 billion thanks to favorable financing costs, catch-up investments due to prior tariff pauses, and a healthy rebound in secondary market valuation accelerating exit activity.

Speaker #4: The pipeline remains highly robust, with strong line utilization. Middle-market banking achieved $205 million in growth, supported by solid production and utilization rates. Tech and healthcare delivered strong momentum with a 3.7% sequential increase, anchored by strong performance in the fintech, and sponsor segments.

Speaker #4: In the general bank, production numbers remained strong, however, loans were relatively flat as paydowns and payoffs outpaced new loan production. We are focused on new prospecting opportunities as well as new referral opportunities to drive lending and overall relationship growth.

Speaker #4: Period-in-total deposits increased by 2.6 billion or 1.5% sequentially, driven by the direct bank, which added $2.8 billion during the quarter. These highly insured granular retail deposits continued to strengthen our liquidity profile and significantly reduce large institutional concentration.

Craig Nix: Period-end total deposits increased by $2.6 billion or 1.5% sequentially, driven by the direct bank, which added $2.8 billion during the quarter. These highly insured granular retail deposits continue to strengthen our liquidity profile and significantly reduce large institutional concentration. The Commercial Bank segment declined by $1.5 billion stemming from anticipated early quarter corporate outflows. This reflects the historically lumpy nature of commercial fund flows and remains well within our modeled expectations. We remain encouraged by the performance of these underlying businesses. The General Bank experienced a modest decline, but we expect a medium-term recovery. We are actively focused on driving core deposit growth by enhancing our deposit strategy, broadening digital outreach, strengthening client engagement, and refining our attention and relationship-based pricing strategies. We continue to supplement organic growth with strategic use of broker deposits, bolstering liquidity to prepay the FDIC note.

Speaker #4: The commercial bank segment declined by 1.5 billion stemming from anticipated early-quarter corporate outflows. This reflects the historically lumpy nature of commercial fund flows and remains well within our modeled expectations, and we remain encouraged by the performance of these underlying businesses.

Speaker #4: The general bank experienced a modest decline but we expect a medium-term recovery. We are actively focused on driving core deposit growth by enhancing our deposit strategy broadening digital outreach, strengthening client engagement, and refining our attention and relationship-based pricing strategies.

Speaker #4: We continue to supplement organic growth with the strategic use of broker deposits, bolstering liquidity to prepay the FDIC note. We actively monitor pricing and tenor to ensure a resilient, cost-effective funding mix.

Craig Nix: We actively monitor pricing and tenor to ensure a resilient, cost-effective funding mix. Period-end and average total client funds in the SVB commercial business rose by $1.1 billion and $6.1 billion respectively. Off-balance sheet growth was driven by tech and healthcare and Global Fund Banking, reflecting strong cash and new money inflows from public entities. Our credit profile remains strong, driven by resilient asset quality trends. The net charge-off ratio improved by one basis point sequentially to 29 basis points, outperforming our guidance. Outperformance was driven by accelerated resolutions in the general office portfolio and reduced investor-dependent losses. While the current operating environment has been impacted by geopolitical factors, the broader economy has remained resilient. This backdrop, combined with continued improvement in criticized and classified asset levels and a migration to higher credit quality portfolios, has resulted in lower net charge-offs and a reduction in our allowance for loan losses.

Speaker #4: Period-in-average period-in-average total client funds in the SVB commercial business rose by 1.1 billion and 6.1 billion respectively. Off-balance sheet growth was driven by tech and healthcare and global fund banking, reflecting strong cash and new money inflows from public entities.

Speaker #4: Our credit profile remained strong, driven by resilient asset quality trends. The net charge-off ratio improved by one basis point sequentially, to 29 basis points, outperforming our guidance.

Speaker #4: Outperformance was driven by accelerated resolutions in the general office portfolio and reduced investor dependent losses. While the current operating environment has been impacted by geopolitical factors, the broader economy has remained resilient.

Speaker #4: This backdrop, combined with continued improvement in criticized and classified asset levels, and a migration to higher credit quality portfolios, has resulted in lower net charge-offs and a reduction in our allowance for loan losses.

Speaker #4: Non-accrual loan non-accrual loans held steady quarter over quarter at 96 basis points of total loans, a slightly elevated level reflects timing in resolving a few large loans originally slated for the second quarter.

Craig Nix: Nonaccrual loans held steady quarter-over-quarter at 96 basis points of total loans. The slightly elevated level reflects timing and resolving a few large loans originally slated for the Q2. We expect nonaccrual loans to decline throughout the H2 2026. As of 21 July 2026, we had repurchased over 20% of our common shares outstanding for a total of $6.3 billion, roughly 84% of our total authorization. Share repurchases were $600 million during the quarter. Our CET1 ratio was 10.77 at quarter end. As we approach our CET1 target range of 10% to 10.5%, we are proactively moderating the pace of share repurchases. We anticipate repurchases of approximately $600 million in the Q3 and $300 million in the Q4 as the capital distribution strategy pivots from deploying excess capital towards sustainable capital maintenance. Our capital position remains comfortably above regulatory requirements.

Speaker #4: We expect non-accrual loans to decline throughout the second half of 2026. As of July 21, we had repurchased over 20% of our common shares outstanding, for a total of $6.3 billion roughly $84% of our total authorization.

Speaker #4: Share repurchases were $600 million during the quarter, and our CET-1 ratio was 10.77 at quarter-end. As we approach our CET-1 target range of 10 to 10.5%, we are proactively moderating the pace of share repurchases.

Speaker #4: We anticipate repurchases of approximately $600 million in the third quarter, and $300 million in the fourth quarter as the capital distribution strategy pivots from deploying excess capital toward sustainable capital maintenance.

