8-K: First Citizens BancShares Reports Mixed Q3 2025 Results

First Citizens BancShares announced solid third-quarter 2025 earnings, driven by loan and deposit growth across all operating segments, but impacted by increased credit losses.

Summary

• Net income for the third quarter of 2025 was $568 million, a decrease from $575 million in the second quarter of 2025.
• Net income available to common stockholders for the current quarter was $554 million, or $43.08 per common share, a $7 million decrease from the linked quarter.
• Adjusted net income for the current quarter was $587 million, compared to $607 million for the linked quarter.
• Net interest income was $1.73 billion for the current quarter, an increase of $39 million over the linked quarter.
• Net interest margin (NIM) was 3.26% in both the current and linked quarters.
• Loans and leases increased by $3.49 billion or 2.5% to $144.76 billion at September 30, 2025, primarily driven by SVB Commercial.
• Deposits increased by $3.26 billion or 2.0% to $163.19 billion at September 30, 2025, with growth across all operating segments.
• Provision for credit losses totaled $191 million for the current quarter, a significant increase from $115 million in the linked quarter, mainly due to a $115 million increase in net charge-offs.
• Net charge-offs were $234 million (0.65% of average loans), including an $82 million charge-off on a single supply chain finance client.
• Repurchased 457,350 shares of Class A common stock for $900 million during the quarter, completing the 2024 plan and commencing the 2025 plan.
• Announced an agreement to acquire 138 branches from BMO Bank N.A., assuming approximately $5.7 billion in deposit liabilities and acquiring approximately $1.1 billion in loans, with an expected closing in mid-2026.

Sentiment

Score: 6

Explanation: While the company reported solid loan and deposit growth and strong capital positions, the significant increase in provision for credit losses and net charge-offs, driven by a large single client loss, indicates a notable negative impact on profitability compared to the previous quarter. The BMO acquisition is a positive strategic move, but the immediate financial results show some deterioration.

Positives

• Delivered solid return metrics in the third quarter as all operating segments achieved loan and deposit growth, led by SVB Commercial.
• Capital and liquidity positions remained strong, with the CET1 ratio at 11.65% and total liquid assets of $61.9 billion.
• Returned an additional $900 million of capital to stockholders through share repurchases, completing the 2024 plan and commencing the 2025 plan.
• The announced acquisition of 138 BMO Bank branches will expand the footprint and enhance liquidity to support strategic initiatives.
• Net interest income increased by $39 million to $1.73 billion over the linked quarter.
• Net interest margin (NIM), excluding Purchase Accounting Accretion (PAA), expanded by 1 basis point to 3.15%.
• Noninterest-bearing deposits grew by $1.87 billion (4.6% over linked quarter) and represented 26.2% of total deposits.
• The cost of average total deposits decreased to 2.25% for the current quarter, down from 2.27% in the linked quarter.
• Funding mix remained stable with 80.8% of total funding comprised of deposits.
• Successfully completed the issuance of $600 million of 5.600% fixed-rate-rest subordinated notes during the third quarter.
• The General Bank segment achieved strong loan growth (4.1% annualized) and deposit growth ($1.1 billion) compared to the linked quarter.
• The Commercial Bank segment achieved strong loan growth (6.2% annualized) during the quarter.
• SVB Commercial segment loans increased driven by Global Fund Banking production and improved utilization.
• SVB Commercial total client funds increased, reflecting higher VC investment activity and slowing client cash burn.
• The Rail segment fleet is effectively fully utilized, with a utilization rate of 96.8%.
• Favorable rail renewal repricing trends continued, up 28% over the expiring rate for the quarter.

Negatives

• Net income decreased to $568 million from $575 million in the linked quarter.
• Net income available to common stockholders decreased by $7 million to $554 million.
• Adjusted net income decreased to $587 million from $607 million in the linked quarter.
• Adjusted net income available to common stockholders decreased by $20 million to $573 million.
• Provision for credit losses increased significantly to $191 million from $115 million in the linked quarter.
• Net charge-offs increased to $234 million (0.65% of average loans) from $119 million (0.33%), mainly due to an $82 million charge-off on a single supply chain finance client.
• Nonaccrual loans increased to $1.41 billion (0.97% of loans) at September 30, 2025, from $1.32 billion (0.93%) at June 30, 2025.
• The allowance for loan and lease losses decreased by $20 million to $1.65 billion.
• Liquid assets decreased to $61.92 billion at September 30, 2025, from $63.62 billion at June 30, 2025.
• Adjusted rental income on operating lease equipment decreased by $9 million, primarily due to higher maintenance costs.
• Net interest margin (NIM) contracted 27 basis points from 3.53% in 3Q24 to 3.26% in 3Q25.
• The yield on average interest-earning assets decreased by 3 basis points to 5.64% from the linked quarter.

