First Citizens BancShares, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the First Citizens Bank Shares First Quarter 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, 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.

Good morning and thank you. Welcome to First Citizens First Quarter 2026 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, for citizens is not responsible for and does not guarantee the accuracy of earnings transcripts provided by third parties. I will now turn it over to Frank.

Thank you, Deanna. Good morning and welcome, everyone. Thank you for joining us. I'll start by highlighting our overall performance for the quarter before turning it over to Craig Nix to take you through our financial results and outlook for 2026 in more detail. Starting on page five, we were pleased with our first quarter results. This morning, we reported adjusted earnings per share of $44.86, representing an adjusted ROE and ROA of 10.39% and 0.97% respectively. While lower rates were a headwind, we saw strong deposit growth, Credit quality remained strong and expenses came in below our expectations. Deposit growth accelerated this quarter up by 5.7% sequentially, anchored by increased client activity in tech and healthcare and global fund banking. In addition, deposits grew in the general bank segment and the direct bank. This growth was also supplemented by the strategic use of broker deposits to further bolster our liquidity position. We also achieved solid increases in off-balance sheet client funds driven by the tech and healthcare and global fund banking businesses. We continue to optimize our capital stack, returning another $900 million to shareholders through share repurchases, Due to our strong liquidity position, we were able to prepay another $2.5 billion to the FDIC on our FDIC promissory money note during the quarter. Turning to our announcement this morning, we are expanding our commercial solutions and optimizing our brand portfolio to better serve our clients and drive growth. In 2026, we are accelerating our strategic roadmap by expanding capabilities in payments, international banking, and digital assets. As part of this growth, we will transition to a united brand structure in the fourth quarter, featuring innovation banking and fund banking sub-brands under the First Citizens umbrella. Brand adjustments always generate questions, and we want to be perfectly clear that while names are changing, the client experience is not. Our relationship teams remain the cornerstone of our service, providing the same deep specializations that our clients rely on. This brand alignment simply opens the door to a larger platform of solutions and a more connected network of experts for the future. Despite a complex global backdrop, we continue to operate from a position of strength. Our capital, liquidity, and risk discipline provide a solid foundation that allows us to focus on what matters most, serving our clients and customers and continuing to drive long-term shareholder value. We are confident in our strategy, disciplined in our execution, and very optimistic about the path ahead. I'll conclude with that and pass it over to Craig next to take us through the financial results for the quarter and guidance for the remainder year. Craig?