Speaker #4: Our capital position remains comfortably above regulatory requirements. This provides us with meaningful optionality to support client needs, fund strategic growth initiatives, and deliver consistent, long-term results to our shareholders.

Craig Nix: This provides us with meaningful optionality to support client needs, fund strategic growth initiatives, and deliver consistent long-term results to our shareholders. Turning to page 28, I'll conclude with our outlook for the remainder of 2026. We are projecting Q3 loan balances in the range of $152 to $155 billion, driven by growth in the Commercial Bank and General Bank segments. We reiterate our full year guidance of $153 to $157 billion, underpinned by sustained client activity and the upcoming BMO branch acquisition. In the Commercial Bank, we expect loan growth to be anchored in the commercial finance industry verticals and the seasonably robust factoring business. Global Fund Banking is supported by a healthy $11 billion pipeline, though we anticipate balance growth will moderate following record production and high utilization in the H1 of the year.

Speaker #4: Turning to page 28, I'll conclude with our outlook for the remainder of 2026. We are projecting third-quarter loan balances in the range of $152 to $155 billion driven by growth in the commercial bank and general bank segments.

Speaker #4: We reiterate our full-year guidance of $153 to $157 billion underpinned by sustained client activity and the upcoming BMO branch acquisition. In the commercial bank, we expect loan growth to be anchored in the commercial finance industry verticals and the seasonably robust factoring business.

Speaker #4: Global fund banking is supported by a healthy $11 billion pipeline though we anticipate balance growth will moderate following record production and high utilization in the first half of the year.

Speaker #4: In the general bank, growth is expected to accelerate in the second half of the year fueled by the business and commercial portfolios within the branch network.

Craig Nix: In the general bank, growth is expected to accelerate in H2, fueled by the business and commercial portfolios within the branch network. We also anticipate that the BMO branch acquisition, expected to be completed in Q3, will add approximately $700 million to the loan portfolio. We project Q3 deposits between $179 to 182 billion, driven by our BMO branch acquisition, adding approximately $5.3 billion in deposits. We expect this to be bolstered by growth in the direct bank and branch network, where our digital marketing strategies and pricing enhancements continue to help us capture share. We expect this growth will more than offset normal outflows in tech and healthcare banking as our clients deploy cash into operations or off-balance sheet investment alternatives. We have made significant headway on the FDIC purchase money note, prepaying $8.5 billion through July.

Speaker #4: We also anticipate that the BMO branch acquisition, expected to be completed in the third quarter, will add approximately $700 million to the loan portfolio.

Speaker #4: We project third-quarter deposits between $179 and $182 billion, driven by our BMO branch acquisition, which is adding approximately $5.3 billion in deposits. We expect this to be bolstered by growth in the direct bank and branch network, where our digital marketing strategies and pricing enhancements continue to help us capture share.

Speaker #4: We expect this growth will more than offset normal outflows in tech and healthcare banking as our clients deploy cash into operations or off-balance sheet investment alternatives.

Speaker #4: We have made significant headway on the FDIC purchase money note prepaying 8.5 billion through July. We remain committed to a steady paydown pace of $500 million to $1 billion per month and will also leverage other positive liquidity events to accelerate the paydown, reinforcing balance sheet optimization.

Craig Nix: We remain committed to a steady paydown pace of $500 million to $1 billion per month and will also leverage other positive liquidity events to accelerate the paydown, reinforcing balance sheet optimization. Driven by recent wholesale funding activities and the anticipated positive liquidity event created by the BMO branch acquisition, we expect an acceleration in the pace of paydown in Q3 totaling between $6 to 8 billion. We reaffirm our full-year guidance of $181 to 186 billion, accounting for the BMO branch acquisition and targeted deposit growth. On net interest income, we are maintaining our midpoint while marginally narrowing our full-year range to $6.6 to 6.75 billion. We are guiding to a range of $1.63 to 1.71 billion in Q3. Our guidance factors in 0 to 125 basis points rate hike, potentially moving the Fed funds rate to 4% by year-end.

Speaker #4: Driven by recent wholesale funding activities and the anticipated positive liquidity event created by the BMO branch acquisition, we expect an acceleration in the pace of paydown in the third quarter totaling between 6 to 8 billion dollars.

Speaker #4: We reaffirm our full-year guidance of $181 to $186 billion, accounting for the BMO branch acquisition and targeted deposit growth. On net interest income, we are maintaining our midpoint while marginally narrowing our full-year range to $6.6 to $6.75 billion.

Speaker #4: We are guiding to a range of $1.63 to $1.71 billion in the third quarter. Our guidance factors in 0 to 125 basis points rate hike potentially moving the Fed funds rate to 4% by year-end.

Speaker #4: Headline and accretion net interest income troughed in the first quarter due to interest rate shifts and changes in accretion levels. We expect continued strength in earning asset growth will successfully mitigate modest increases in funding costs as we work to grow deposits across all channels and prepay the FDIC note.

Craig Nix: Headline and ex accretion net interest income troughed in Q1 due to interest rate shifts and changes in accretion levels. We expect continued strength in earning asset growth will successfully mitigate modest increases in funding costs as we work to grow deposits across all channels and prepay the FDIC note. While we remain asset sensitive, the anticipated timing of the rate hikes means the bulk of the net interest margin benefits will be realized in 2027 rather than late 2026, as we expect deposits to reprice more quickly than variable rate loans, which often take up to a quarter to reprice. We expect Q3 net charge-offs in the 30 to 40 basis points range. We are actively managing the commercial general office and innovation portfolios, where we expect charge-offs to continue in the medium term.

