01—Abstract
Summary
Summary of the 8-K filed July 23, 2026. Cited figures are marked; the original filing is the authoritative source.
First Citizens BancShares (FCNCA) reported second-quarter 2026 GAAP net income of $672 milliona, up from $534 million in the first quarter, and GAAP diluted EPS of $55.52 versus $42.63 in the linked quarter.
Adjusted EPS (non-GAAP) was $57.09b versus $44.86. Results were helped by a $74 million reserve release that drove a net credit-loss benefit of $10 million, and by a $69 million increase in noninterest income that was partly from a $27 million derivative fair value gain and a $17 million gain on sale of tax credit investments. Net interest income rose 2.2% to $1.66 billion, while net interest margin held essentially flat at 3.10% (3.01% excluding purchase accounting accretion).
Management highlighted $600 millionc of share repurchases and a $2.5 billion prepayment of the FDIC Purchase Money Note, which has now fallen to $28.42 billion from $35.85 billion at September 30, 2025. Balance sheet growth was modest. Loans rose 1.6% to $151.0 billion, led by the Commercial Bank's Global Fund Banking and capital call lines, and deposits rose 1.5% to $173.4 billion, driven by Direct Bank and brokered deposits.
Noninterest-bearing deposits fell to 24.5%d of total deposits from 25.5%, and the deposit cost ticked up 3 basis points. Credit quality looks stable, with net charge-offs at 0.29% of average loans and nonaccrual loans at 0.96% of loans. The allowance covered nonaccruals only 1.0 times, down from 1.2 times a year earlier.
CET1 was 10.77%, down from 10.83% in the first quarter. The pending acquisition of 138 BMO branches, which brings about $5.3 billion of deposits and $700 million of loans, is expected to close in Q3 2026. Management's 3Q26 guidance includes that deal and projects FY26 net interest income of $6.60–6.75 billion.
For investors, the key question is how much of the earnings improvement is durable. Excluding the reserve release and notable items, core pre-provision earnings grew more slowly.
Expense discipline and a funding mix that is shifting toward deposits are positives. Watch the timing and deposit impact of the BMO integration, the sustainability of fee income, and whether reserve releases continue to support earnings.
02—Key points
Key Highlights
- GAAP diluted EPS of $55.52 rose 30% sequentially from $42.63; adjusted EPS of $57.09 rose 27% from $44.86.
- Net income was $672 million, up 26% quarter over quarter. The provision was a $10 million benefit, which included a $74 million allowance release.
- Net interest income rose 2.2% to $1.66 billion, and NIM edged up 1 basis point to 3.10%.
- Noninterest income rose 12% to $776 million, helped by $27 million of derivative fair value gains and a $17 million gain on the sale of tax credit investments. Adjusted noninterest income rose 13% to $586 million.
- Loans grew 1.6% to $151.0 billion and deposits grew 1.5% to $173.4 billion. Noninterest-bearing deposits fell to 24.5% of total deposits.
- Capital remained solid with a CET1 ratio of 10.77%. The company repurchased $600 million of stock and prepaid $2.5 billion of the Purchase Money Note.
- The pending BMO branch acquisition (about $5.3 billion of deposits and $700 million of loans) is expected to close in Q3 2026. FY26 NII guidance is $6.60–6.75 billion.
03—Questions
Frequently Asked Questions
What drove the earnings increase in the second quarter?
Net income rose $138 million, or 26%, from the first quarter. The largest contributors were a $69 million swing in the provision for credit losses, helped by a $74 million reserve release, and a $84 million increase in noninterest income. Net interest income also rose $35 million. Partly offsetting this, noninterest expense rose $15 million.
Is the reserve release a sustainable source of earnings?
Probably not in full. Management attributed the $74 million release to lower specific reserves, model updates, macro scenario changes, and loan growth in low-loss capital call lines. Coverage is thinner: the allowance fell to 0.98% of loans from 1.05%, and it covers nonaccrual loans only about 1.0 times. Investors should expect provisions to normalize, with 2026 NCO guidance of 30–35 basis points.
How is the BMO branch acquisition expected to affect the balance sheet?
First-Citizens Bank expects to assume about $5.3 billion of deposits and acquire about $700 million of loans from 138 BMO branches in the Midwest, Great Plains, and West. The transaction is expected to close in Q3 2026. Guidance for 3Q26 and FY26 already includes it, with projected period-end deposits of $179–182 billion in Q3 and $181–186 billion for the full year.
Why did the funding mix improve even though deposit costs rose?
The company repaid $2.5 billion of the FDIC Purchase Money Note and reduced total borrowings by $1.77 billion. Deposits rose to 84.3% of total funding from 83.4%. The cost of interest-bearing deposits increased 3 basis points to 2.73%, driven by higher Direct Bank and brokered balances and rates. Net interest margin stayed flat, which suggests lower-cost borrowing repayment offset the higher deposit costs.
What should investors watch in the coming quarters?
Key items include the BMO integration and its deposit retention, whether noninterest-bearing deposit mix stabilizes after falling to 24.5%, credit trends in commercial real estate and criticized loans (which declined to 5.09% of commercial loans), continued capital returns given $1.31 billion of remaining buyback capacity, and whether the Purchase Money Note is paid down further.
04—Continue