Thank you, Frank, and good morning, everyone. I will anchor my comments to page eight of the presentation. Pages 9 through 27 provide details underlying our first quarter results. In the first quarter, we delivered adjusted earnings of $44.86 per share on net income of $560 million. The sequential decline of $6.41 per share largely reflects the impact of lower interest rates on our net interest margin. However, we were pleased that lower non-interest expense helped offset a portion of the net interest income decline. In line with our previous guidance, net interest income declined by $101 million, with NIM compressing 11 basis points to 3.09%. This decline was primarily driven by lower earning asset yield following the Fed's rate cut in late 2025 alongside a shorter day count this quarter. However, these headwinds were moderated through strong organic loan growth, lower funding costs, and a reduction in average borrowings. Non-interest income was down $9 million from the late quarter, but in line with our previous guidance. The majority of the decline centered in other non-interest income, which was down $15 million, largely attributable to a decrease in other investment income, a line item subject to fluctuation on a quarterly basis. Outside of the decline in other non-interest income, our core fee categories performed well. We saw solid growth in deposit fees and lending-related capital market fees, though these increases were partially tempered by seasonal declines and factoring commissions. Additionally, while the Fed funds rate environment pressured client investment fees, we successfully mitigated that impact through a $3.9 billion increase in average off-balance sheet client funds. Adjusted non-interest expense was $38 million lower sequentially, outperforming our previous guidance. This reduction reflects a $16 million decline in professional fees as we successfully completed several technology and risk management projects at the end of 2025. Marketing costs also declined by $15 million as we pivoted our funding strategy this quarter to leverage lower cost broker deposits rather than higher cost deposits in the direct bank. While the direct bank remains a critical funding source and we expect marketing expense to normalize in the future, we will remain agile, balancing deposit growth with cost efficiency to protect our margins. Finally, we saw a $16 million seasonal normalization and other expenses. These reductions were partially offset by seasonally higher benefits expense due to resets, as well as continued deliberate investments in our technology platforms, which are essential to scaling our operations and enhancing our client experience. Turning to the balance sheet, period-end loans grew $762 million, or 0.5% sequentially, driven by global fund banking, which was up $1 billion on record production of over $6 billion, surpassing the record set just last quarter. With average line utilization also trending higher, we see evidence of higher client demand and a robust pipeline moving forward. In middle market banking, We added $327 million in growth as stable production was bolstered by lower prepayments. While we are pleased with this quarter's growth, we maintain a guarded outlook given the broader macro environment. General bank loans decreased $591 million, primarily reflecting a strategic decision to move $365 million in SBA loans to held for sale. Excluding this balance sheet optimization, the decline was driven by typical first quarter seasonality. On an average loan basis, loans increased $2.2 billion sequentially, led by a global fund banking business. Turning to the right-hand side of the balance sheet, period-end deposits grew by $9.3 billion, or 5.7% sequentially. This growth reflects strong organic growth in our core business segments, as well as execution of our balance sheet optimization strategies. Within SVB commercial, we saw significant momentum in global fund banking and tech and healthcare, where deposits grew sequentially by $5.6 billion driven by visible pickup in VC investment and exit activity. Growth here underscores the strength of our franchise within the innovation economy. While these inflows were encouraging, we remain disciplined in our outlook as a portion of this growth stem from large, short-term deposits. As we've noted before, these inflows can be lumpy, and we have already observed some anticipated outflows in April. We are managing these balances with a strict focus on liquidity and funding cost optimization in mind. In the general bank, deposits grew by $1.1 billion. This was largely driven by a successful seasonal campaign within our cab business and solid growth in our branch network, demonstrating our ability to consistently execute on core deposit gathering initiatives. To support the transition away from the purchase money note and limit impacts to net interest income, we also tactically utilized $1.8 billion in broker deposits. This was a flexible lever for us this quarter as the all-in cost was lower than leading rates in the direct bank as we continued to monitor pricing and tenor to ensure a resilient and cost-effective funding mix. On an average basis, deposits also performed well, growing by $2.7 billion or 1.7% sequentially, driven primarily by tech and healthcare banking and CAB. Finally, off-balance sheet momentum was equally strong. SVB commercial client funds rose $8.1 billion to nearly $78 billion, while average off-balance sheet funds grew by $3.9 billion. Turning to credit, provision was $103 million for the quarter, up $46 million from the link quarter. The increase was driven almost entirely by a larger reserve release last quarter rather than a negative shift in credit quality. In fact, the net charge-off ratio came in nine basis points lower than the link quarter at 30 basis points, with net charge-offs totaling $111 million. This was favorable to our previous guidance, though I'd characterized the BEAT as a matter of timing on specific resolution efforts, particularly within our general office book, rather than a significant change in our overall outlook. While non-accrual loans moved slightly higher to 96 basis points, the change was isolated to a few specific credits. We do not view this as a signal of broader migration or systemic pressure across the portfolio. This is supported by our $8 million reserve release this quarter, which was underpinned by growth in high-quality segments like global fund banking and changes to the macroeconomic outlook. Given the heightened market focus on private credit and NDFI exposures, we've included a new slide today to provide additional transparency. Our NDFI exposure stands at $38.8 billion, but it is critical to look at the structure. 83% of this book consists of capital call lines. These are backed by contractual LP commitments, not investment performance, and historically carry exceptionally low credit risk. The remainder of the book is diversified, well collateralized, and supported by structural protections. Traditional private credit represents approximately 8% of the NDFI portfolio and includes lines provided to credit funds and warehouse lines, both of which are well secured. To summarize, our exposure to the private credit ecosystem is defined by conservative structures, significant sponsor equity, and rigorous covenant protections. While we remain vigilant in a volatile macro environment, our credit culture is built for this backdrop. We are confident that our disciplined standards and resilient portfolio position us well to navigate the cycles ahead. Turning to our capital position, we continue to execute on our commitment to a disciplined capital return. As of April 21, 2026, we have made significant progress on our 2025 share repurchase plan, having repurchased over 20% of total common shares outstanding for a total of $5.7 billion. This includes the successful completion of our 2024 plan and roughly 52% of our current $4 billion authorization. Our first quarter CET1 ratio stood at 10.83%. While this represents a 32 basis point sequential decrease, it was a deliberate outcome as we balanced loan growth and share