Speaker #4: While we remain asset-sensitive, the anticipated timing of the rate hikes means the bulk of the net interest margin benefits will be realized in 2027 rather than late 2026 as we expect deposits to reprice more quickly than variable-rate loans, which often take up to a quarter to reprice.

Speaker #4: We expect third-quarter net charge-offs in the 30- to 40-basis-point range. We are actively managing the commercial general office and innovation portfolios, where we expect charge-offs to continue in the medium term.

Speaker #4: Reflecting our 2026 performance, through the first half of the year, we are moving our full-year net charge-off guidance to 30 to 35 basis points.

Craig Nix: Reflecting our 2026 performance through H1, we are moving our full-year net charge-off guidance to 30 to 35 basis points. We are not observing any systemic trends signaling credit quality deterioration across the broader portfolio and believe we are well reserved. We remain encouraged by our credit results year-to-date and are optimistic the good performance will continue. We expect non-interest income between $520 to 560 million in Q3. Overall, we continue to see strength in many of our business lines such as rail, card and merchant, client investment fees, and wealth. For the full year, we are raising our guidance to $2.14 to 2.22 billion, driven in part by client investment fees benefiting from off-balance sheet volume growth and favorable asset yields in a flat to increasing rate environment.

Speaker #4: We are not observing any systemic trends signaling credit quality deterioration across the broader portfolio and believe we are well-reserved. We remain encouraged by our credit results year-to-date and are optimistic the good performance will continue.

Speaker #4: We expect non-interest income between $520 and $560 million in the third quarter, overall we continue to see strength in many of our business lines such as rail, card and merchant, client investment fees, and wealth.

Speaker #4: For the full year, we are raising our guidance to 2.14 billion to 2.22 billion dollars driven in part by client investment fees benefiting from off-balance sheet volume growth and favorable asset yields and a flat to increasing rate environment.

Speaker #4: In the commercial bank more broadly, we expect continued strength in international fees and seasonal volume lifts and factoring commissions. We also expect continued momentum in wealth via regional talent acquisition and deeper connectivity with general and commercial bank relationship managers.

Craig Nix: In the commercial bank more broadly, we expect continued strength in international fees and seasonal volume lifts and factoring commissions. We also expect continued momentum in wealth via regional talent acquisition and deeper connectivity with general and commercial bank relationship managers. We anticipate sustained stability in deposit fees, and we remain encouraged by the performance of our lending-related businesses as we continue to benefit from strong loan growth and capital markets activity. Finally, we expect high asset utilization and strong lease rate repricing in our rail business through year-end 2026. We project Q3 expenses to remain relatively stable in the $1.33 to $1.37 billion range, and full year in the $5.34 to $5.41 billion range, both improvements from our previous guidance. For Q3, we expect expansion in various categories given the expected completion of the BMO branch acquisition, as well as work on our FCB brand transition.

Speaker #4: We anticipate sustained stability in deposit fees and we remain encouraged by the performance of our lending-related businesses as we continue to benefit from strong loan growth and capital markets activity.

Speaker #4: Finally, we expect high asset utilization and strong lease rate repricing in our rail business through year-end 2026. We project third-quarter expenses to remain relatively stable in the $1.33 to $1.37 billion range and full year in the $5.34 to $5.41 billion range both improvements from our previous guidance.

Speaker #4: For the third quarter, we expect expansion in various categories given expected completion of the BMO branch acquisition as well as work on our SVB brand transition.

Speaker #4: We will continue to utilize the direct bank to support deposit growth in the third quarter but do expect marginally lower marketing expenses as the team has improved efficiency around client acquisition and retention.

Craig Nix: We will continue to utilize the direct bank to support deposit growth in Q3, but do expect marginally lower marketing expenses as the team has improved efficiency around client acquisition and retention. The shift in full-year expenses reflects our ability to continue to find efficiencies in how we operate, which is helping offset the year-over-year impact of the BMO branch acquisition, merit-based increases, direct bank marketing costs, and IT spend as we continue to invest in solutions that simplify our processes and improve our customer experience. We expect that our adjusted efficiency ratio will be in the low 60% range in 2026, as strong revenue performance is partially offset by funding pressures and continued investments in our franchise.

Speaker #4: The shift in full-year expenses reflects our ability to continue to find efficiencies in how we operate which is helping offset the year-over-year impact of the BMO branch acquisition, merit-based increases, direct bank marketing costs, and IT spend as we continue to invest in solutions that simplify our processes and improve our customer experience.

Speaker #4: We expect that our adjusted efficiency ratio will be in the low 60% range in 2026, as strong revenue performance is partially offset by funding pressures and continued investments in our franchise.

Speaker #4: To wrap up on expenses, we are highly encouraged by our current trajectory and the discipline we are seeing across the organization, which reflects deliberate actions to streamline our cost of doing business.

Craig Nix: To wrap up on expenses, we are highly encouraged by our current trajectory and the discipline we are seeing across the organization, which reflects deliberate actions to streamline our cost of doing business. Our strategic focus on operating efficiency and expense management is successfully bending the cost curve, as evidenced by our Q2 performance. We recognize that our efficiency ratio is higher than our ultimate baseline, and we are fully committed to driving this metric down into our mid-50s target range over time. We will continue to focus on cost efficiencies and revenue enhancements to optimize operating leverage and maximize long-term shareholder value. For both Q2 and full year 2026, we expect our tax rate to be in the range of 24.5% to 25.5%, which is exclusive of any discrete items. This concludes our prepared remarks.

Speaker #4: Our strategic focus on operating efficiency and expense management is successfully bending the cost curve, as evidenced by our second quarter performance. We recognize that our efficiency ratio is higher than our ultimate baseline, and we are fully committed to driving this metric down into our mid-50s target range over time.