Risks

• General competitive, economic (including tariffs or trade barriers), political (including impacts of the U.S. government shutdown), geopolitical events (including conflicts in Ukraine and the Middle East), natural disasters, and market conditions.
• Changes in competitive pressures among financial institutions and the impacts related to or resulting from previous bank failures, the risks and impacts of future bank failures, and other volatility in the banking industry.
• Public perceptions of business practices, including deposit pricing and acquisition activity.
• The financial success or changing conditions or strategies of vendors or customers, including changes in demand for deposits, loans, and other financial services.
• Fluctuations in interest rates.
• Changes in the quality or composition of the loan or investment portfolio.
• Actions of government regulators, including interest rate decisions by the Board of Governors of the Federal Reserve Board.
• Changes to estimates of future costs and benefits of actions taken by BancShares.
• Ability to maintain adequate sources of funding and liquidity.
• The potential impact of decisions by the Federal Reserve on BancShares' capital plans.
• Adverse developments with respect to U.S. or global economic conditions, including significant turbulence in the capital or financial markets.
• The impact of any sustained or elevated inflationary environment.
• The impact of any cyberattack, information, or security breach.
• The impact of implementation and compliance with current or proposed laws (including the 2025 U.S. budget reconciliation legislation), regulations, and regulatory interpretations, including potential increased regulatory requirements, limitations, and costs, such as FDIC special assessments, increases to FDIC deposit insurance premiums, and the proposed interagency rule on regulatory capital.
• The risk that such laws, regulations, and regulatory interpretations may change.
• The availability of capital and personnel.
• Risks associated with previously completed acquisition transactions, the pending BMO Branch Acquisition, or any future transactions.
• Continued pressure in public and private markets could negatively impact investor-dependent borrowers' ability to raise funds and execute an exit strategy, leading to elevated net charge-offs.
• Large loan sizes in the Growth Stage portfolio may contribute to lumpiness in quarterly net charge-offs and credit metrics.
• Evolving macroeconomic and social conditions (including the shift to more hybrid work arrangements) have resulted in changing demands for office property and stress within the General Office CRE portfolio.

Future Outlook

For Q4 2025, loans and leases are projected to be between $143 billion and $146 billion, and deposits between $161 billion and $165 billion. The Federal Reserve is projected to implement zero to two 25 basis point rate cuts in Q4 2025, with Fed funds ending between 3.50% and 4.25%. Net interest income for Q4 2025 is projected to be between $1.65 billion and $1.75 billion. The net charge-off ratio for Q4 2025 is projected to be between 35 bps and 45 bps. Adjusted noninterest income for Q4 2025 is projected to be between $480 million and $510 million, and adjusted noninterest expense between $1.29 billion and $1.33 billion. The effective tax rate for Q4 2025 is projected to be between 25.0% and 26.0%.

Management Comments

• "We delivered solid return metrics in the third quarter as all of our operating segments achieved loan and deposit growth, led by SVB Commercial."
• "Capital and liquidity positions remained strong, enabling us to return an additional $900 million of capital to our stockholders during the quarter through share repurchases as we completed the 2024 plan and commenced repurchases under the 2025 plan."
• "We are excited about our recently announced acquisition of 138 BMO Bank branches which will expand our footprint and enhance our liquidity position to support strategic initiatives."

Industry Context

The acquisition of 138 BMO Bank branches expands First Citizens' footprint across the Midwest, Great Plains, and West regions, enhancing its liquidity position and supporting strategic initiatives in a consolidating banking industry. This move allows First Citizens to bring its high-touch service and deep sector expertise to clients and communities nationwide. The banking industry continues to see consolidation and strategic acquisitions as institutions seek to optimize market presence, deposit bases, and operational efficiencies amidst evolving economic conditions and regulatory landscapes.

Comparison to Industry Standards

• NA

Stakeholder Impact

• Shareholders benefited from $900 million in share repurchases and a $1.95 per share dividend, indicating strong capital return. The BMO acquisition is expected to expand footprint and enhance liquidity, potentially benefiting long-term shareholder value.
• Customers will benefit from an expanded branch network through the BMO acquisition, offering broader access to services. Deposit growth across segments indicates continued customer trust and engagement.
• Employees are a focus for the company, with strategic priorities including attracting, retaining, and developing associates, suggesting ongoing investment in its workforce.
• Creditors saw the successful issuance of $600 million in subordinated notes, indicating continued access to capital markets and diversified funding.

Next Steps

• Conference call to discuss financial results on Thursday, October 23, 2025, at 9 a.m. Eastern time.
• Expected closing of the BMO Branch Acquisition in mid-2026.
• Continued share repurchases under the 2025 Share Repurchase Program, with $3.71 billion remaining capacity as of September 30, 2025.
• Expand and grow capabilities and products while harnessing enterprise scale and maintaining client-first focus.
• Attract, retain, and develop associates aligned with long-term direction and culture.
• Enhance processes and systems to reduce organizational complexity and maximize productivity.
• Manage balance sheet prudently to optimize funding and liquidity profile, drive core deposit growth, and enhance returns.

Key Dates

Recommendation

While First Citizens BancShares demonstrated solid loan and deposit growth and maintained strong capital and liquidity, the notable increase in provision for credit losses and net charge-offs, particularly due to a single large client loss, raises concerns about asset quality in the short term. The strategic BMO branch acquisition is a positive long-term move, but its benefits are still in the future. Given the mixed financial performance with a significant credit quality deterioration offset by strategic growth and capital return, a 'hold' recommendation is appropriate for a seasoned investor to observe how credit quality trends evolve and how the BMO acquisition integrates.

Keywords

First Citizens BancShares, FCNCA, Q3 2025 Earnings, Banking, Commercial Banking, SVB Commercial, Global Fund Banking, Deposit Growth, Loan Growth, Share Repurchase, BMO Branch Acquisition, Net Interest Income, Net Interest Margin, Credit Quality, Capital Ratios, Liquidity, SEC Filing, 8-K