repurchases against first quarter earnings. As part of our annual capital planning and informed by internal stress testing, we adjusted our CET1 target range down by 50 basis points to 10 to 10.5%. We believe this recalibrated level provides the ideal balance of ensuring we remain strong for severe stress events while maximizing our flexibility to support both client growth and shareholder returns. Regarding the pace of repurchases moving forward, we returned $900 million to shareholders this quarter. However, as we approach our new target capital range, we anticipate a slower pace for the remainder of the year. This shift reflects prudent management of the balance sheet, accounting for anticipated organic growth, the shifting economic backdrop, and our commitment to a conservative capital buffer. Finally, we are encouraged by the revised Basel III proposal released in March. Our initial assessment indicates a potential 70 to 100 basis points benefit to our CET1 ratio, primarily driven by lower risk-weighted assets under the new standardized approach. While the proposal includes the phase-in of AFS and pension-related AOCI, we don't expect a material impact given our short-duration investment strategy and limited AOCI risk. Overall, these regulatory developments represent a clear step forward, providing us with enhanced capital flexibility to drive long-term value for our shareholders. Turning to page 29, I'll conclude with our outlook for the remainder of 2026. The macroeconomic backdrop remains fluid, making it difficult to narrow the range of potential impacts on the broader economy and our business lines and clients. Accordingly, we have not made significant changes to our previous guidance, but do continue to monitor the environment and how it could impact our performance. Starting with the balance sheet, we expect loans to land between $149 billion and $152 billion at the end of the second quarter. In the commercial bank, we expect loan growth to be anchored in global fund banking, where we are managing a robust $12 billion pipeline. While we expect long-term expansion, we remind everyone that ending balances can ebb and flow based on the timing of client draws, and we anticipate some quarter-to-quarter volatility here, even as absolute levels grow. Outside of growth in global fund banking, we are projecting growth in commercial finance industry verticals and middle market banking portfolios. In the general bank, as seasonal headwinds abate, we expect growth to be supported in the branch network's business and commercial loan portfolios. For the full year, we are reiterating our loan guidance of $153 billion to $157 billion, inclusive of the $1 billion in the BMO acquisition. To optimize our balance sheet, we continue to evaluate strategic sales similar to this quarter's $365 million SBA securitization to efficiently fund the repayment of our purchase money note. Now to deposits and funding. We anticipate second quarter deposits between $171 and $174 billion. We expect growth in the general bank segment and in the direct bank as we are seeing strong momentum in both where competitive pricing and marketing are helping us capture share. Growth in these channels will help mitigate expected outflows in global fund banking and within tech and healthcare as those clients continue to utilize cash for operations or move to off-balance sheet investment products. For the full year, we reaffirm our range of $181 to $186 billion, including the $5.7 billion BMO infusion. This range continues to include significant growth in the direct bank as we look to continue to prepay the purchase money note. We've made significant progress on the purchase money note with $5.5 billion in total prepayments through today, including $2.5 billion this quarter and another $500 million in April. Moving forward, we expect to pay down at least $500 million to $1 billion per month, utilizing excess liquidity, broker deposits, or other funding levers as interest rates and market conditions dictate. Next, our net interest income and rate outlook covers a range of zero to two 25 basis point rate cuts where the Fed funds rate may decline from a range of 350 to 375 today to a range of three to 325 by year end. We expect second quarter headline net interest income to be in the 1.6 billion to $1.67 billion range. While we expect strong earning asset growth, we think it will be partially offset by modest increases in funding costs as deposit competition remains intense across all channels. For the full year, we are marginally tightening our range to $6.5 to $6.8 billion. This accounts for the persistent pressure on DDA balances and a higher for longer environment continued deposit competitions and a projected $100 million reduction in loan accretion. Moving to credit, we expect second quarter net charge-offs in the 35 to 45 basis point range. We are actively managing the commercial general office portfolio and the SVB commercial books, where we expect losses to remain elevated in the medium term, while the equipment finance portfolio losses have largely stabilized we are watching one larger deal that could result in elevated losses in the second quarter. Reflecting first quarter performance, we are lowering our full year net charge off outlook to 30 to 40 basis points with the range reflective of the fact that a handful of large deals can cause lumpiness in the ratio. Moving to non-interest income, we expect it to be in the $520 to $550 million range in the second quarter. Overall, we continue to see strength in many of our business lines, such as fees from wealth, rail, and credit card and merchant services. For the full year, we are raising our adjusted non-interest income guidance to $2.12 to $2.22 billion, driven by our rail business, repricing momentum, deposit fees and service charges, growth in wealth, and lending-related fees as we continue to benefit from loan growth and capital markets activity. Onto expenses, we expect the second quarter to be in the $1.34 to $1.38 billion range, slightly up from the first quarter. We expect the growth to come primarily from higher direct bank marketing costs, giving our focus on client acquisition in that channel. As we continue to focus on bending the cost curve, we are reducing our four-year range to $5.34 billion to $5.43 billion. The increase in four-year expenses includes merit-based increases, marketing costs, tech scaling, and the BMO acquisition impact, which will add less than 1% to our overall expense growth in 2026. As Frank mentioned earlier, we are excited to implement a united brand strategy to continue to align platforms and provide expanded solutions for our clients. While we are still assessing the impact of this announcement, we believe it will add an additional $20 to $30 million to full-year non-interest expense. We expect that our adjusted efficiency ratio will be in the lower 60% range in 2026 as the impact of prior year rate cuts have put downward pressure on net interest incomes. We believe that the investments we have made in our franchise while driving up costs in the short and medium term are foundational to delivering positive operating leverage over time. Meanwhile, exercising disciplined expense management is a top priority for us given headwinds to net interest income. And while we are not providing guidance beyond 2026, We are committed to returning to positive operating leverage as the interest rate environment normalizes and we begin to recognize some of the efficiencies from the investments in our franchise. Longer term, our goal remains to operate an efficiency ratio in the mid-50s. And finally, for both the second quarter 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. To conclude, our first quarter results were reflective of the strength and resilience of our diversified business model. Thanks to our long-term focus and continued investments in our business, we're well positioned to continue delivering value to our clients, customers, and shareholders. This concludes our prepared remarks. I will now turn it over to the operator for instructions for the question and answer portion of the call.

