First Citizens BancShares, Inc. earnings

Management highlights

- Overall performance: Pleased with first quarter results, despite lower rates, saw strong deposit growth, strong credit quality, and expenses below expectations. - Brand strategy: Expanding commercial solutions and optimizing brand portfolio, transitioning to a united brand structure in Q4 2026 with innovation banking and fund banking sub-brands under First Citizens umbrella. - Balance sheet: Period-end loans grew, driven by global fund banking; period-end deposits grew, with strong organic growth in core segments and use of broker deposits. - Credit: Provision was $103 million, up $46 million from prior quarter, but net charge-off ratio was favorable; NDFI exposure is $38.8 billion with specific structure details. - Capital position: Returned $900 million to shareholders through share repurchases, prepayed $2.5 billion to FDIC on promissory note; CET1 ratio at 10.83%, adjusted CET1 target range to 10-10.5%, and revised Basel III proposal may benefit CET1 ratio by 70-100 basis points.

Guidance

- Balance sheet: Loans expected to land between $149 billion and $152 billion at end of Q2 2026, full-year loan guidance $153 billion to $157 billion. Deposits anticipated to be between $171 and $174 billion in Q2 2026, full-year deposit guidance $181 to $186 billion. - Net interest income and rate outlook: Second quarter headline net interest income expected in 1.6 billion to $1.67 billion range, full-year net interest income guidance marginally tightened to $6.5 to $6.8 billion. - Credit: Second quarter net charge-offs expected in 35 to 45 basis point range, full-year net charge off outlook lowered to 30 to 40 basis points. - Non-interest income: Second quarter non-interest income expected in $520 to $550 million range, full-year adjusted non-interest income guidance raised to $2.12 to $2.22 billion. - Expenses: Second quarter expenses expected in $1.34 to $1.38 billion range, four-year expense range revised to $5.34 billion to $5.43 billion, and united brand strategy expected to add $20 to $30 million to full-year non-interest expense. - Tax rate: Expected to be in range of 24.5% to 25.5% for second quarter and full year 2026.

Segment performance

Adjusted earnings per share was $44.86, adjusted ROE was 10.39%, adjusted ROA was 0.97%. Deposit growth accelerated by 5.7% sequentially, anchored by tech, healthcare, and global fund banking. Period-end loans grew $762 million, or 0.5% sequentially, driven by global fund banking. Period-end deposits grew by $9.3 billion, or 5.7% sequentially. Off-balance sheet client funds rose $8.1 billion to nearly $78 billion. Credit quality remained strong with net charge-off ratio at 30 basis points, down nine basis points from the prior quarter.

Risks & headwinds

- Macro environment: Broader macro environment poses a guarded outlook for loan growth in middle market banking. - Deposit outflows: Some deposits from global fund banking and tech and healthcare clients could be lumpy and result in outflows. - Credit risk: While credit quality remained strong, some specific credits led to increase in non-accrual loans, and there are concerns regarding private credit and NDFI exposures. - Competition: Intense competition in deposits with peers, affecting deposit pricing and betas.

Analyst Q&A

• Q: Chris McGrady with KBW asked about the new CET1 target and Basel III benefit, and near-term buybacks and capital uses.

  A: Craig said repurchases have ranged from $600 to $900 million per quarter and would moderate to lower end of 10-10.5% range for next two quarters. On NAI guide, Craig explained trajectory for 2Q26 and fourth quarter exit.

• Q: Casey Hare with Autonomous Research asked about deposit growth outlook, especially on SVB side.

  A: Elliot and Mark said they expect continuing growth through end of year for SVB, with moderate growth in second quarter.

• Q: Anthony Ellion with JP Morgan asked about software industry exposure in loans and deposits.

  A: Andy elaborated on on-balance sheet software exposure ($8.1 billion in about $14.4 billion of exposure) and the composition of the portfolio including emerging growth VC backed, middle market software companies, and cash secured/ABL transactions.

• Q: Bernard Von Geziki with Deutsche Bank asked about deposit competition and broker deposits.

  A: Mark, Elliot, and Tom discussed intense deposit competition, with broker deposits having lower all-in cost compared to direct bank, and expectation of continuing to monitor market conditions.

• Q: David Cavarini with Jefferies asked about loan outlook for middle market and loan pricing.

  A: The speaker said there is guarded optimism for middle market loan growth due to macro uncertainty, and loan pricing competition is intense and remaining so.

• Q: Christopher Marinak with Breen Capital LLC asked about FDIC purchase money note and broker deposits.

  A: The speaker said they anticipate paying down at least $500 million to $1 billion per month on the FDIC purchase money note and that broker deposits are not constrained with opportunities for cost-effective execution, and the direct bank is still expected to grow.