Speaker #4: We will continue to focus on cost efficiencies and revenue enhancements to optimize operating leverage and maximize long-term shareholder value. For both the second quarter and full year '26, we expect our tax rate to be in the range of 24.5 to 25.5% which is exclusive of any discrete items.

Speaker #4: This concludes our prepared remarks. I will now turn it over to the operator to open the line for questions.

Craig Nix: I will now turn it over to the operator to open the line for questions.

Operator: Ladies and gentlemen, if you have a question or comment at this time, please press star one 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. If your question has been answered and you wish to remove yourself from the queue, please press the pound key. We'll pause for one moment to compile our Q&A roster. Our first question comes from the line of Casey Orr with Autonomous Research. Casey, your line is now open.

Operator: Ladies and gentlemen, if you have a question or comment at this time, please press star one 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. If your question has been answered and you wish to remove yourself from the queue, please press the pound key. We'll pause for one moment to compile our Q&A roster. Our first question comes from the line of Casey Haire with Autonomous Research. Casey, your line is now open.

Speaker #1: Ladies and gentlemen, if you have a question or comment at this time, please press star one on your touchstone telephone. As a courtesy to others on the call, we ask that you limit yourself to one question and one follow-up.

Speaker #1: If your question has been answered and you wish to remove yourself from the queue, please press the pound key. We'll pause for one moment to compile our Q&A roster.

Speaker #1: Our first question comes from the line of Casey Hare with Autonomous Research. Casey, your line is now open.

Speaker #2: Yeah, great. Thanks. Good morning, everyone. One of the touch crack on the NIM came in a little bit stronger than I think what you guys were talking about.

Casey Orr: Yeah, great. Thanks. Good morning, everyone. Wanted to touch, Craig, on the NIM. Came in a little bit stronger than I think what you guys were talking about last quarter. Just some updated thoughts on what the outlook is and maybe where spot deposit costs are versus that 273 IBD level in Q2. Thanks.

Casey Haire: Yeah, great. Thanks. Good morning, everyone. Wanted to touch, Craig, on the NIM. Came in a little bit stronger than I think what you guys were talking about last quarter. Just some updated thoughts on what the outlook is and maybe where spot deposit costs are versus that 273 IBD level in Q2. Thanks.

Speaker #2: Last quarter, just some updated thoughts on what the outlook is, and maybe where spot deposit costs are versus that 2.73 IBD level in the second quarter.

Speaker #2: Thanks.

Speaker #3: Okay. Thank you. For the third quarter, and this is anchored to one rate hike in October. So for the third quarter, we're expecting both baseline and execretion net interest income to be flat with the second quarter.

Craig Nix: Okay. Thank you. For Q3, this is anchored to 1 rate hike in October. For Q3, we're expecting both baseline and ex-accretion net interest income to be flat with Q2. We expect both baseline and ex-accretion NIM to also be flat with Q2. In terms of the Q4 exit, we're expecting headline net interest income to be up low single digits percentage points, and ex-accretion to be up low to mid single digit percentage points. We expect headline NIM and ex-accretion NIM to be flat with Q2. That's the trajectory through H2. In terms of spot rates on total deposits compared to our 2.07% cost of deposits in the quarter, our spot rate was 1.99%.

Speaker #3: We expect both baseline and excretion NIM to also be flat with the second quarter. In terms of the fourth quarter exit, we're expecting headline net interest income to be up low single-digit percentage points.

Speaker #3: And excretion to be up low to mid-single digit basis points—percentage points. We expect headline NIM and excretion NIM to be flat with the second quarter.

Speaker #3: So that's the trajectory through the second half of the year. In terms of spot rates on total deposits, compared to our 2.07% cost of deposits in the quarter, our spot rate was 1.99%.

Speaker #2: Okay. Very good. And then on the capital front, so if I layer in that the $900 million that you're expecting the back half of the year on buyback and then the BMO branch deal that CET1 ends the year at around 10%.

Casey Orr: Okay. Very good. On the capital front, if I layer in the $900 million that you expect in H2 on buyback, and the BMO branch deal, that CET1 ends the year at around 10%. Just thinking about buyback appetite in 2027. You guys would be at your floor, but would you lean into that Basel III proposal? Just trying to get a feel for what buyback would be in next year.

Casey Haire: Okay. Very good. On the capital front, if I layer in the $900 million that you expect in H2 on buyback, and the BMO branch deal, that CET1 ends the year at around 10%. Just thinking about buyback appetite in 2027. You guys would be at your floor, but would you lean into that Basel III proposal? Just trying to get a feel for what buyback would be in next year.

Speaker #2: So, just looking at—or thinking about—buyback appetite in 2027, would you guys—I mean, you guys would be at your floor—but would you lean into that Basel III proposal? Just trying to get a feel for what buyback would be like next year.

Speaker #3: Okay. First of all, and I'll let our expand on this. We expect that our CET1 ratio will be towards the higher end of our target range of 10 to 10 and a half at the end of this year.

Craig Nix: Okay. First of all, I'll let Arch expand on this. We expect that our CET1 ratio will be towards the higher end of our target range of 10% to 10.5% at the end of this year, and that assumes the $900 million of repurchases in H2. Arch, why don't you touch a little bit on the enhanced Basel III-

Speaker #3: And that assumes the $900 million of repurchases in the second half. Arch, why don't you touch a little bit on the Basel III? And our plans there.

Speaker #2: Sure. Sure. Casey, to echo Craig's point, at least on the exit for Q4 this year, we do expect to kind of be at that midpoint of our target range.

[Company Representative] (First Citizens BancShares): Sure

Craig Nix: Our plans there.