Ladies and gentlemen, if you have a question or a comment at this time, please press star, then the one key 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 Chris McGrady with KBW. Your line is open. Please go ahead.

Oh, great. Morning. Craig or Frank, on the new CET1 target, just want to make sure I got all the pieces. 10, 10 and a half is the new target. And then on top of that, there's a 70 to 100 benefit on the Basel III. How should we think about, I hear you on the near term on the buybacks, but is there any bias within the range near term? Any changes in uses of capital near term?

Yeah, if you go back to 25 and so far 26, our repurchases have ranged from $600 to $900 million per quarter. And as we move closer to that range, the 10 to 10.5, we would expect to moderate to the lower end of that range for the next two quarters.

Okay. And then on the NAI guide, I appreciate the fluidity of the curve, but any last quarter you gave some comments on, you know, refresh of that, um, both on a core and a reported basis. Uh, Craig, thanks.

Sure. Um, in terms of just the, the, the, the tightening of the guidance, we, we would still for the full year expect low single digit percentage to climb in the absolute dollar amount of net interest income. If we look at the trajectory though, for 2Q26, we would expect both headline and execretion, uh, net interest income to be down low single digits percentage points and NIM to be in the mid three O's and execution in the high 290s. As far as fourth quarter exit, we expect both headline and execution net interest income to be up mid single digits percentage points and expect headline NIM to be in the high 3.0s and execretion in the low 3.0s. And in terms of troughing, I think you asked about that. We would expect that headline net interest income and execretion net interest income to have already troughed in the first quarter, but that NEM would trough in the third quarter. Great. Thanks, Parker. You're welcome. Thank you.

Our next question comes from Casey Hare with Autonomous Research. Your line is open. Please go ahead.

Great, thanks. Wanted to touch on the deposit growth outlook. Very good start here in the first quarter. A lot of it coming from the SVB side of things. Craig, I think I heard you say that you expect the rec bank to drive a lot of the growth going forward, but just wondering what the outlook is on the SVB side of things after a strong quarter.

Elliot, why don't you do the SVB? And Mark, you can weigh in on this as well.

Yes, we're starting with the SVB. I mean, we do expect continuing growth through the end of the year. I think when you look at the balances, as Craig mentioned, we did have some very large inflows, client accounts that we do expect to either go back out and or transition to off balance sheet. Um, and so I think, you know, second quarter from an F Silicon Valley perspective, uh, we, we do think moderate, but we do see growth, you know, really through the end of the year. And nothing to add.

Mark, nothing to add. Mark. Okay. Oh, you got it. Thanks.

