FIRST CITIZENS BANCSHARES INC /DE/

First Citizens BancShares, Inc. (BancShares) operates in the highly competitive financial services industry, which is characterized by evolving regulation, technology, product delivery systems, consolidation among financial service providers, and the general market and economic climate. The company competes with national, regional, and local financial services providers, including other banks, credit unions, commercial finance companies, leasing companies, wealth management providers, private equity firms, private credit providers, hedge funds, insurance agencies, and mortgage companies ¹. Non-bank financial entities, which are not subject to the same regulatory restrictions as traditional commercial banks, have intensified competition ¹. BancShares' largest deposit market shares as of June 30, 2025, were 11.8% in North Carolina and 9.5% in South Carolina, making it the third and fourth largest bank in those states, respectively ¹. In North Carolina, Bank of America and Truist Bank collectively held 63.1% of deposits, while in South Carolina, Bank of America, Wells Fargo, and Truist Bank collectively held 39.1% ¹.

BancShares generates revenue primarily through its banking subsidiary, First-Citizens Bank & Trust Company (FCB), offering a broad range of financial services to individuals, businesses, and professionals. The core business model involves providing deposit products, loans, wealth management, private banking, leasing, capital markets, and advisory services ¹. The company serves small and middle-market companies across various industries, including private equity, venture capital, technology, life sciences, and healthcare ¹. BancShares also provides deposit, cash management, and lending to homeowner associations and property management companies, and owns a fleet of railcars and locomotives for leasing ¹. Revenue is a mix of interest income from loans and investments, and noninterest income from various fee-based services and leasing activities. The company operates through an extensive branch network and a nationwide digital banking platform, the Direct Bank ¹.

The company's reportable segments as of December 31, 2025, include the General Bank, the Commercial Bank, and Rail ¹. The General Bank segment delivers services to individuals and businesses through its branch network and digital channels, offering deposit products, loans (primarily business/commercial loans and residential mortgages), wealth management, private banking, and fee-based services. It also provides private banking and wealth management solutions to consumers, including private equity and venture capital professionals, and executive leaders of innovation companies, as well as deposit, cash management, and lending solutions to homeowner associations and property management companies ¹. For the year ended December 31, 2025, the General Bank segment reported net income of $1.175 billion ¹.

The Commercial Bank segment provides lending, leasing, capital markets, and other financial and advisory services, primarily to small and middle-market companies across various industries. It offers a full suite of commercial deposit, liquidity management, and international products to commercial clients, and a full suite of financial products and services to private equity firms, venture capital firms, and commercial clients in innovation markets such as technology, life sciences, and healthcare. This segment also provides asset-based lending, factoring, receivables management, and secured financing services ¹. For the year ended December 31, 2025, the Commercial Bank segment reported net income of $975 million ¹.

The Rail segment provides equipment leasing and secured financing to railroads and shippers ¹. For the year ended December 31, 2025, the Rail segment reported net income of $87 million ¹. The Corporate section includes financial information not allocated to the segments, such as investment securities, interest-earning deposits at banks, interest expense for borrowings, Direct Bank deposits, and brokered deposits, as well as gains or losses on sales of investment securities, fair value adjustments on marketable equity securities, and income from bank-owned life insurance ¹.

For the fiscal year ended December 31, 2025, BancShares reported total interest income of $11.778 billion ¹ and interest expense of $4.964 billion ¹, resulting in net interest income of $6.814 billion ¹. The provision for credit losses was $514 million ¹, and noninterest income totaled $2.727 billion ¹. Noninterest expense was $6.056 billion ¹, leading to income before income taxes of $2.971 billion ¹. Income tax expense was $765 million ¹, and net income was $2.206 billion ¹. After preferred stock dividends of $57 million ¹, net income available to common stockholders was $2.149 billion ¹. Diluted earnings per common share were $165.24 ¹, based on 13,002,455 weighted average common shares outstanding (diluted) ¹. The net interest margin was 3.25% ¹. As of December 31, 2025, total assets were $229.698 billion ¹, total deposits were $161.578 billion ¹, total borrowings were $36.008 billion ¹, and total stockholders' equity was $22.238 billion ¹. The allowance for loan and lease losses (ALLL) was $1.566 billion ¹, representing 1.06% of total loans ¹.