[Company Representative] (First Citizens BancShares): Sure, Casey. To echo Craig's point, at least on the exit for Q4 this year, we do expect to kind of be at that midpoint of our target range as we exit the year and as we normalize the share repurchase pace, as Craig had mentioned his prepared remarks. As we're thinking about the Basel refresh and the final rule becoming effective, we've clearly done a lot of work in the back end here to prepare for it. We are not getting too many ducks in a row here until we have that final rule fully in front of us to really start implementing how that might influence the forward capital plan and capital strategy for us internally.

Speaker #2: As we exit the year and as we normalize the share repurchase pace as Craig had mentioned as prepared remarks, as we're thinking about the Basel refresh in the final rule becoming effective, we've clearly done a lot of work in the back end here to prepare for it.

Speaker #2: We are not getting too many ducks in a row here until we have that final rule fully in front of us to really start implementing how that might influence the forward capital plan and capital strategy for us internally.

Speaker #2: But I think as we think about that, we'll certainly have more to share as we think about 2027 and pace at that rule really kind of firms up and becomes a reality.

[Company Representative] (First Citizens BancShares): I think as we think about that, we'll certainly have more to share as we think about 2027 and pace as that rule really kind of firms up and becomes a reality.

Speaker #2: Gotcha. Thank you.

Casey Orr: Got you. Thank you.

Casey Haire: Got you. Thank you.

Speaker #3: Thank you.

Craig Nix: Thank you.

Frank Holding: Thank you.

Speaker #1: Our next question comes from the line of Chris McGrady with KBW. Chris, your line is now open.

Operator: Our next question comes from the line of Chris McGratty with KBW. Chris, your line is now open.

Speaker #4: Oh, great. Good morning. Craig, just following up on the NII and the margin conversation, which is helpful. How would those numbers change if you don't get a hike?

Chris McGratty: Oh, great. Morning. Craig, just following up on the NII and the margin conversation, which is helpful. How would those numbers change if you don't get a hike, if rates stay flat? I guess more about the Q4.

Speaker #4: If rates stay flat? I guess the more of the fourth quarter rates?

Craig Nix: If rates stay flat, if you're looking at Q3, we would still project flat net interest income headline and ex-accretion. We would also anticipate that our NIM headline and ex-accretion have sort of flattened out as well. We might bump up and down a couple of basis points, but we would expect those to be fairly stable as well. Not much impact on 2026. Moving into 2027 with a flat environment, and I'm talking or moving into H2, Q4, we would expect low single-digit growth in both core and ex-accretion NIM and our margins to remain fairly consistent where they are now. Not much change.

Speaker #3: If rates stay flat, looking at the third quarter, we would still project flat net interest income, headline and execretion. We would also anticipate that our NIM headline and execretion have sort of flattened out as well.

Speaker #3: So we might bump up and down a couple of basis points, but we would expect those to be fairly stable as well. So not much impact on not much impact on '26.

Speaker #3: Moving into '27, with a flat environment, and I'm talking or moving into the fourth second half of the year, fourth quarter, we would expect low single digit growth in those core and execretion NIM and our margins to remain fairly consistent where they are now.

Speaker #3: So not much change.

Chris McGratty: Okay. No big change. Okay. I guess broader competitive, a lot of your peers have talked about just the broader competitive dynamic for fundraising and deposits. Your spot rates would suggest that you're holding the line there, but any incremental color on the funding outlook? Thanks.

Speaker #4: Okay.

Speaker #2: No, no big change.

Speaker #4: Okay. And then I guess broader competitive a lot of your peers have talked about just the broader competitive dynamic or fundraising and deposits. Your spot rates would suggest that you're holding the line there.

Speaker #4: But any incremental color on the funding outlook? Thanks.

Speaker #3: Yeah. I think we observe that competition is very fierce for deposits, putting a lot of pressure. And frankly, a lot of banks are putting out deposits that are really unprofitable.

Craig Nix: I think we observe that competition is very fierce for deposits, putting a lot of pressure. Frankly, a lot of banks are putting out deposits that are really unprofitable. The pressure is intense. I think that's really, if you think about our asset sensitivity, we would expect to have much more improvement in margin and net interest income. I think the funding costs are sort of blunting that, muting sort of our position to neutral to where it is now. Elliot, any more comments on deposit competition, funding costs, et cetera?

Speaker #3: So the pressure is intense. And I think that's really if you think about our asset sensitivity, we would expect to have much more improvement in margin and net interest income.

Speaker #3: And I think the funding costs are sort of blunting sort of blunting that muting sort of our position to a neutral to where it is now.

Speaker #3: Elliot, any more comments on deposit competition, funding costs, etc.?

Elliot Howard: I think that's right. I think we're very pleased with what we were able to raise in direct bank in Q2. I think that being said, rates are kind of marginal cost in that channel, more than 4%. I do think, not just in direct bank, but others, we're seeing good competition out there that's pushing rates a little bit higher. Really, Greg, would echo your comments there.

Speaker #5: I think that's right. I mean, I think we're very pleased with what we're able to raise in direct bank. In the second quarter, I think that being said, I mean, rates are kind of marginal cost in that channel, 4%.

Speaker #5: So I do think not just in direct bank but others, we're seeing good competition out there that's pushing rates a little bit higher. So really, Craig would echo your comments there.

Speaker #4: Awesome. Thank you so much.

Chris McGratty: Awesome. Thank you so much.

Speaker #1: Our next question comes from the line of Bernard Vongitzky with Deutsche Bank. Bernard, your line is now open.

Operator: Our next question comes from the line of Bernard von Gizycki with Deutsche Bank. Bernard, your line is now open.

