First Citizens BancShares' Q1 Earnings Highlight Resilience Amid Tax Headwinds

First Citizens BancShares (NASDAQ: FCNCA) reported its first quarter 2025 earnings, revealing a net income decline of 31% year-on-year to $483 million. While the drop may raise eyebrows, a closer look at the numbers suggests the bank’s underlying performance remains robust, buoyed by strong deposit growth, disciplined capital management, and a resilient loan portfolio. The results underscore a financial institution navigating macroeconomic challenges while maintaining its strategic focus on commercial lending and community banking.

At the heart of the earnings miss was a $132 million jump in income tax expense. This surge reversed a one-time tax benefit recognized in Q4 2024 following the acquisition of Silicon Valley Bank (SVB), which had allowed First Citizens to reduce its deferred tax liabilities. Excluding this volatility, core earnings trends appear healthier. Net interest income fell modestly to $1.66 billion, reflecting lower Federal Funds rates and shifts in asset mix, but remained stable given the rate-sensitive environment.

The bank’s commercial lending prowess shone through. Total loans rose to $141.36 billion, a 3.3% annualized increase, driven by 7.8% growth in its core Commercial Bank segment and 4.8% expansion in the SVB Commercial segment. This growth aligns with management’s emphasis on high-margin commercial loans, which now account for 63% of the loan portfolio. Meanwhile, deposits surged 10.7% annualized to $159.33 billion—a testament to First Citizens’ deposit-driven funding model, which reduces reliance on volatile wholesale markets.

Credit quality also improved, with net charge-offs dipping to 0.41% of average loans, near historic lows. Combined with a CET1 capital ratio of 12.81%, the bank maintains ample buffers to withstand potential economic shocks. Management further bolstered liquidity by issuing $1.25 billion in debt, bringing total liquidity to $62.79 billion, or 39% of assets—a conservative ratio by industry standards.

Despite the earnings disappointment, the bank returned capital aggressively, repurchasing $613 million in shares (2.2% of outstanding stock) and maintaining a 30% dividend payout ratio. These actions reflect confidence in First Citizens’ long-term trajectory. CEO Frank Holding emphasized the bank’s operational resilience during the April 24 earnings call, noting that deposit growth (now 80.6% of funding) and a 15.23% total risk-based capital ratio provide “significant flexibility” amid uncertainty.

Recent business wins further underscore First Citizens’ strategic agility. The bank recently expanded a credit facility for D.P. Nicoli (a mid-sized industrial firm) and invested in affordable housing through The Neighborhood Developers, aligning with its community-focused mandate. Meanwhile, a $22.5 million senior debt facility for Standpoint Inc., a tech-enabled financial services firm, highlights its commercial lending diversity.

Critics may question whether the bank can sustain loan growth in a slowing economy, but First Citizens’ focus on relationship-based commercial lending—a segment less susceptible to interest rate cycles—offers a stabilizing counterweight. Its deposit franchise, now 10.7% larger annually, also positions it to capitalize on potential disintermediation from smaller banks.

In conclusion, while First Citizens’ Q1 earnings reflect the lingering effects of tax volatility and macroeconomic headwinds, the bank’s fundamentals remain intact. With deposit growth outpacing loans, a fortress balance sheet, and commercial lending momentum, the institution is well-positioned to navigate 2025. The 31% net income decline is largely a artifact of prior-period accounting, not operational weakness. Investors should view the results as a temporary setback for a bank that has consistently delivered on its strategic priorities. As of March 31, First Citizens held $200.3 billion in assets, solidifying its rank among the top 20 U.S. banks—a milestone achieved through disciplined execution, not luck.