Comparing the fiscal year 2025 to 2024, net income decreased by $571 million, or 21%, from $2.777 billion ¹ to $2.206 billion ¹. Net interest income decreased by $329 million, or 5%, from $7.143 billion ¹ to $6.814 billion ¹, with the net interest margin declining by 29 basis points (bps) from 3.54% ¹ to 3.25% ¹. Noninterest income increased by $112 million, or 4%, from $2.615 billion ¹ to $2.727 billion ¹. Noninterest expense increased by $321 million, or 6%, from $5.735 billion ¹ to $6.056 billion ¹. The provision for credit losses increased by $83 million, or 19%, from $431 million ¹ to $514 million ¹. Total loans and leases increased by $7.71 billion, or 6%, from $140.221 billion ¹ to $147.930 billion ¹. Deposits increased by $6.35 billion, or 4%, from $155.229 billion ¹ to $161.578 billion ¹. The ALLL as a percentage of loans decreased by 14 bps from 1.20% ¹ to 1.06% ¹.

During 2025, FCB made a $2.49 billion ¹ partial prepayment of the Purchase Money Note in December ¹. The Parent Company also redeemed $350 million ¹ aggregate principal amount of its 3.375% Fixed-to-Floating Rate Subordinated Notes due in 2030 on June 15, 2025 ¹. Concurrently, the Parent Company issued new debt totaling $1.85 billion ¹ in public offerings, including $600 million ¹ of 5.600% Fixed Rate Reset Subordinated Notes due 2035, $500 million ¹ of 5.231% Fixed-to-Floating Rate Senior Notes due 2031, and $750 million ¹ of 6.254% Fixed-to-Fixed Rate Subordinated Notes due 2040 ¹. On November 18, 2025, the Parent Company issued $500 million ¹ of 7.000% non-cumulative perpetual preferred stock, Series D ¹. FCB also entered into an agreement on October 16, 2025, to acquire 138 branches from BMO Bank N.A., expecting to assume approximately $5.7 billion ¹ in deposit liabilities and acquire approximately $1.1 billion ¹ in loans, with the transaction anticipated to close in the second half of 2026 ¹. The Shared-Loss Agreement with the FDIC, related to the SVBB Acquisition, was terminated on April 7, 2025, with no impact to consolidated balance sheets or statements of income ¹.

Management has outlined specific strategic priorities for the upcoming period, focusing on client focus, talent and culture, operational efficiency, and balance sheet optimization ¹. While no formal revenue, margin, or EPS guidance figures were explicitly provided for the upcoming period, these priorities suggest a continued emphasis on organic growth and prudent financial management.

A key growth area for BancShares is the expansion of its branch network and loan portfolio through strategic acquisitions. The pending BMO Branch Acquisition, announced on October 16, 2025, is expected to close in the second half of 2026, subject to customary closing conditions and regulatory approvals ¹. This acquisition is projected to add approximately $5.7 billion ¹ in deposit liabilities and $1.1 billion ¹ in loans, strengthening BancShares' presence in the Midwest, Great Plains, and West regions of the U.S. ¹. This expansion aligns with the strategic objective to expand and grow capabilities and products while harnessing the scale of the enterprise ¹.

Another growth vector involves the continued development and scaling of technology platforms and digital banking services. The increase in equipment expense of $51 million ¹ in 2025, primarily due to higher software-related costs, indicates ongoing investment in technology infrastructure ¹. The rise in third-party processing fees by $38 million ¹ also reflects increased transaction volume and additional services as the company transitions to more cloud-based computing services ¹. These investments are part of the strategic priority to optimize processes and systems, reduce organizational complexity, and streamline the information technology operating environment to improve data infrastructure ¹.

In terms of operational outlook, management aims to optimize processes and systems to reduce organizational complexity and maximize productivity, as well as streamline systems to simplify the information technology operating environment and improve data infrastructure ¹. The increase in personnel cost by $216 million ¹ in 2025, driven by net staff additions, annual merit increases, and promotions, suggests continued investment in human capital to support growth and operational needs ¹. The company's annual voluntary turnover remained below the financial services industry benchmark through December 2025, reflecting a focus on talent retention and development ¹.