Bernard von Gizycki: Hey, guys. Good morning. On the FDIC note, wanted to get an updated sense of where you think the remainder proceeds come from. I know you're down to $27 billion with the $1 billion paid in July. Craig, you mentioned the $6 billion to $8 billion pay down using the BMO branch acquisition in Q3. Kind of curious, is the remaining after that, so Q4 on until it's paid off, just the $500 million to $1 billion a month like you said? Wanted to get some updates.

Speaker #6: Hey, guys. Good morning. Just on the FDIC note, just wanted to get an updated sense of where you think the remainder proceeds come from.

Speaker #6: I know you're down to 27 billion. With the 1 billion paid in July, Craig, you mentioned the 68 billion paid down using the BMO branch acquisition in 3Q.

Speaker #6: Just kind of curious, is the remaining after that, so 4Q on until it's paid off, just the 500 million to million or billion, sorry, a month, like you said, just wanted to get some updates.

Speaker #3: No, the $1.5 billion to $3 billion a quarter is sort of a natural run rate. But beyond that, we would repay— to date, we've repaid through excess liquidity on our balance sheet.

Craig Nix: No, the $1.5 billion to $3 billion a quarter is sort of a natural run rate. Beyond that, to date, we've repaid through excess liquidity on our balance sheet. We'd expect to continue to prepay from that. We have good capacity at the Federal Home Loan Bank, we might draw on that. We are planning on doing some more long-term debt issuance, that would be a source, and then broker deposits if needed. Arch, anything you'd like to add to that?

Speaker #3: We'd expect to continue to prepay from that. We have good capacity at the Federal Home Loan Bank, so we might draw on that. We are planning on doing some more long-term debt issuance.

Speaker #3: So that would be a source, and then broker deposits if needed. Arch, anything you'd like to add to that?

Speaker #2: The only thing I'll echo there is just continued execution through the deposit channels. Obviously, branch and commercial—we're still looking at growth there over the long run.

[Company Representative] (First Citizens BancShares): Only thing I'll echo there is just continued execution through the deposit channels. Obviously, branch and commercial, we're still looking at growth there over the long run. To Craig's point, echoing there, we do have a diverse menu of funding opportunities ahead of us, I think, to really kind of measure the purchase money note down over time ahead of that 2028 maturity.

Speaker #2: But to Craig's point, echoing there, we do have a diverse menu of funding opportunities ahead of us, I think, to really kind of measure the purchase money note down over time ahead of that 2028 maturity.

Speaker #3: Yeah. And just with respect to our projection of 6 to 8 billion, and prepayments for the third quarter, that'll come from a combination of that normal billion and a half to 3 billion dollar run rate plus the net liquidity provided from the BMO branch acquisition.

Craig Nix: With respect to our projection of $6 to 8 billion in prepayments for Q3, that'll come from a combination of that normal $1 billion and a half to 3 billion dollar run rate, plus the net liquidity provided from the BMO branch acquisition.

Speaker #6: Great. And just as a follow-up, just given all those moving parts, when we think about your asset sensitivity, obviously, it's an outlier versus peers the FDIC note's been a big part of it.

Bernard von Gizycki: Great. Just as a follow-up, given all those moving parts, when we think about your asset sensitivity, obviously it's an outlier versus peers. The FDIC note's been a big part of it. Greg, you mentioned that the bulk of rate hikes, if they occur, the NIM will benefit next year. Just wondering, if you were to replace the note, obviously, there's different factors that you kind of mentioned, how would that impact your rate asset sensitivity?

Speaker #6: And Greg, you mentioned that the bulk of rate hikes, if they occur, the NIM will benefit next year. Just wondering, if you were to replace the note obviously, there's a different factors that you kind of mentioned.

Speaker #6: How would that impact your rate asset sensitivity?

Craig Nix: I lost you on the last part of that question. How would it impact what?

Speaker #3: I lost you on the last part of that question. How would it impact what?

Bernard von Gizycki: Your asset sensitivity once you get rid of the note.

Speaker #6: Your asset sensitivity, once you get rid of the note?

Speaker #3: Okay, thank you. Thank you. I got you.

Craig Nix: Okay. Thank you. I got you.

Speaker #2: This is our chair responded to that one as well. On the note itself, just as a tool or as a line item there, it is a fixed rate note on the balance sheet.

[Company Representative] (First Citizens BancShares): This is Arch here responding to that one as well. On the note itself, just as a tool or as a line item there, it is a fixed-rate note on the balance sheet. For us, it does accentuate from a mix perspective, the sensitivity on the balance sheet for us. As we go into replacement funding, whether that's coming through deposit channels or whether those are coming through wholesale funding channels, it permits us more flexibility to manage the sensitivity off the liability side of the balance sheet than we have today. I think as we look at gradual replacement of that funding, it'll just provide us more flexibility as we manage the sensitivity position on the balance sheet inherently there.

Speaker #2: So for us, it does accentuate from a mixed perspective—the sensitivity on the balance sheet, for us. So as we go into replacement funding, whether those are coming through deposit channels or whether those are coming through wholesale funding channels, it permits us more flexibility to manage the sensitivity of the liability side of the balance sheet than we have today.

Speaker #2: So, I think as we look at the gradual replacement of that funding, it'll just provide us more flexibility as we manage the sensitivity position on the balance sheet inherently there.

Speaker #6: Okay. Thanks for taking my questions.

Bernard von Gizycki: Okay. Thanks for taking my questions.

Speaker #1: Our next question comes from the line of David Kiaverini with Jefferies. David, your line is now open.

Operator: Our next question comes from the line of David Chiaverini with Jefferies. David, your line is now open.

Speaker #6: Hi. Thanks for taking the questions. I wanted to touch on loan growth. Strong SVB commercial and capital call line utilization. Can you talk about the outlook from here, how sustainable it can be?

