FCNCA Q4 Deep Dive: Technology Investment and Deposit Strategy Shape Outlook

Regional banking company First Citizens BancShares (NASDAQGS:FCNC.A) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 1.2% year on year to $2.25 billion. Its non-GAAP profit of $51.27 per share was 17.1% above analysts’ consensus estimates.

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StockStory’s Take

First Citizens BancShares’ fourth quarter results were overshadowed by a negative market reaction, despite revenue and adjusted earnings per share both exceeding Wall Street expectations. Management attributed the performance to resilient net interest income and stable credit quality, particularly within their global fund banking and SVB Commercial segments. CEO Frank Holding emphasized the bank’s progress in deepening client relationships and investing in digital capabilities, noting that loan growth was primarily driven by increased activity in the innovation economy. However, he also acknowledged competitive pressures on lending spreads and deposit competition, as well as expense growth linked to technology and personnel investments. The quarter was further marked by continued share repurchases and a strategic focus on optimizing the balance sheet.

Looking forward, management’s guidance for 2026 is shaped by expectations of continued investment in technology, operational efficiency initiatives, and a focus on core deposit growth. CFO Craig Nix outlined plans for disciplined expense management, with technology spending expected to peak in 2026 before normalizing. The company anticipates growth in both commercial and general banking loans, supported by the upcoming BMO branch acquisition, but also highlighted elevated credit losses in certain portfolios. Management cautioned that further Federal Reserve rate cuts and persistent inflation could impact net interest income, stating, “We are prudent in providing a range of expectations as we have done in prior quarters.”

Key Insights from Management’s Remarks

Management credited loan growth and client fund expansion in the innovation economy as key drivers for the quarter, while expense increases tied to technology and deposit acquisition weighed on margins.

• Innovation economy momentum: SVB Commercial’s loan growth was supported by higher utilization rates and increased venture activity, with management citing improved market stability and the ability to capture new client funds.
• Technology investments impact costs: The bank made significant investments in technology infrastructure, including data center consolidation and platform modernization. CIO Greg Smith noted that technology spending is expected to peak in 2026, which contributed to near-term expense growth but is aimed at improving long-term operational efficiency.
• Deposit mix shift: Management highlighted a strategic focus on growing core deposits, particularly through direct bank channels and marketing efforts. This shift was designed to support liquidity and fund loan growth, though it resulted in higher marketing and acquisition costs.
• Credit quality improvement: Provision for credit losses declined due to lower net charge-offs and reserve releases, particularly driven by higher-quality loan portfolios and a better macroeconomic outlook. However, management expects credit losses to remain elevated in select commercial portfolios in the near term.
• Leadership transition: The upcoming retirement of Chief Risk Officer Lori Rupp and her replacement by Treasurer Tom Eckland was announced, signaling continuity in risk management amid ongoing operational and regulatory changes.

Drivers of Future Performance

Management expects further technology investments, deposit acquisition strategies, and loan portfolio diversification to drive performance, while interest rate trends and expense control will influence profitability.

• Technology spend at its peak: Management stated that 2026 will mark the high point for technology investment, after which spending is expected to level off. This is part of a multiyear plan to modernize systems and reduce operational complexity, supporting future efficiency gains and scalability.
• Deposit growth strategies: The company is prioritizing core deposit growth, especially through direct banking and new market initiatives, to support loan expansion and repayment of the purchase money note. Elevated marketing and promotional expenses are anticipated in the near term, but management believes falling interest rates may reduce funding costs over time.
• Credit and macroeconomic risks: While credit quality improved in Q4, management remains cautious about elevated losses in commercial office and equipment finance portfolios. The impact of further rate cuts and inflation remains uncertain, and strategic loan sales may be used to optimize liquidity and capital deployment.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace and effectiveness of technology infrastructure projects and whether expense growth moderates as planned, (2) progress in core deposit acquisition, particularly through direct banking channels, and (3) credit performance in commercial office and equipment finance portfolios. Additionally, we will watch the BMO branch integration and its impact on balance sheet growth.

First Citizens BancShares currently trades at $2,018, down from $2,204 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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