First Citizens BancShares Third Quarter 2026 Earnings Call - FIRST CITIZENS BANCSHARES INC

Explicit Guidance:

• Full Year 2026 Net Interest Income (NII): Raised to $6.68–6.75 billion.
• Q4 2026 Net Interest Income: New range of $1.70–1.77 billion, incorporating zero to 125 basis points of potential rate hikes.
• Full Year 2026 Net Interest Margin (NIM): Projected to expand; Q4 2026 NIM expected in the mid-300s basis points excluding accretion.
• Full Year 2026 Adjusted Non-Interest Income: Raised to $2.22–2.26 billion.
• Q4 2026 Adjusted Non-Interest Income: Range of $540–580 million.
• Full Year 2026 Net Charge-Off (NCO) Ratio: Tightened to 29–31 basis points.
• Q4 2026 Net Charge-Off Ratio: Expected to remain stable at 30–35 basis points.
• Full Year 2026 Adjusted Non-Interest Expense: Range of $5.39–5.43 billion.
• Q4 2026 Adjusted Non-Interest Expense: Range of $1.35–1.39 billion.
• Full Year 2026 Effective Tax Rate: Expected range of 24.5–25.5%.
• Q4 2026 Loan Growth: Raised guidance to $158–161 billion.
• Q4 2026 Deposit Growth: New range of $189–192 billion.
• Q4 2026 Share Repurchases: Projected at approximately $300 million.
• Q4 2027 NII Growth: Baseline assumes one rate hike in Q4 2027; projected low-to-mid single-digit percentage growth for 2027 NII excluding accretion.
• 2027 NIM Exit: Headline NIM expected in the mid-320s basis points; NIM excluding accretion in the low-320s.
• 2027 Funding & Capital: Anticipate $1–2 billion in aggregate senior unsecured and subordinated debt issuances through year-end 2027 to support capital levels and note repayment.
• FDIC Note Prepayment: Guidance to maintain $3.5–4 billion in quarterly prepayments through end of 2027 to extinguish the remaining balance.

Business-Segment Outlook:

• Fund Banking: Anticipates loan growth moderating from Q3's exceptional pace but remaining robust; pipeline averages $10 billion; utilization rates expected to normalize from ~40% but remain healthy; competitive pricing compression has slowed.
• Innovation Banking: Loan growth driven by tech sector and commercial finance referrals; deposit growth expected to remain robust despite client cash burn.
• General Bank: Projected steady, reliable loan growth driven by branch network and wealth management expansion; deposit growth fueled by branch network and direct bank channels.
• Direct Bank: Expected to contribute to organic deposit growth via high-quality, granular inflows.
• Rail Business: Continues to capture high-value expansion with exceptional utilization stability and resilient positive repricing trends.
• Balance Sheet Optimization: Systematic prepayment of FDIC purchase money note expected to continue, accelerating liquidity from organic deposit growth.

Market and Competitive Outlook:

• Capital Markets & VC Ecosystem: Elevated demand for capital deployment and fundraising among established managers; growth influenced more by capital deployment than rate movements alone; IPO exits remain below desired levels but secondaries provide liquidity.
• Pricing & Competition: Loan yield compression in fund finance has slowed; banks evaluating opportunities based on total relationship returns (lending, deposits, fees) rather than isolated spreads.
• M&A Strategy: No specific current deals for whole bank acquisitions; open to opportunistic M&A (whole bank or branch) to improve liquidity profiles and increase scale; regulatory environment viewed as supportive of M&A.
• Digital Banking: Secular trend of consumer adoption of digital-only banking continuing to expand scale and reduce depositor concentration.

Macro / Industry Outlook:

• Interest Rates: Baseline scenario assumes one rate hike in Q4 2026 and two in 2027; acknowledges uncertainty but confident in ability to manage asset sensitivity and funding cost drag.
• Economic Activity: Higher rates could slow venture investment pace, particularly for higher leverage transactions, though enthusiasm remains undiminished as of Q3 2026.
• Regulatory Environment: View recent proposed changes (FRB supervisory principles, FDIC rulemaking, tailoring) as highly positive; estimate standardized Basel III approach could reduce risk-weighted assets by mid-to-high single digits and be accretive to CET1 by ~70 basis points.
• FDIC Note Impact: Replacing the fixed-rate FDIC note with higher-cost funding sources (FHLB, debt issuances) expected to create a temporary margin drag, offset by earning asset yield expansion.

Strategic Initiatives:

• FDIC Note Repayment: Committed to extinguishing remaining balance by end of 2027; $17 billion prepaid to date (47% of original).
• BMO Branch Integration: Full financial impact expected to be realized in Q4 2026; acquisition successfully added $6.9 billion in deposits and $650 million in loans.
• Capital Return: Announced new $1.2 billion share repurchase plan commencing in 2027; current focus shifting from deploying historical excess capital to a sustainable run rate.
• Technology & Infrastructure: Continued investment in digital infrastructure and data center modernization; ongoing vendor relationship optimization to maximize efficiency.
• Brand Alignment: SVB brand transition complete with positive client sentiment; no significant friction reported.

Risks and Headwinds to Outlook:

• Valuation Fluctuations: Warrant income subject to periodic fair value adjustments based on public/private market valuations, causing non-operational revenue volatility.
• Utilization Rates: Fund banking utilization levels (currently ~40%) are macro-driven and may normalize downward; outside management's control.
• Funding Costs: Replacement of the FDIC note with higher-cost alternatives (FHLB, debt) may exert downward pressure on margins.
• IPO Market: Persistent high barriers to IPOs could limit capital realization and round-trip activity for venture clients.
• Rate Sensitivity: Potential deviation between forward rate curves and actuals could marginally impact margin trajectory, though offset by loan repricing.

Management Tone on the Future:

• Confidence Level: "Extremely well-positioned," "highly confident," "unwavering confidence" in growth trajectory and balance sheet resilience.
• Strategic Shift: Transitioning from aggressive capital deployment (excess capital) to a normalized, sustainable capital run rate prioritizing organic growth.
• Resilience: Emphasizes structural resilience across business lines, not dependent on single interest rate cycles or macro variables.
• Execution: Praised team execution in Q3 and commitment to operating efficiency and expense discipline.

Miscellaneous:

• CET1 Ratio: Currently 10.24% at quarter end, within target range; pace of repurchases will moderate.
• Non-Accrual Loans: Expected to continue declining as asset resolution outpaces new inflows.
• Deposit Mix: Continued strategic use of brokered CDs to supplement organic growth and optimize funding costs.
• Expense Drivers: Q4 2026 expenses include seasonally higher benefits, increased incentive compensation, and higher professional fees tied to milestone projects.