Regarding capital allocation, BancShares authorized a new share repurchase program (2025 SRP) on July 25, 2025, allowing for repurchases of Class A common stock up to an aggregate amount of $4.0 billion ¹ through December 31, 2026 ¹. As of December 31, 2025, the total capacity remaining under the 2025 SRP was $2.81 billion ¹, and as of February 13, 2026, it was $2.37 billion ¹. During 2025, BancShares repurchased approximately $3.03 billion ¹ of its Class A common stock under both the 2024 and 2025 SRPs ¹. The company also paid quarterly dividends of $1.95 per share for the first three quarters and $2.10 per common share in the fourth quarter of 2025 on its Class A and Class B common stock ¹. In January 2026, the Board declared a quarterly dividend of $2.10 per common share ¹. Additionally, the Parent Company issued $500 million ¹ of Series D preferred stock in November 2025 and $400 million ¹ of Series E preferred stock in February 2026 ¹.

Management explicitly flagged structural headwinds and execution risks related to the evolving regulatory landscape, particularly concerning the proposed Basel III Endgame rules. The federal banking agencies are expected to introduce a revised proposal for the implementation of the Basel III Endgame in 2026, with final rules anticipated to be implemented beginning in 2027 ¹. These rules could introduce additional capital requirements addressing credit risk, operational risk, and market risk, as well as new long-term debt and clean holding company requirements for banking organizations with over $100 billion ¹ in total consolidated assets ¹. BancShares will continue to monitor these developments ¹.

Geographic, regulatory, and macro factors identified as constraints include the dynamic and uncertain tariff environment, which could lead to volatility in financial markets and economic conditions ¹. The Supreme Court's ruling in February 2026 that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs creates uncertainty regarding potential refunds and replacement measures under other legal authorities ¹. Additionally, the evolving regulatory landscape for Artificial Intelligence (AI) and crypto-assets presents compliance costs and risks of non-compliance ¹. The potential for an economic slowdown or recession is also being assessed, which could increase credit and market risk ¹.

BancShares faces material risks across several categories. Macroeconomic risks include unfavorable economic conditions, such as changes in unemployment, real estate values, inflation, interest rates, and foreign currency exchange rates, which could adversely affect financial condition and results of operations ¹. The U.S. debt ceiling and budget deficit concerns could also destabilize financial markets and lead to economic slowdowns ¹. Competitive risks stem from the highly competitive financial services industry, with traditional and non-traditional providers, including non-bank entities and digital asset service providers, potentially reducing market share and profitability ¹. Regulatory risks are significant due to extensive federal and state laws, rules, and regulations impacting operations, taxes, corporate governance, executive compensation, and financial accounting ¹. Changes in these regulations, or failure to comply, could lead to increased compliance costs, adverse regulatory actions, civil money penalties, or reputational damage ¹. Geopolitical risks include the impact of natural or man-made disasters, global pandemics, civil unrest, acts of war, and terrorist activities, which could directly damage facilities or indirectly affect customers and suppliers ¹. The current tariff environment remains dynamic and uncertain, with potential for replacement measures that could impact economic conditions ¹. Operational risks include significant operational failures, cyberattacks, information or security breaches, technology outages, and reliance on third-party providers, which could disrupt business, lead to data misuse, increase costs, or result in litigation ¹. The company is exposed to losses related to fraud, which is becoming increasingly sophisticated ¹. Credit risks are inherent in lending, with potential for insufficient allowance for credit losses, concentrations in industries like non-depository financial institutions (NDFIs), healthcare, and technology, and deteriorating collateral values, particularly in commercial real estate ¹. The financial system's interrelatedness means a default by a single financial institution could cause market-wide liquidity and credit problems ¹.

Management's message to shareholders emphasizes a commitment to effectively managing capital to protect depositors, creditors, and stockholders, continually monitoring capital levels and ratios to ensure they exceed minimum regulatory requirements and are appropriate for growth projections, risk profile, and potential changes in the regulatory or external environment ¹. The overall tone suggests a proactive approach to risk management and strategic growth, while acknowledging the dynamic and challenging operating environment. Management has articulated specific strategic priorities for the period ahead: client focus, talent and culture, operational efficiency, and balance sheet optimization ¹. Under client focus, the company aims to expand and grow capabilities and products while maintaining a client-first approach ¹. For talent and culture, the priority is to attract, retain, and develop associates who align with the long-term direction and culture, while scaling for continued growth ¹. Operational efficiency involves optimizing processes and systems to reduce organizational complexity and maximize productivity, including streamlining systems to simplify the information technology operating environment and improve data infrastructure ¹. Finally, balance sheet optimization focuses on prudently managing the balance sheet to optimize funding and liquidity while driving core deposit growth and enhancing returns ¹.

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