Okay. Great. Um, On the credit quality front, on the NPL uptick, Craig, I heard it's nothing systemic, but I was just wondering if you could provide a little more color as to what drove that, those credits, what type of credits they were and, you know, resolution efforts to reduce the NPL ratio at around 1% going forward.

Andy, would you like to take that one, please?

Yeah, sure. The increase was driven specifically by three main credits, two of which were our multifamily that have moved to non-accrual. We really don't see a lot of lost content on those two, reviewed them for specific reserves and are working through resolution on those. The third was an account in our innovation portfolio. It's been criticized for some time. It's currently up for sale, and we hope to have resolution on that credit at some point this year. In terms of efforts to bring down our NPLs, the majority of our NPLs really reside in our general office. And so as Craig noted at the beginning, CHARGE-OFFS IN OUR GENERAL OFFICE PORTFOLIO WERE DOWN THIS QUARTER, AND WE ANTICIPATE, AND A LOT OF THAT WAS TIMING ON RESOLUTION. SO WE WOULD ANTICIPATE AS WE WORK THROUGH THIS YEAR TO SEE SOME OF THOSE RESOLUTIONS COME TO FRUITION, AND AS A RESULT, WE WOULD ANTICIPATE NPLs TO COME DOWN. NEW SPEAKER THANK YOU.

NEW SPEAKER THANK YOU.

Our next question comes from Anthony Ellion with JP Morgan. Your line is open. Please go ahead.

Hi, everyone. Craig or Frank, I appreciate the new slide you have on the NDFI book. Could you help us quantify your exposure to companies in the software industry for both loans and deposits? I don't think this has been disclosed since you acquired SVB a few years ago.

Yeah, I will let Andy elaborate. But in terms of on balance sheet, software is $8.1 billion. in about $14.4 billion of exposure. But I'll let Andy talk about what that portfolio looks like.

Sure. Thanks, Greg. So having backed the innovation economy for quite a while, we obviously have some very deep experience managing tech credit portfolios through multiple economic cycles and changes in tech shifts there. We have seen improvement throughout the last several quarters on our criticized levels within the SOAR 4 portfolio. And if you think about our portfolio, a couple of main buckets, if you will, The first would be emerging growth VC backed, um, type companies. Um, and they are focused on being kind of the disruptors themselves and are really, um, AI native or investing heavily in AI. And so you can think about those really being the investor dependent type, uh, transactions. So they're really focused on access to capital and that's where the risk would be. Um, The other large bucket would be the middle market software companies, kind of PE controlled or the late stage venture backed companies. These are actively focused on AI adoption and the evolution to address any potential disruption. And that would be the second bucket. And then there's also within that eight billion, there's probably 20, 30% of which are either cash secured or ABL transactions. So we feel good about that credit risk as well. We have done a deep dive into the portfolio to evaluate any differences attributes for vulnerability or strength within each of those borrowers, including looking at are they a system of record? Do they have proprietary data? What is the level of switching cost, et cetera? So we've got a good sense for strengths or weaknesses with each of those borrowers. we're also leveraging our deep relationships with the VC firms themselves to get additional insight. Um, and as we go through the second quarter, we will be doing additional, uh, focal reviews that have a finer segmentation. Um, that that's kind of the overview, high level overview, our software exposure. I think you'd, you'd touched on NDFI as well. Um, Within our private credit book, we did a deep dive there this quarter as well. The software exposure within that portfolio averages about 14% of software exposure for any given fund. So not too outsized. And as Craig said, those structures are very well collateralized and have a lot of structural protections included. And then finally, as part of that deep dive, we did a stress scenario and assumed some very conservative either default rates and recovery rates and found that any losses would be manageable coming out of that portfolio.

Great. Thanks, Sally. And then my follow-up from an earlier question is, Craig, on the exit NII guide you gave earlier, you gave a range of up mid-single digits. Could you make clear what time period that was for and what comparison period was the base? Thank you.

The up mid-single digits was the first quarter to fourth quarter exit.

Both for core and gap NII.

That's correct.

Thank you.

Our next question comes from Bernard Von Geziki with Deutsche Bank. Your line is open. Please go ahead.

Hey, guys. Good morning. So just a question on the competition that remains intense in deposits. Could you just maybe provide some commentary on just thoughts in your franchise of what you're seeing with terms and pricing from peers?

I think competition is intense. Pricing, you know, betas haven't moved much given pricing pressures. So I would describe competition as intense. I will let Mark maybe talk about a little bit what he's seeing at SVB and Elliot, a little bit of what we're seeing in the branch network and the direct bank.