David Chiaverini: Hi. Thanks for taking the questions. I wanted to touch on loan growth. Strong SVB commercial and capital call line utilization. Can you talk about the outlook from here, how sustainable it can be? It sounds like tech, healthcare, middle market is also performing well. Can you talk about the outlook?

Speaker #6: And also, it sounds like tech, healthcare, middle market is also a performing well. Can you talk about the outlook?

Speaker #2: Yeah. I think on both of those, we're very positive right now. I think global fund banking, I mean, we've had a lot of really strong production and utilization.

Elliot Howard: Yeah, I think on both of those, we're very positive right now. I mean, we've had a lot of really strong production and utilization over the past few quarters. I think we would expect utilization to moderate, but we would still, even with that, expect balances to grow. We have very healthy pipelines right now. I think we've seen good activity. Second healthcare certainly had a great quarter. It was our highest quarter of growth really since 2023. I think there's some very strong fundamentals just kind of industry wide there. In middle market, I think middle market's really kind of a build of that line of business, right? We put a lot of effort as we're kind of translating some of the legacy SVB products over to that line of business.

Speaker #2: Over the past few quarters, I think we would expect utilization to moderate, but we would still, even with that, expect balances to grow. A very healthy pipelines right now.

Speaker #2: I think we've seen good activity. And then tech and healthcare certainly had a great quarter. It was our highest quarter of growth, really, since 2023.

Speaker #2: I think there's some very strong fundamentals, just kind of industry-wide there. In middle market, I think middle market's really kind of a build of that line of business, right?

Speaker #2: We put a lot of effort as we're kind of translating some of the legacy SVB products over to that line of business. I think we've seen strong growth, and that's really kind of So really kind of positive, I think, across kind of those three lines of business right now.

Elliot Howard: I think we've seen strong growth, and that's really kind of extended to the loan side as well. Really kind of positive I think across kind of those three lines of business right now. Marc Cadieux, I'm not sure if you want to add anything.

Speaker #2: Mark Cadre, I'm not sure if you want to add anything.

Speaker #3: Elliot, I think you covered it very well. Thank you. I have nothing to add.

Marc Cadieux: Elliot, I think you covered it very well. Thank you. Nothing to add.

David Chiaverini: Thanks for that. As my follow-up, loan pricing, can you talk about how spreads are trending in the competitive environment?

Speaker #6: And as my thanks for that. And as my follow-up, loan pricing, can you talk about how spreads are trending and the competitive environment?

Speaker #2: I think the competitive environment is strong. I think we've seen spreads come in, even in areas like Global Fund Banking. I would say we've started to see some moderation in some of that spread tightening.

Elliot Howard: I think the competitive environment is strong. I think we've seen spreads come in even in areas like global fund banking. I would say we've started to see some moderation in some of that spread tightening. We might have a little bit more to go, we think kind of the worst is probably behind us. I think overall in regional banking, I think competitors are out there. I think they're lending. Competition is strong out there. We feel like we're competing very well, even against that backdrop.

Speaker #2: So we might have a little bit more to go, but we think kind of the worst is probably behind us. But I think overall in regional banking, I think competitors are out there.

Speaker #2: I think they're lending. And so competition is strong out there, but we feel like we're competing very well even against that backdrop.

Speaker #6: Very helpful. Thank you.

David Chiaverini: Very helpful. Thank you.

Speaker #1: Our next question comes from the line of Anthony Ellian with JP Morgan. Anthony, your line is now open.

Operator: Our next question comes from the line of Anthony Elian with J.P. Morgan. Anthony, your line is now open.

Speaker #7: Hi, everyone. Just on the other side of SVB's balance sheet, the deposit trends on and off slowed a little bit from the prior quarter.

Anthony Elian: Hi, everyone. Just on the other side of SVB's balance sheet, the deposit trends on and off slowed a little bit from the prior quarter. Marc, maybe what are you seeing there? Has sentiment changed now that the forward curve has a hike in it? Anything there would be great. Thank you.

Speaker #7: Mark, maybe what are you seeing there as sentiment change now that the forward curve has a hike in it? Anything there would be great.

Speaker #7: Thank you.

Speaker #3: Sure. So our clients continue to like that there are interest rates and an ability to get a return these days. But having said that, based on the really focusing on the average numbers, we continue to be pleased with the continued execution, our ability to attract new client balances and, as I think already referenced, very pleased with the strong execution through the first half

Marc Cadieux: Our clients continue to like that there are interest rates and an ability to get a return these days. Having said that, based on really focusing on the average numbers, we continue to be pleased with the continued execution, our ability to attract new client balances, and as I think already referenced, very pleased with the strong execution through the H1.

Speaker #7: Thank you. And then on credit, the large reserve release you saw this quarter was driven by lower specific reserves and improvements in credit quality. It looks like you also had some model updates.

Anthony Elian: Thank you. On credit, the large reserve release you saw this quarter driven by lower specific reserves, improvements in credit quality. It looks like you had some model updates. Would you categorize that as being one-time in nature, or are there more model refinements and fine-tunings to come in the H2 that could drive additional releases? Thank you.

Speaker #7: Would you categorize that as being one-time in nature, or are there more model refinements and fine-tunings to come in the second half that could drive additional releases?

Speaker #7: Thank you.

Craig Nix: No, those are largely behind as model enhancements.

Speaker #3: No, those are largely behind as model enhancements.

Speaker #7: Thank you.

Anthony Elian: Thank you.

Speaker #1: Our next question comes from the line of Janet Lee with TD Cohen. Janet, your line is now open.

Operator: Our next question comes from the line of Janet Lee with TD Cowen. Janet, your line is now open.

Speaker #5: Good morning.

Janet Lee: Good morning.

