First Citizens BancShares, Inc. Q2 FY2025 earnings call

• Key earnings metrics were solid, with net interest income growth, low net charge-offs, and adjusted noninterest expense in the guidance range. <br>- Maintained strong capital and liquidity positions, returning $613 million to shareholders via share repurchases. <br>- Progressed on 2025 strategic priorities, consolidating platforms and relationship teams and seeing positive momentum. <br>- Appointed Diane Morais to the Board, whose experience aligns with the company's customer-centric focus. <br>- Rail business utilization remained high (96.9%) with 15th consecutive quarter of positive repricing trends. <br>- General Bank implemented new deposit growth tactics to accelerate growth through deepening relationships and improving digital capabilities.

Net Interest Income: Growth was noted, with net charge-offs at their lowest level since the second quarter of 2024 and adjusted noninterest expense at the low end of the guidance range. Adjusted earnings per share were $44.78, adjusted ROE was 11.00%, and ROA was 1.07%. <br>Adjusted Noninterest Income: Increased by $34 million or 7.2%, driven by favorable changes in the fair value of customer derivative positions and other nonmarketable investments, and increased rental income in the rail business ($5 million sequentially). <br>Loans: Declined modestly by $89 million (0.1%) sequentially, with growth in Global Fund Banking within the SVB Commercial segment and in the General and Commercial Bank segments, offset by a decline in the tech and healthcare portfolio within the SVB Commercial segment. <br>Deposits: Up $610 million (0.4%) sequentially, driven by growth in the Direct Bank ($941 million) and SVB Commercial, with demand deposits up $2.2 billion annually. <br>Credit: Net charge-offs declined, with the allowance ratio at 1.18%, and well reserved against potential losses. <br>Capital: Returned $613 million to shareholders via share repurchases in the second quarter, and the Board approved a new $4 billion share repurchase plan.

• Loans: 3Q loans expected to be in the $141 billion to $144 billion range, full year $143 billion to $146 billion. <br>- Deposits: 3Q deposits expected to be in the $159 billion to $162 billion range, full year $161 billion to $166 billion. <br>- Headline Net Interest Income: 3Q expected to be stable, full year tightened to $6.68 billion to $6.88 billion from prior range. <br>- Net Charge-offs: 3Q expected 35 to 45 basis points, full year maintained 35 to 45 basis points range. <br>- Adjusted Noninterest Income: 3Q $480 million to $510 million, full year $1.97 billion to $2.05 billion. <br>- Adjusted Noninterest Expense: 3Q modestly up, full year $5.1 billion to $5.2 billion.

• Macro and geopolitical uncertainty, including tariff policy, interest rates, and regulatory change. <br>- Credit risk from tariffs difficult to determine full impact. <br>- Volatility in client derivative positions affecting noninterest income. <br>- Muted IPO activity and macroeconomic uncertainty impacting SVB business. <br>- Potential deposit outflows in SVB Commercial and Global Fund Banking.

Q: On loan growth outlook, especially SVB pipeline. <br>A: SVB pipeline is up, but utilization pulled in, with a conservative outlook but strong fundamentals in tech, media, telecom, energy, and health care. <br>Q: FDIC purchase money note and FHLB capacity. <br>A: Declining rates would precipitate paydown of the note in 2026, with preference for core deposit growth first, then broker deposits, FHLB advances, and long-term debt. <br>Q: Deposit growth and SVB deposits. <br>A: Cautiously optimistic, expecting some outflows in SVB, with flat guidance otherwise. <br>Q: Deregulation and deposit opportunities. <br>A: Well positioned to grow deposits, encouraged by M&A activity. <br>Q: NIM and rate cuts. <br>A: Rate cuts move NIM troughs to 1Q 2026. <br>Q: Deposit betas and competitive pressures. <br>A: Beta approaching cycle levels, continue managing interest expense, well positioned in credit. <br>Q: Bank charters and Web3 services. <br>A: Continue to compete, well positioned in Web3 with existing services, fluid in future offerings. <br>Q: NIM trough and TLAC debt. <br>A: Rate cuts affect NIM trough timing, with modest LTD requirements and optimizing capital stack. <br>Q: Deposit betas and future. <br>A: Depends on rate forecasts, continue working to raise betas.