So I will start. It's Mark Cadger on SVB and SVB. As Craig mentioned, the competition is intense. We see it from all manner of financial institutions, neobanks, fintechs, et cetera, competing for balances. And as I think the quarter indicates, we are holding our own notwithstanding the competition, allowing, as already mentioned, that there is some volatility to the balances and all of which is reflected in our guide. I will pass it along.

Yeah, and I think as it relates to both the branch network and especially the direct bank, where we're really seeing the pressure is on a lot of the money market promos, CD rates too now with kind of the expectation of really no rate cuts. And so we're seeing competitors still out there with really kind of a 4% type rate. I think our hope would be that betas would have shifted down a little bit, that we would have seen something kind of more in the high threes, but competition has really remained, and those lead rates have really stayed elevated through the first quarter.

Great. And just as a follow-up, the commentary about the broker deposits being all-in, lower cost versus the direct bank, just any commentary you can provide on what maybe the spread difference is between the two, just to give us a sense?

Yeah, sure. And this is Tom. If you look at the broker deposits, I mean, during the first quarter, you were able to raise those, what I would consider in the high threes. Whereas to Elliot's point earlier, some of the competition we've seen in the direct bank and even some of the branch network, we've seen rates north of 4% there. Obviously, the brokered market's efficient. Marketing costs are sort of fixed at that 10 basis point. So you have an all-in cost below that 4% handle in that channel. So that's really what drove us to shift a little heavier into that space. And again, we'll continue to monitor market conditions as we move ahead.

Great. Thanks for taking my questions.

Our next question comes from David Cavarini with Jefferies. Your line is open. Please go ahead.

Hi, thanks for taking the question. So on the loan outlook, it sounds like the pipelines for global fund banking are robust, but you sounded more guarded. On the middle market side of the business, can you talk about what's driving this? Is it macro uncertainty or geopolitical risk? Just any color there would be helpful.

Yes. You know, I think in the middle market and really in the industry vertical space, I think we still do expect growth. I think, you know, certainly with the geopolitical events occurring right now, a little bit uncertainty. You know, we did see prepayments pick up a little bit in the first quarter. But I think all is equal. You know, we are expecting growth really kind of in the mid single digits and industry verticals and really that middle market space. So still still optimistic. But, you know, I think we do have a little bit of hesitation just with kind of the uncertainty, you know, that's out there right now.

Great. And in terms of the loan pricing environment and the competitive environment there, Can you provide some commentary there? It's clearly very intense on the deposit side. Curious about the loan pricing side.

Yeah, we've generally, I think, over the past few quarters seen spreads come in a little bit just due to the competition. What I'd say is I think we're reaching more of a stabilization on really those spreads. So I think competition is fierce right now, but I think we'd characterize it really throughout 25 and certainly in first quarter 26 as remaining intense.

Thank you.

Our next question comes from Christopher Marinak with Breen Capital LLC. Your line is open. Please go ahead.

Good morning. Is there a further goal on the FDIC purchase money note beyond what you've already done in April?

A further goal, we would anticipate at a minimum based on the roll-off of the loans collateralizing or U.S. Treasuries collateralizing the note to pay down an additional $500 million to a billion per month.

Okay.

So that would sort of give you an idea of the trajectory we're on.

Sure. And then back to the other conversation about broker deposits, you really are a long ways away from having any restraints on how many broker funds you can do. Is that correct?

Yes, that's correct. I mean, these were really sort of the first deposits. We had another slug of broker deposits that matured, I believe it was back in October last year. So we're really coming off of a very low base here. And really the way we look at that is we look at those deposits in conjunction with the direct bank and sort of look for, as I spoke about earlier, opportunities from a cost perspective where we can get the best execution.

Great. But in general, in the big picture, the direct bank is still going to grow. It might just be more of a timing difference in terms of where you are this year, next year, et cetera.

Yeah, that's right. We still expect the direct bank to continue to grow. It's just that we might moderate some of the expectations if we continue to put on broker deposits to augment that growth, if that turns out to be cheaper.

Understood. Thank you for taking our questions this morning.

You're welcome.

I'm not showing any further questions at this time. I'd like to turn the call back over to our host, Ms. Deanna Hart, for any closing remarks.

Thank you. And thanks everyone for joining our call today. 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. We hope you have a great rest of your day.

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