Speaker #3: Good morning.

Craig Nix: Good morning.

Speaker #5: On deposits and the paydown of the FDIC purchase note, if and when SVB deposits increase meaningfully, at what point would you be inclined to use some SVB deposits to pay potentially pay down on the purchase note, or is that out of the question?

Janet Lee: On deposits and the pay down of the FDIC purchase note, if and when SVB deposits increase meaningfully, at what point would you be inclined to use some SVB deposits to potentially pay down the purchase note, or is that out of the question?

Speaker #7: Hey, Janet. This is our chair. On the SVB deposit specifically, we do have some of those on balance sheet. We are circling those from a conservative nature to bring and retain those on balance sheet that provide us with the liquidity factors and quality that are preferred to us as we manage the balance sheet and liquidity position.

[Company Representative] (First Citizens BancShares): Hey, Janet, this is Arch here. On the SVB deposit specifically, we do have some of those on balance sheet. We are circling those from a conservative nature to bring and retain those on balance sheet that provide us with the liquidity factors and quality that are preferred to us as we manage the balance sheet and liquidity position. As you can see with the off-balance sheet build that we've had, we continue to manage those relationships very dynamically and very well with the growth in that business and those client relationships. There are certainly questions around how we think about that off-balance sheet deposit quality over time as we continue to get our hands around the deposit franchise.

Speaker #7: As you can see with the off-balance sheet bill that we've had, we continue to manage those relationships very dynamically and very well with the growth in that business and those client relationships.

Speaker #7: There are certainly questions around how we think about that off-balance-sheet deposit quality over time as we continue to get our hands around the deposit franchise.

Speaker #7: But for where we're sitting right now, as we look at the purchase money note path, we are not bringing in any sort of that off-balance sheet product as it's positioned today to kind of support how we are looking at the forecast path for the purchase money note.

[Company Representative] (First Citizens BancShares): For where we're sitting right now, as we look at the purchase money note path, we are not bringing in any sort of that off-balance sheet product as it's positioned today to kind of support how we are looking at the forecast path for the purchase money note.

Speaker #5: Got it. Could you give us a little more color around where the deposit at what price or at what rate the deposits are coming in from the direct bank channel today?

Janet Lee: Got it. Could you give us a little more color around where the deposit, at what price or at what rate the deposits are coming in from the direct bank channel today? Is it largely still neutral to NII as you're using those to pay down the purchase note?

Speaker #5: And is it largely still neutral to NII as you're using those to pay down the purchase note?

Craig Nix: The spot rate right now in the direct bank is 3.71. The highest offer grade is 4.1.

Speaker #3: The spot rate right now in Direct Bank is 3.71%, and the highest offer grade is 4.1%.

Speaker #5: Okay. So.

Janet Lee: Okay.

Speaker #3: That's in the $371, compared to the cost of $370 during the second quarter. So, fairly neutral.

Craig Nix: The 3.71 compares to the cost of 3.70 during Q2, so fairly neutral.

Speaker #5: Okay. And should we assume that that is going to be the primary avenue to pay down, alongside the brokered? Or is that a fair assumption?

Janet Lee: Okay. Should we assume that that is going to be the primary avenue to pay down alongside the brokered, or is that a fair assumption?

Speaker #3: Well, our assumption is it'll come from excess liquidity, which will be deposit growth and excess loan growth, about a third of that for the remainder of the year.

Craig Nix: Well, our assumption is it'll come from excess liquidity, which will be deposit growth in excess of loan growth. About a third of that for the remainder of the year we'd expect to come from the direct bank. Then again, FHLBs out there, long-term debt issuance is an option and further broker deposit issuance if needed. We feel very confident in our ability to prepay the purchase money note.

Speaker #3: We expect to come from the direct bank. And then again, FHLBs out there, long-term debt issuance is an option, and further broker deposit issuance, if needed.

Speaker #3: But we feel very confident in our ability to note.

Speaker #5: Got it. Thank you.

Janet Lee: Got it. Thank you.

Speaker #3: Thank you.

Craig Nix: Thank you.

Operator: Our last question comes from the line of Christopher Marinac with Green Capital. Christopher, your line is now open.

Operator: Our last question comes from the line of Christopher Marinac with Brean Capital. Christopher, your line is now open.

Speaker #1: Our last question comes from the line of Christopher Marinak with Green Capital. Christopher, your line is now open.

Speaker #7: Hey, thank you for hosting us this morning. I wanted to ask about additional deposit acquisitions beyond the BMO transaction. Is BMO unique, or are there others out there that you could do?

Christopher Marinac: Hey, thank you for hosting us this morning. I wanted to ask about additional deposit acquisitions beyond the BMO transaction. Is BMO unique or are there others out there that you could do?

Speaker #3: We have no other current ones in the queue. We're very pleased with the BMO acquisition, though.

Craig Nix: We have no other current ones in the queue. We're very pleased with the BMO acquisition, though.

Speaker #7: Okay, sounds good. Thank you again for hosting this morning.

Christopher Marinac: Okay. Sounds good. Thank you again for hosting this morning.

Speaker #3: Yep. You're welcome. Thank you.

Craig Nix: Yep. You're welcome. Thank you.

Speaker #1: There will be no further questions at this time. I'd like to turn the call back over to our host, Ms. Deanna Hart, for closing remarks.

Operator: There will be no further questions at this time. I'd like to turn the call back over to our host, Ms. Deanna Hart, for closing remarks.

Speaker #8: Thank you. And thank you, everyone, for joining our call this morning. 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.

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

Speaker #8: We hope you have a great rest of your day.

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

Q2 2026 First Citizens BancShares Inc Earnings Call

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First Citizens BancShares

Earnings